[ExI] Inflation graph

[Rafal Smigrodzki]

On Mon, Oct 28, 2013 at 12:06 PM, John Clark <johnkclark at gmail.com> wrote:
>
>
> Richard Feynman also said that when a theory doesn't fit the facts it must
> be abandoned no matter how beautiful or well loved the theory may be. Ten
> years ago I too would have predicted huge inflation if the printing presses
> continued to operate at the rate they were at it would create huge
> inflation, but in spite of the fact that the presses have actually
> accelerated my prediction failed miserably, therefore I must change my
> economic theories.
>

### John, you should not throw out a theory based on a thousand data points
when a single new data point seemingly disagrees with it. Inflation is a
monetary phenomenon (that's a well-accepted economic theory), i.e. it is
caused by an increase in the amount of circulating currency. The USG has
been recently generating huge amounts of currency but only a part of it
actively circulates in the US - since the dollar is still a global and
especially Chinese wealth parking spot, you can print a lot of it and not
much will move in domestic US prices.

Generally, government production of money is evil, since it strengthens the
government and transfers real resources from the productive economy to
non-productive or even destructive government employees, cronies,
government-associated bankers and other hangers-on. This is the key point -
a destructive transfer of resources, no matter whether it leads to obvious
inflation or not. You should read Rothbard on that.

The stories about the benefits of inflation are vastly exaggerated: "sticky
wages" get unstuck pretty quick if there is less regulation and no labor
unions.

Rafal
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