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?