Heinz Blasnik- Views You Can Use Message Board

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Strategies & Market Trends : Heinz Blasnik- Views You Can Use

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To: yard_man who wrote (2398)	6/11/2003 12:28:48 PM
From: GraceZ	Read Replies (3) of 4905

You misunderstand why Austrians use the definition they use regarding inflation -- just because there isn't a rise in a general price level when they are inflating the money in circulation does not mean that damage is not being done -- it most certainly is doing damage -- the measuring stick is all wrong. What is the damage if, as in the case of Japan, prices are falling while the money supply expands? Are you saying there is inflation there but the measuring stick isn't seeing it? I think you guys who follow this Mises miss the reason why the money supply grows in the first place. It grows because every single day people, through their efforts, add to the value in the economy and money supply grows in order to represent that value. Does Mises say that the money supply should never grow or is he recommending that the growth in the money supply be returned to the vagaries and expense of mining precious metals? Good grief, the history of governments and their relation to the gold market is hardly free of interference. Aside from that, gold is still an active form of money available for transactions, readily convertible (for a small transaction cost) to the local fiat currency. As to holding its value through the ages, I'd say it has an even worse record than the dollar in the last twenty years and in the last 1000 its even worse. An ounce of gold won't even cover the monthly rent in any but the poorest neighborhoods whereas in the middle ages one could live for quite a while on an ounce of gold. I guess the Austrians would say it must be dropping in value because there's more of it. If that is the case then one could say that all forms of money are subject to inflation. OTOH technology will always give us more for less. Its the nature of technology to make things cheaper (even gold). Now if you really want to get to the root cause of inflation you have to look at the all too human tendency to want to reap higher rewards without additional effort.

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