Time to take the red pill, friend. You are saying it's not Curly's fault, it's really Larry and Moe. Central banks are the genesis of what we face today. It happened only a decade after the Federal Reserve was established in 1913 and they fueled the roaring 20s only to result in a crushing depression and it's been a predictable boom and bust cycle at their hands ever since. Ironically, avoiding such cycles is precisely the justification given for having a central bank in the first place. But that horrible 100 year experiment is seeing its bitter decline today. We've reached what they call the Keynesian endpoint.
Willful inflation through debasement of currency is not useful, nor is it a monetary "tool." It is an artificial scourge that is an inevitable result of the abuse of fiat currency and has shown to be true through many failed governments, civilizations and empires throughout human history. Claiming that having sound money would concentrate wealth into the hands of the few defies history. The more central bank interference we've had, the more the gap between the wealthy and poor has grown. In fact it has accelerated especially over the last year. Why is that? Because central banks reward the financiers, because they are one in the same.
Please, wake up from the Keynesian nap. The music has stopped playing. The patient is in cardiac arrest, and there's only so much monetary "life support" can do.
What you need to understand is that it is not left versus right, or rich versus poor. It is the vast majority of the citizenry against a financial oligarchy that is joined at the hip with the central banks of the world and the politicians that partner with them.
If you are going to sit here and believe that "inflation" is a "monetary tool" then we have really nothing further to discuss. But if there's one request, I'd ask you'd attempt to read some material that is not fueled by the same system that gives you cable news and 401k plans with 6 loaded mutual fund options. Some good places to start:
http://www.zerohedge.com
http://www.chrismartenson.com
http://www.sovereignman.com
Best,
rp
Linking me to a bunch of gold bug blogs isn't going to convince me of anything.
Are the inherent flaws in deflation really lost on you?
To make this simple, let's pretend there are 10 people in the world, or our "economy". In this world, we have 1000 ounces of gold,
and no more - we've checked. Since we plan on using this gold as a metric to facilitate trade in our world but are not willing to
carry around and chop up gold to describe transactions, we invent dollars and cent and say each ounce of gold is worth $1, and we
write into law that 1 ounce of gold will equal 1 dollar forever.
Now in order to make money, decide to use the money I inherited from my father ($100, he was wealthy) to start a business making
FoodPacks to sell to the other 9 people on the planet. I hire you, a middle class man with only $5 to your name to make FoodPacks
for me to see for 10 cents a day.
Over the years, our business does well. Between labor and supply cost, each FoodPack costs me 20 cents to produce, and I sell them
for 50 cents each, netting me big profits. Wealth gets moved around between people trading, I now have $200, you have worked your
way up to an impressive $20, and the rest of the $1000 in the economy is divided roughly evenly between the other 8 members of our
society.
Over these years though, the world has grown a bit. The 10 people in our world have socialized, gotten married, and have given
birth to 10 more people, all of whom are ready to work and participate in the economy.
So, now there is 20 of us, but the gold/dollars are in the hands of the original 10. Since we have to create roughly twice as many
FoodPacks now due to greater demand by the other participants in our "economy", I have to hire on a second person to help produce
enough of them. When it comes time to set wages for the new employee and yourself after your yearly review, I am stuck in a
conundrum.
You see, before now our economy was pretty stable. We had exactly 10 participants who were trading goods back and forth at a
fairly constant rate, so have exactly $1000 in circulation was not a problem - in fact, it worked out perfectly. Now though, our
economy has grown, we are producing more, have more workers, and more importantly, have a much greater (double, in fact) demand
for gold for trading. Since this doubling in demand has essentially caused my net work to double over night, I realize something:
I can pay you half of what I did before (due to the greater demand for dollars, what I am paying you, while lower in numbers, is
the same in value). Due to my materials costing less as well, I am now paying 10 cents for labor plus materials, and can charge 25
cents each while keeping my same profit ratio. Since there is also twice the demand for my product, I am actually earning the same
number of dollars every week.
My personal expenditures used to be $1/week, but now due to deflation I am only spending 50 cents/week (technically, the same
'value' as before). I am now able to just stashed the other 50 cents of every dollar I spent in savings.
Time continues, and there is a constant greater and greater demand for dollars due to growing populations and newer product being
released. I continually keep spending a smaller and smaller fraction of my wealth on expenditures and saving more and more as the
deflation continues, which makes my portion of the dollars in the economy swell up to $900 of the $1000 in gold, while the rest of
the population (now around 50 people) spend and trade.
Long story short, I keep saving my money as the value of the dollar deflates until one day I start spending. As I have a
disproportionate amount of the money compared to the rest of the populace due completely to the fact that I let the rest of you
increase it's value by expanding the economy by making more products and babies while I just stored my money away, I am able to
buy up all the property in our little world and keep it all to myself.
I really can't think of a good ending to this story besides you and the rest of the population rising up, killing me, seizing my
assets, and creating a new, inflating fiat currency that accurately represents the economic growth of the world and encourages the
new investing class to invest in new projects today lest their dollars graudally devalue over time, so we'll say that's what
happened.
The only people who benefit from your gold-based, deflationary money ARE the financial oligarchs, as every day their large sum of money is worth more and more, and they can keep spending less of it for the same labor that they did before. It accelerates the accumulation of wealth into the hands of the rich.
It also very much discourages investment - why take a risk on an investment today, when thanks to deflation their is zero risk of my money will be worth more tomorrow?
Once again, I'm not defending the Fed as much as I'm defending properly controlled inflation. Also, it's not just the oligarchs vs everyone, but it is very much rich vs poor in this country, ad the recent trend of union-busting going on has shown.
And no, I don't get my news from the 24-hour channels, I usually hang out in places like this (
http://forums.somethingawful.com/forumdisplay.php?forumid=46) where you can expect a ban if you make a claim without backing it up with hard math, historical evidence, or at least a peer-reviewed article; not some blog by an alarmist who is trying to get me to buy precious metals because they are 'valuable'.
