Chart usGOLD   Chart usSILVER  
 
Food for thought
Socialism is the philosophy of failure, the creed of ignorance and the gospel of envy
Winston Churchill  
Search for :
LATEST NEWS  :
MINING STOCKS  :
Subscribe
Write Us
Add to Google
Search on Ebay :
PRECIOUS METALS (US $)
Gold 1304.96-2.84
Silver 20.67-0.03
Platinum 1483.258.98
Palladium 882.256.85
WORLD MARKETS
DOWJONES 16961-119
NASDAQ 4450-23
NIKKEI 1552972
ASX 5570-4
CAC 40 43365
DAX 9621-23
HUI 2426
XAU 1023
CURRENCIES (€)
AUS $ 1.4278
CAN $ 1.4525
US $ 1.3435
GBP (£) 0.7906
Sw Fr 1.2149
YEN 136.7800
CURRENCIES ($)
AUS $ 1.0629
CAN $ 1.0812
Euro 0.7444
GBP (£) 0.5886
Sw Fr 0.9043
YEN 101.8150
RATIOS & INDEXES
Gold / Silver63.13
Gold / Oil12.82
Dowjones / Gold13.00
COMMODITIES
Copper 3.240.00
WTI Oil 101.77-0.32
Nat. Gas 3.790.00
Market Indices
Metal Prices
RSS
Precious Metals
Graph Generator
Statistics by Country
Statistics by Metals
Advertise on 24hGold
Projects on Google Earth
In the same category
What is Inflation?
From the Archives
Originally published June 30th, 2002
647 words - Reading time : 1 - 2 minutes
( 1 vote, 4/5 ) Print article
 
    Comments    
Tweet

 

 

 

 

"The reality of inflation is that governments steal money from their citizens with absolutely no intention of repaying that money." (John Maynard Keynes, The End of Laissez-Faire)

 

Imagine a counterfeiting printing enough money in his basement to provide every member in his community with an extra million dollars. Could we say that every member of that community is wealthier? It would depend...within the community the differences in wealth would have shrunk.

 

Lets imagine that Peter the barber had saved $200k and Paul had only $20k before the counterfeiter began his endeavour. Peter had ten times the wealth of Peter. After both receive the million from the counterfeiter, they are much closer.

 

Now that every member of the community is a millionaire, businesses would naturally begin to charge higher prices for their goods and services. This is the essence of inflation.

 

Inflation Defined

 

Inflation is not a general rise in prices but an increase in the supply of money, which in turns sets in motion a general increase in the prices of goods and services. Inflation deals with volume as in the concepts of inflating a balloon, or inflating the money supply (volume of money).

 

"Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term `inflation' to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. . . . As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil. They try to keep prices low while firmly committed to a policy of increasing the quantity of money that must necessarily make them soar. As long as this terminological confusion is not entirely wiped out, there cannot be any question of stopping inflation." (Ludwig von Mises, Inflation: An Unworkable Fiscal Policy)

The irony of today is that the central bank is commonly viewed as an inflation fighter when in fact it, along with the fractional reserve banking system, is the actual source of inflation.

 

Additionally, the various and unavoidable effects of inflating the actual money supply, such as rising commodities prices and increasing worker wages, are seen as the causes of inflation!

 

This represents a complete reversal of cause-and-effect! An increase of the money supply leads to an increase in the cost of goods and services, not the other way around!

 

Below is a chart showing the credit expansion of the US Money supply since 1981. Note that on March 23, 2006 the USFed ceased to release figures on M3 (the broadest measure of money supply) claiming that it was costing too much to calculate. Strange to hear that coming from the very institution that has the ability to create money.

 


 

Resources:

 

  • Methods of a Wall Street Master by Victor Sperandeo.
  • Mises.org a website devoted to the Austrian School of Economics, a school of economic thought founded by Carl Menger (Feb 28, 1840 - Feb 26, 1921) with his work Principles of Economics published in 1871.
  • Money, Banking, and the Federal Reserve System is a great video that examines the formation of credit and the Federal Reserve System.
  • The Federal Reserve Bank of Chicago used to publish a pamphlet entitled Modern Money Mechanics, which explains M1, M2, and M3.

 

 

 

 

Mike Hewitt

Editor

DollarDaze.org

 

 

 

 

Tweet
Rate :Average note :4 (1 vote)View Top rated
Previous article by
Mike Hewitt
All articles by
Mike Hewitt
Receive by mail the latest articles by this author  
Latest comment posted for this article
Be the first to comment
Add your comment
TOP ARTICLES
Editor's picks
RSS feed24hGold Mobile
Gold Data CenterGold & Silver Converter
Gold coins on eBaySilver coins on eBay
Technical AnalysisFundamental Analysis

Mike Hewitt

Mike Hewitt is the editor of www.DollarDaze.org, a website pertaining to commentary on the instability of the global fiat monetary system and investment strategies on mining companies.
Mike Hewitt ArchiveWebsite
Most recent articles by Mike Hewitt
6/2/2014
5/15/2014
5/9/2014
4/30/2014
4/20/2014
All Articles
Comment this article
You must be logged in to comment an article8000 characters max.
 
Sign in
User : Password : Login
Sign In Forgot password?
 
Receive 24hGold's Daily Market Briefing in your inbox. Go here to subscribe or unsubscribe.
Disclaimer