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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (28433)	3/20/2005 5:11:16 PM
From: Elroy Jetson	Read Replies (2) \| Respond to of 306849

Capitalism is so alien to most Americans they don't even know what inflation is. Inflation is expansion of money and credit - which the Fed mistakenly calls the money supply. In a normal capitalist economy, with a fixed money supply, the value of money increases by the same rate as the growth of the economy. In general, this means that the cost of most goods decline as society becomes more wealthy, which is altogether obvious and right. Land and other things in fixed supply hold their value or appreciate modestly. Let's look at an economy which grows by 3.5% per year. An index of goods will decline in price by 3.5%. A CPI should always decline in a growing economy. This is classic capitalism with a long history of succcessful experience. Now a Monetarist will want to create counterfeit money equal to 3.5% of the GDP each year - the Monetarist Tax. This will create 3.5% inflation and inflate the index of goods up to 0% change. Monetarists call this normal and zero inflation - another of their many lies. They call the tax, which is equal to 3.5% of the nation's income, price stabilization operations. Even Milton Friedman acknowledges this when he says that, "Inflation is always and everywhere a monetary phenomenon." .