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Essays, Opinion, & Commentary |
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Something to Think About
by Gordon Francis Corbett
We often hear that inflation is "a general rise in prices." What is the truth? People produce and sell goods and services. When they buy them, they use monetary units, e.g., dollars. Inflation increases the ratio of monetary units to the economy's goods and services, reducing the individual unit's purchasing power, and increasing the goods' and services' numerical prices. That explains why inflation is not "a general rise in prices." The numerical prices rise because the ratio of units to the amount of goods and services has risen. Not counting gold rushes, this does not occur when an economy has a gold standard. The amount of units stays relatively constant, but the amount of goods and services usually increases. This decreases the ratio of units to the amount of goods and services, making the unit more valuable, and decreasing numerical prices. When this happened in the nineteenth century, savers were rewarded, but borrowers were punished. Farmers, for instance, usually could not buy farm equipment without borrowing; but paying off their loans forced them to pay back much more purchasing power than they borrowed. When the money is fiat currency, inflation is the norm. In our system, inflation results from politicians' deficit spending. Politicians borrow so that they can hand out "goodies" to their constituents and brag that "I brought home the bacon." They know how few people realize that when the Federal Reserve System finances those deficits, that financing will create more dollars that, in turn, will raise numerical prices. The Federal Reserve System lets powerful men use inflation to rob us blind. Money is a store of value. To let us keep ours, we must repeal the Federal Reserve Act and bring back the gold standard. To use an old American expression, no politician is "as good as gold."
Enrich your life with a book about politics and current events... Enrich your political & social life with a politics or news magazine... |
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Something to Think About Index |
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