▶ What Is Inflation? | Price Inflation Versus Printing Money Inflation
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What Is Inflation|Price Inflation Versus Printing Money Inflation ...
What Is Inflation|Price Inflation Versus Printing Money Inflation
According to Wikipedia http://en.wikipedia.org/wiki/Inflation, "inflation" has this definition:
"In economics, inflation is a persistent increase in the general price level of goods and services in an economy over a period of time."
We will call this definition, "price inflation."
It is, to be sure, what the vast majority (the bottom 99.9999% of us) feel the greatest economic impact from
and is generally what most people mean when they use the term, "inflation," as it results in us spending more and more of our money on less and less goods and services.
Price inflation robs us of the wealth that we create and results in a lower quality of life for everybody because it diminishes our ability to freely participate in commerce with each other.
Then on same Wikipedia page, the following is also said about inflation:
"Economists generally believe that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply."
“Excessive growth of the money supply,” is generally what economists are referring to when they use the term inflation.
Since it is all too common to apply these two concepts interchangeably, and confusingly, to the term, "inflation," we will make a distinction between the two concepts here.
As noted earlier, an increase in prices will be referred to here as, "price inflation."
"Excessive growth of the money supply," will be referred to here as, "circulatory inflation."
The mantra that many economists, particularly the so-called Austrian School, have been repeating is that price inflation is the direct result of circulatory inflation, or by the government "printing too much money."
It sounds good on paper, right?
In theory, circulatory inflation *could* cause price inflation.
In some parallel universe.
If circulatory inflation existed there.
First of all, the government does NOT print money.
With the exception of minted coins, all of our currency is issued by privately held banks at INTEREST.
Since all of these privately published representations (which we call currency) have to be paid back to private banks at interest which they never issue in the first place, it is mathematically impossible for circulatory inflation to exist.
Second of all, are we to believe that manufacturers and other business owners possess some magical telepathic power to detect when the the supply of currency has been expanded and then automatically raise their prices to compensate?
Is that why prices have been increasing as much as 10% annually?
Since we have been obligated to pay back these representations of entitlement
with interest which is never issued, the inevitable result is, in fact, circulatory DEFLATION.
In other words, paying interest on every single unit of currency in circulation causes a DECREASE in the volume of currency.
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