Inflation Series - Inflation Is A Form Of Bribery.

Inflation: Artificial expansion of the money supply

The classic view of bribery is a brown paper envelop exchanged in secret for the purpose of gaining special favors. It doesn't take much of a deviation from this classic example to include inflation as one of the forms of bribery.

The exchange is done in secret in two ways. The counterfeiting by the central banks is done quickly and shamelessly with no accountability in any real sense and so it is unseen. The exchange takes place as if everything is normal and moral - by large, well-known entities.

The carrier of the 'brown paper envelop' has no objection since that is what provides its slice of wealth from the inflation bribery pie.

Of course the main purpose of the bribery has to do with gaining special favors but this is definitely not a one-sided arrangement. The recipients of the counterfeited money gain wealth instantly and use it to further its goals, often by extending its influence by furthering the reach of bribery down the line. The other side of the bribery exchange also benefits because acting as the agent supplying counterfeit money is the most lucrative of all positions to be in.

I don't know if you noticed the implications of this process. It has the tendency to continue to extend further and further, corrupting the entire society. It starts as a counterfeit operation and eventually changes the ethical nature of the society into a counterfeit society suffering from a lack of any ethical or moral foundation.

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Inflation Series - Inflation Empowers Warmongering.

Inflation: Artificial expansion of the money supply

If you look at every war fought from the beginning of recorded history you will find that it calls for a vast rearranging of resources by both the aggressor and the defender. In fact one of the reasons aggressors have initiated war is to try to seize resources.

In peaceful and cooperative periods of history resources are directed towards the means chosen at that time for the purposes of the continuation and expansion of peace and cooperation. But history is full of disruptions of this state of affairs as the ego-driven gain enough power to try to impose their will on others. War has been the aggressor's tool, used to confiscate wealth to gain more power.

But the aggressor has to rearrange its resources to increase its chance of victory especially since the defender will rearrange its resources to counter the attack. This problem would pose as a natural deterrent to war because the people will object to the changes in lifestyle and the sacrifices of personal wealth that would be required.

If, however, the aggressor could counterfeit the money to pay for its military expansion then it could rearrange resources in a way that empowers warmongering. And indeed that is exactly the characteristic of the times and the places where inflation is practiced. For example:

• The U.S. launched 201 out of the 248 armed conflicts since the end of WWII:

“Since the end of World War II, there have been 248 armed conflicts in 153 locations around the world. The United States launched 201 overseas military operations between the end of World War II and 2001, and since then, others, including Afghanistan and Iraq ….”

• U.S. military spending dwarfs all other countries:

“The United States is responsible for 41% of the world’s total military spending. The next largest in spending are China, accounting for 8.2%; Russia, 4.1%; and the United Kingdom and France, both 3.6%. . . . If all military . . . costs are included, annual [US] spending amounts to $1 trillion . . . . According to the DOD fiscal year 2012 base structure report, ‘The DOD manages global property of more than 555,000 facilities at more than 5,000 sites, covering more than 28 million acres.’ The United States maintains 700 to 1000 military bases or sites in more than 100 countries. . . .”

June 2014 issue of the American Journal of Public Health

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Inflation Series - Inflation Causes Overconsumption.

Inflation: Artificial expansion of the money supply.

What would happen if all of a sudden you had access to as much money as you wanted, as if money grew on trees? Well, if all you could buy were gourmet foods then it would be easy to predict: overconsumption - literally!

The same principle applies when the natural constraints of market prices are distorted, like what happens when the market interest rate that reflects the supply of loanable funds and the demand for loanable funds is overridden by an artificial interest rate.

"Come my little pretty have a bite of this apple!" And then the stupor begins. This enticement by deceitful appearance alters decisions and patterns of decisions in a way that would not occur in an unhampered market. This is the breeding ground of greed and the consequence is an alteration of the ethics of the society.

The shallowness of materialism and its detrimental effects on human culture are the offshoots of the overconsumption stemming from inflation. When you hear the statist apologists say that 'a little inflation is good' you can be certain that they are oblivious of both economics and ethics and are like the hooded creature offering the poison apple! 

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Inflation Series - Inflation Causes Malinvestment.

Inflation: Artificial expansion of the money supply.

Let's start with supply and demand. The supply of loanable funds and the demand for loanable funds is part of the natural market mechanism that determines the market rate of interest. When allowed to operate this disequilibrium-tending-towards-equilibrium coordinates goods and services in the present and goods and services in the future.

When the currency is counterfeited by the central bank the funny money has to enter into the economy somewhere and by design the central bank uses the banking system to inject the expanded supply of money. If you visualize the effect of an increase in the supply of money (the supply curve moves to the right), now as loanable funds, you will see that the effect is to artificially push down the interest rate. 

The signal that is sent is that there is a greater supply of loanable funds. This alters the pattern of present goods and services and it alters the pattern of future goods and services. The faulty signal causes errors in judgment. The investment errors resulting from judgments made based on distorted prices - the interest rate is a price - causes malinvestment.

The regression theorem of interventionism 'pins the tail' of the tremendous costs associated with the errors caused by distorting the interest rate 'on the donkey' or 'jackass' - the interventionist central bank.

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Inflation Series - Inflation Is A Hidden Tax.

Inflation: Artificial expansion of the money supply.

Because of the way inflation is used to redistribute wealth towards those who have politically-favored connections (to the counterfeiting operation) this hidden tax is extremely regressive. It penalizes the poor (those who have none of the political connections enjoyed by the well-connected) to a much greater extent than the rich because the rich are more connected—directly or indirectly—to the early stages of the injection of the new funny money into the system.

Just like all taxes take some portion of the individual's wealth at the time of the transaction the result is a diminished total value of income that can be used for living. But everyone knows how taxes are constantly taking their wealth. The common saying is "Only two things are certain: death and taxes!" Inflation is a hidden and extremely regressive tax that most people do not know enough about to be able to muster a concerted resistance.

And that is just the way the State likes it. Keep the people ignorant about this hidden tax because it then can continue to be used to extract wealth from the people and because a foolish population can easily be told that inflation is caused by all sorts of bogeymen; deflecting the ire of the masses (a regressive tax hurts the masses the most) away from the counterfeiting operation of the State.

Inflation is a hidden and extremely regressive tax which means that it is unjust and it is theft that is especially targeted at the masses.

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Inflation Series - Inflation Redistributes Wealth.

Inflation: Artificial expansion of the money supply.

When the money supply is artificially increased it has to be initiated by some entity; some legally-sanctioned or some illegal counterfeiting agency. If we assume it is an illegal counterfeiter then the first possessors of this new money have new wealth in terms of the goods and services received in exchange for pieces of paper not worth what they claim. The goods and services extracted decrease the wealth of the providers of goods and services because they get nothing in return. Wealth is redistributed towards the counterfeiters.

The same thing happens when the legally-sanctioned counterfeiters expand the money supply. Those who have first access to the new money gain wealth at the expense of those who receive it later on after prices have adjusted upwards. This is the real reason why those in control of the money supply expand the money supply - they redistribute wealth towards themselves and those who are favored.

The well-known saying "The rich get richer and the poor get poorer." is the direct and indirect consequence of the artificial expansion of the money supply. Instead of believing the statist diatribe that individual selfishness is the cause of the widening gap between rich and poor, you now are better able to see that it is inflation which being used purposefully to redistribute wealth and which is the primary cause of the extremes of wealth and poverty.

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