INFLATION FEEDS SELF EXAMINATION, EMPLOYMENT, FUTURISM.
Moderate Inflation Optimizes Consumption, Self Examination, A Questioning Attitude, Full Employment, New Economy, Technology & Science, Enough Money For What’s Needed.
Why?
1) Inflation advantages the implementation of more advanced technology, because inflation forces people to a continual reevaluation of their old habits.
2) Inflation stirs the economic soup and advantages workers relatively to rentiers. (A rentier, by definition works from a rent; rentiers’ existence is less active than that of workers, they have to do less. Advantaging them is advantaging laziness. Activity ought to be more encouraged by a better income than the one received by doing nothing; it’s harder to negotiate the augmentation of a rent than that of a salary.)
3) Inflation insures that those who want to work, in particular with the future, have enough money to do so.
Inflation creates, de facto, negative interest rates. With inflation turned on, the very rich and corporations could not sit on the money, or lend it to each other through “dark pools“. The money would have to be invested profitably in the real economy.
Putting inflation back in gear is ONLY PART of the return to the winning recipe of the 1950s. But a master piece. It fights economic stagnation.
Conventional economic theory has it that people look for the cheapest products, or for better products, or a mix of these characteristics. Right. That fantasy is called the “market”. As in a real market, people are supposed to go down the alleys, and pick up what they deem to be the best.
In the imagination of vulgar economists, the “market” is supposed to solve everything (including health care in Obama’s Financial Times addicted mind). Let’s leave aside for now the problem that what they call a market is rather a jungle.
Before comparing products, people have to want to bother to look at them. Comparing is tiring, risky, and involves training (be it of a slightly new taste). Be it to buy sushi, a car, a new TV, or a vacation. In a steady state economy, with always the same prices, why would people want to look?
And what about, not just comparing old products, but looking at completely new products? Say you always bought apples and never looked at oranges? Why would people want to look at those? Curiosity? What about adding necessity to curiosity? Inflation insures the latter, because inflation introduces an element of discomfort with one’s old world.
Inflation forces people to look and make comparisons, not just between the products that are offered, but between the habits they themselves hold (and that, left unchanged, would lead them to yesterday’s products). Continually rising sticker shocks spur a more demanding demand that questions one’s old demands.
Socrates said that the unexamined life was not worth living. Inflation says that one cannot afford the unexamined life.
Verily, conventional economic theory had forgotten that detail: if consumers don’t need to bother, they will not bother. MENTAL INERTIA RULES, and turns into generalized economic inertia. Inflation is a spur that forces economic participants to reconsider their relationship with the economy, and all values, and makes actually the entire public into savvy , even philosophical, economic participants, lest they drown in rising prices, and an unaffordable past.
Having more demanding consumers (that nominal price inflation creates), in turn incites would be suppliers to offer new products, as they know consumers are continually examining not just the products offered, but examining if the habits they have make life as worthy as possible.
Indeed, old habits depend upon old values, and old consumption patterns. When inflation permeates the economy, all prices rise, and force a dynamic ecology, by changing continually the environment, forcing speciation of new technology, that serve new habits.
It is similar to what happens when speciation in biology is forced by environmental changes.
Increasing prices force people to continually look afresh at whether their old habits are WORTH IT. People see the costs and prices of what they used to like, go up, and they ask themselves: why not to try something better?
Inflation continually swirls the economy, for higher performance. It creates an ever changing world, never boring, always valuing work
It’s no coincidence that the period of the 30 years of gloriously expanding economy after World War Two was characterized with significant inflation. Nor is it a coincidence that a depression is characterized by years of deflation.
As one can see today, or one has seen in Japan, deflation is hard to fight. Work programs in infrastructure financed by the government in Japan, over two decades, resulted with a government debt to GDP basically the highest in the world (more than 200%). And still Japan is stuck. Maybe what’s lacking in Japan, are animal spirits.
How is inflation controlled? By not expanding the money supply too much. What does that mean? Those who have the money keep it, others can wait for the grave. In other words no inflation profits first the established order.
Some will say: oh no, you don’t understand, with 4% inflation, the rich will get richer. Question: how come did the rich not become richer during the post war forceful expansion? High margin tax rates (93% under that well known Marxist, President Eisenhower). Just reinstitute those and redistribute to the indigent (including victims of inflation).
The “market” has been the paradigm of economics, and it’s made possible by the fractional reserve private-public money creating banking system. The latter has been ignored by most thinkers (except for president FDR and his men, who regulated it cleanly. and which the Clinton and his weasels destroyed).
Of course the FDR reforms ought to be reestablished (this is what the inchoating “Banking Union” is about in Europe, and the various fines given to EU & USA banks in recent weeks. although jail sentences would have been better).
But more generally, the very image of the free economy as a “free market” is meek. And irrelevant.
There is no “free market”. Most of the impulsion for new technologies was given by governments (even cans and microwaves were initially military programs; actually the question ought to be inverted: which new technologies were started as non-governmental programs, or not governmentally supported? Good luck to find any!)
Through the (mostly private) bankers, the (plutocracy captured) government regulates the money supply, and has opted to restrict the new flow to old money.
A better picture of reality than the “free market” is the jungle. The genus Homo evolved through war, in the jungle. It’s hypocrisy and obfuscation to pretend that it’s otherwise in today’s economy. Once one has admitted this, and only then, can one mitigate this efficiently. Let’s bring some light to that obscure and tragic reality.
And let’s bring fresh money, enough money to employ youth well and irrigate the future. That is, allow enough inflation to insure this.
Could that create problems? Sure. And it did, in the roaring post-WWII expansion. However, corrective mechanisms were then applied: help to first time home buyers, construction programs, free universal health care and education, anti-plutocratic taxation.
One ought to argue that inflation is progressive, as it forced the implementation of these progressive measures (otherwise society would have exploded in rage; whereas now its put to sleep in the torpor of stagnating plutocratization).
Last, but not least: in the unprecedented confrontation between human technology and the biosphere, stagnation is not an option. Missing out on inflation, and the reality of the jungle it makes obvious, and the progressive answers it requires, maybe missing out on the animal spirits we need to survive.
Patrice Ayme
