Re: When should the Fed act against inflation?

"puntontg" <tomrules111@xxxxxxxxxxx> wrote in message
news:1150643332.648713.204130@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
That _means_ that "inflation" to actually be "inflation" is not simply a
rise in prices. It says that "inflation" IS a monetary event and that
real "inflation" is actually a decrease in the value of money. This is a
point with which you may certainly disagree.

Even if you do not agree with inflation being "a rise in prices" you
have to understand the damage that this has on the economy, in the way
it makes both consumers and firms uncertain about the future.

The point I am attempting to make here is that the current use of the
word "inflation" is nothing more than yet another ill defined "devil"
word. The current ruling class has spent several decades in teaching
the masses that inflation is simply a monster that eats small children.
The word is then used when appropriate so as to scare the masses
any time the ruling class deems it appropriate. There is no actual
definition for this term that would distinguish a monetary problem
from a market problem. That is why it can be used as a "devil"
word.

This
uncertainty will usually lead to lower investment and lower consumption
in the economy which will result in lower aggregate demand and
therefore lower output.

Most of this is speculation on your part that must be tolerated because of
the imprecision of the word "inflation".

Slowing the growth rate of the real economy is not normally a
"good" thing to do unless you are very selective about it.

Some people think that it is better to have low inflation and slower
growth,

And most are the people who have a lot of money and want to stay
wealthy forever and become even more wealthy no matter what that
may cost the species as a whole.

because inflation causes large amounts of uncertainty in the
economy and in the long run this is likely to lead to slower growth
rates.

Actually, of course, we can draw a correlation between growth and
inflation. That is not to say that inflation or growth is good or bad.
It merely is as it is. And it depends upon whether the rise in prices
(which most want to call "inflation") is a monetary thing or a scarcity
of goods/land thing. The point is that the word "inflation" simply
aggregates so many things that the term is really quite useless for
any purpose other than demagoguery or lying.

If we dramatically increase the tax on gasoline I can predict very well
what the reactions will be. Same with an across the board increase in
import duties. Same with increasing the tax on a lot of
"bads".

The problem with putting taxes on googs such as gasoline is that they
are very price inelastic, this means that even for a very large change
in price there is only likely likely to be a small change in the
quantity demanded.

This inelasticity may or may not be a *GOOD* thing if it exists. If the
price of fuel rises due to a tax then all consumable prices will rise
while the price of land and gold and such may well fall. The price of
oil may actually fall as consumption of oil moderates and other fuels
become more acceptable. Even in the face of inelasticity there may
be good reason to tax transportation fuels. If, however, we tax land
then the price of land USE will remain constant (a real inelasticity) and
the price of goods will actually fall. The objective of monetary policy
should be to maintain a constant relationship between money and
land. The objective of physical policy should be to maintain a
constant or very predictable relationship between land and labor.

2. It strangles the really small bossiness's and the small farmers that
are the real soul of a good middle class economy.

This may be the case but sometimes this may be the only solution for
high rates of inflation and will probable benefit the economy in the
long run.

I say not. Strangling the inflation monster in this way rewards the rich
at the expense of everyone else. A highly progressive income tax
or an assets tax is a much better solution. Such a tax increase will
increase the value of money but at the same time decrease the value
of big hoards of money. It is a redistribution without what you would
call "inflation" or "deflation".

--
"I know no safe depository of the ultimate powers
of society but the people themselves; and
if we think them not enlightened enough to
exercise their control with a wholesome
discretion, the remedy is not to take it from
them, but to inform their discretion by
education." - Thomas Jefferson
http://GreaterVoice.org


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