It seems to me we have a hugely flawed monetary system.
No more flawed that trying to tie economic potential to the amount of a shiny yellow metal that can be dug from the ground.
Bottom line is that there is inflation all the time in one asset or another. It can be real estate, commodities, energy, stocks, natural gas, tobacco, wages, or even beanie babies ... etc.
There has to be SOME inflation of prices through the economy or there is no incentive to increase supplies to meet demand. With no earings incentive, supplies inherently will contract relative to growing demand.
Take natural gas, for example... we've seen a 500% gain in NG over the past 12 months, in part because of regulatory issues over expanding supply, and in part due to increased demand for it (again due to regulatory restrictions to increasing supply) and increased power usage because of the IT explosion.
Now is that inflation in NG due to inherent inability to meet demand, or is a artificial inflation due to p*ss-poor energy policies by the enviro-wackos at 1600 Pennsylvania?
Well, it really doesn't matter, does it, because it's here and it's impacting poor fixed income people more than outright price inflation of foodstuffs, clothing, or other staples in the CPI.
And those costs will get passed on again in a double whammy because electricity bills will climb, and the price for electricity derives products will climb as well.
Does that mean that inflation was caused by too much money supply? Not really. It's clearly a result of a misguided approach to managing the energy infrastructure necessary to support economic growth.
But again, I see people railing at the fractional monetary system and calling for a return to gold. But even under a gold standard, there was a fractional monetary system. In fact, it was that FMS that partially caused the US to go off the Gold standard in the first place when other nations started demanding payment in gold, thus depleting our available financial reserves to support money supply.
The gold standard is a even more foolish manner in which to manage our monetary system. Money supply and interest rates SHOULD BE TIED to our national ability to borrow money and create assets of greater value. And that's why a floating exchange rate punishes those nations who have poor economic policies and rewards those who provide greater return on investor's money.
Ok.. your turn... lock and load and take aim... I'm running for cover right now... :0)
Regards,
Ron |
