|
Termyn8or -> RE: And Now For My Next Magic Trick… NO Inflation! And now for my next trick… I will now show you h (1/20/2011 6:49:41 AM)
|
UFR
My eyes lited on the title here and I got to thinking. Is it even possible to eliminate "inflation" ? Let's just say for example that the currency value is almost literally etched in stone. Or perhaps that we trade strictly in gold or silver (which doesn't really accomplish that anyway), or by some means the value of the currency is fixed and cannot change. Period. I know it's far fetched, but just for example let's say there's an act of congress or something that would absolutely fix the value of the USD period. In other words isolate that from the equation.
Would that eliminate "inflation" ? I don't think so. Somewhere along the line, someone will sooner or later want more money. Even in a totally isolated economy, could it even happen ?
All it takes is one. One person decides he is not charging enough for his goods or services, and everyone in need of those will have to pay more. Where would that money come from, thin air ? No, people would either have to pay more or buy less, of that there is no question. Remember now that in this sense it would be "voluntary inflation" I guess. This would not be an external factor, not by a stretch. So you go down to see Sam Drucker at the general store and find a few prices went up. Sam wants to build on to his store, or needs a new horse, whatever. So you go in there and sugar costs 10% more. So you grumble and pay up because you can't make the moonshine without it (well it would not be easy). Obviously you must charge more for your brand of white lightnin'.
So Otis comes along for his usual bottle of "tonic" and grumbles, but pays the higher price. Where does Otis get the money ? Well if he has money he got it somewhere, and with everything else constant he must then charge more for whatever service he performs. His customers grumble, and then pay up. Where do they get the money ? Pretty much the same way.
Now once the higher price is established there is no more grumbling. The addition on Sam's store is complete. Keeping everything constant here, all he has to do is cut a bit more wood for heat. If he has electricity we might be taling about one or two more lightbulbs, so minute an amount it doesn't even matter (in a way). Once the building is over, the costs are pretty much the same, but the higher price has been established. Will Sam then lower the price ? I think not.
How many people would walk into their bosses office and ask for a pay cut ? Believe it or not I actually did once, but I had good reason, it was a tradeoff. But really this does not happen much to say the least. Most people want raises, and to get them takes a threat, the treat of finding another job, but the dynamics of that situation are not the point now though. So labor costs would rise even with all other factors locked. Would that be a fair assumption ?
If so, then "inflation", in it's pure form, unlike as we know it, is then a constant. The rate might not be constant, but the trend would be. That would mean that this "true" inflation is a natural factor in a normal economy. If so that means there is no way to stop it without draconian measures. Whether it is fueled by need or greed doesn't matter, it is simply a natural thing.
If so then, it is futile to fight it. Thinking back to Nixon's wage and price freeze, what did it really accomplish ? First of all it's nearly impossible to enforce, and even with 100% compliance what good did it do, and what good could such a measure do today ? It simply won't work, the freeze would have to be worldwide, and that is of course impossible. Then what does a freeze mean ? If your costs go up and you don't raise prices you are in violation because you effectively took a pay cut.
So even under ideal conditions, true inflation will exist. How to manage it ? Market forces come to mind. Just like if you walked into the bosses office and demanded double the pay, you would most likely price yourself out of a job, so there's not alot of that going around. Any raise in pay that is not totally merit based will cause natural inflation.
Enter the unions, and COLAs. A "cost_of_living_adjustment" is in a way a self fulfilling "prophesy". The simple fact is that the money has to come from somewhere. That is universally the customer, unless people take to just dropping money off for no good reason.
Now what ? If you can't stop it, can you slow it down ? Do you even want to ? Maybe the way to go is just let it happen and lop a zero off the currency every few decades.
Now, if true infation is equal across the board, has it even occurred ?
T^T
|
|
|
|
