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In today’s inflationary environment, people have become so accustomed to rising prices that it has clouded their economic thinking. Concepts like profit, wealth, and economic growth have more or less become synonymous with credit expansion.
However, printing money plays no role in creating any of these concepts—it merely redistributes resources. Since monetary inflation affects all markets unevenly, the earlier recipients of newly-created money benefit at the expense of later recipients.
This phenomenon, known as the Cantillon effect, benefits central banks, commercial banks, governments, and asset owners. On the other hand, it hurts ordinary people who live on fixed incomes and save money.
Most often, new money enters the financial and real estate markets first. This is why we typically see the largest price increases there. Increased production and innovation are also factors in some rising stock prices. But when it comes to real estate, a used house would normally depreciate over time, everything else held equal, just as a used car or shirt would.
Typically, average Joes consider rising financial and real asset prices good and healthy, while rising consumer prices are frowned upon. Often, these people use consumer price indexes as guidelines for how much consumer goods should be “allowed to” increase in price. If the price of a consumer good rises more than the CPI, it’s often blamed on greedy capitalists. …
Last, but certainly not least, we have the most significant beneficiary of inflation—the state. The government dreads losing its fiat currency monopoly, which enables inflation and expands its authority. Deflation under fiat money would strain its finances, but sound money would eliminate its ability to manipulate the money supply altogether.
.Falling prices hurt the government in several ways. First, they significantly decrease tax revenues. Let’s say someone bought a home today for $100,000 and sold it for $99,000 ten years later. In such a case, there would be no nominal profit to tax.
Second, governments are heavy debtors. In a world of deflation, their debts would increase in real terms, as the money they repay would be worth more than the money they borrowed. Conversely, when prices are rising, it hurts lenders, as the money they receive can buy less.
Finally, governments cling to the debunked deflation spiral fallacy, ignoring how falling prices—like those of computers—spur consumption and growth in a free market. Instead, they believe falling prices would lead people to postpone consumption, resulting in economic stagnation and crisis.
Conclusion
To sum up, production and capital accumulation drive economic growth. In a sound monetary system and a free market, overall prices would generally fall as the economy grows faster than the money supply, enabling people to purchase more with their money. The only ones who need to fear this scenario are the leeches who profit from the wealth redistribution caused by monetary inflation.
Yessiree, this is why we have inflation. As the article says, the leaches can only survive in an inflationary environment. They derive their power and wealth because inflation steals it from others. The state is especially adept at this form of theft because the money they take in rubs off on their fingers and goes into their pockets, almost unbeknownst to the general population. People seem to not to be able to see what is happening to them, do they? Do you think inflation or deflation is the natural position of the people?
This is why we need sound money, like gold and silver, managed by private competing mints and banks.
Not Bitcoin?
I often think how the price of bread keeps going up over the last 100 years. Bread should be cents on the dollar with all the land and the operations to make the bread but yet a loaf of healthy non industrial sludged bread is like $7 a loaf. Right at the cost of labor at the federal minimum wage.
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Once upon a time, a good loaf of bread was only a nickel or a dime if you bought the fancy kind. BTC might erode the inflationary atmosphere and bring back stable or deflating prices. The only reason there is inflation is that it benefits bankers, government and those close to them. If it benefited the plebs, there wouldn’t be inflation.
Speaking of bread, if you want a good loaf, nowadays, you have to make it yourself. It is much better hot, right out of the oven.
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Good point but one must have immaculate cooking skills to pull off delicious fresh bread consistently
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Not really. You can use a bread machine or better yet, there is a book about making bread that makes it easy called Artisan Bread in Five Minutes a Day by Jeff Hertzberg and Zoe Francois. They have quite a few really good recipes I have used. And, better yet, it is easy to do.
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Can you make sourdough?
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You can, but you have to get starter for it. Once you start a batch of dough, you can keep part of the batch as starter for the next in a never ending chain.
Part of my wife’s cancer treatment was to eat bread with no sugars left in it. So, I made sourdough bread for months on end. It was awesome bread.
Good thing there's a global non-inflationary outside option that's open to everyone. The fiat system is going to be subjected to pressures that it can't withstand.
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BTC and precious metals will be the only shelter in the storm of fiat collapsing in the near future. It would be nice, for us, anyway, if there were some deflation to also take out the Federal Reserve Bank and some of the larger New York banks. I am not sure that some deflation would take out the federal government, though. Yes, drive it to default on its loans, but I don’t think it would be put out of its misery. I guess deflation is not a coup de gras for the state, darn it!
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