The inflation conflict

It could be that inflation is at the core of the political divisions on the economy in some industrial countries.

This is because people or organizations that owe money, including governments, benefit from inflation and those who have made loans stand to lose.  It might be useful to make a distinction between money and purchasing power.  Inflation increases  the purchasing power of borrowers and decreases the purchasing power of lenders.

As this is at the core of our well-being we want government economic policies that promote or discourage inflation.  Those who would benefit from inflation want stimulus and an increasing money supply.  Those who stand to lose their savings want austerity and smaller government.

Inflation may be a way of dealing with the one percent but it also catches a lot of people who have worked hard to build up some savings.  It should probably be considered a form of theft.  It is no wonder the victims of inflation have such strong feelings.

It probably doesn’t help for them to hear economists call for inflation to solve debt or economic problems.

It is interesting that when  the representatives of those hurt by inflation get into government they appear unable to get debt under control and frequently increase it.   This may be because they enjoy spending, have friends who need to be rewarded for past support and because they now have to deal with the debt problem.  This may explain the rise of the tea party with its strong feelings of frustration.

The way to deal with the inflation conflict is to aim for price stability. This is probably easier said than done because I figure inflation is built into the way we create money.  For more on this please look at my essay “LETS go to market: Dealing with the economic crisis.”

It may be that inflation is becoming a moot point as it has been going down in spite if attempts to stimulate the economy and increase the money supply via quantitative easing.   Does this indicate some other things we don’t understand are happening in the economy?

This analysis is probably an over simplification as some people may be standing on both sides of the inflation issue and others may change from one side to the other during their lifetime but may not change their politics.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

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One Response

  1. Economist calling for infaltion! The ones who do that are total ignoramuses! They may as well call for wings and fly along with the pigs.

    No, at the present time, inflation is not possible. We are in a DEPRESSION.

    Eventually, in about ten years, infaltionary beliefs will work themselves out of the system.

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