“Inflation is Taxation without representation” Milton Friedman
In the 21st century, World Central banks have an inflation target of 2% a year. 2% inflation is not noticeable in the short term. This means £100 in your pocket this year will give you the purchasing power of £98 next year. The price Keynesians believe that inflation is what keeps people spending money.
They believe “if your money loses value you are more likely to spend it.” they argue why controlled inflation is a good thing as it promotes growth.
This is nonsense. True, It makes numbers go up but it’s nothing more than creative accountancy. Fake growth makes national debt to GDP look smaller. And gives a false perception that the nation has been more productive.
Which in turn helps the Government increase the chances of re-election. No wonder why every new Government is in favour of this short-term policy.
When in Rome, don’t do what the Romans did.
History shows that over time this printing policy is doomed to fail. The Romans tried to debase their own currency it created a crisis and destroyed their own empire.
The Romans inflated their currency away so quickly that the people couldn’t afford to buy food. The emperor couldn’t pay his troops, so a revolution took place and the mighty empire crumbled.
The root cause of this destruction of an empire was the inflation of the money supply.
Our Government is broke and it’s borrowing money that it expects our future children to pay back tomorrow. So next time you hear the phrase “Quantitive Easing” on the telly.
That someone higher up than you has made a mistake and they are now printing money to make you pay for it.
Quantitive Easing (increasing the money supply) creates an effect known as the Cantillon effect. i.e. the original recipients of new money enjoy higher standards of living at the expense of later recipients. The concept of relative inflation, or a disproportionate rise in prices among different goods in an economy, is now known as the “Cantillon Effect.”
I look at it in these terms “those with strong relationships to the central banks acquire the newly printed money before anyone else. This enables them to purchase assets before true inflation hits everybody else in society.”
They are given a 10-second start in a hundred-metre race. Does that sound fair to you? Me neither.