A Geek With Guns

Chronicling the depravities of the State.

According to Krugman We Need More Inflation

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Paul Krugman decided to make a fool of himself again by claiming we don’t have enough inflation. The man is an idiot but I repeat myself. Thankfully the boys over at the Mises Institute website called Krugman out on his idiotic rambling:

In an Austrian framework, as in a natural-rate-of-unemployment model, monetary expansion and a low (relative to the natural rate) interest rate may increase employment; the policy may appear to succeed. But, as Hayek and Mises emphasized long before the development of modern macroeconomics, the employment created by stimulus, whether monetary or fiscal, and whether implemented when an economy is near full employment or initiated at a point where significant unemployed resources are available (Hayek 1939 and Ravier 2011) is unstable. Such employment, if it is to be maintained, will require ever-increasing distortions to the spending stream. A policy that uses inflation to generate employment hence contains the seeds of a return to stagflation, and if continually attempted every time unemployment begins to increase, ultimately, to the choice whether to end the inflation or move forward on a wrong path to a eventual crack-up boom.

[…]

More inflation now would just repeat the mistake, trading some lower unemployment now for more unemployment and more inflation in the future. To avoid holding a tiger by the tail avoid inflation now. The crisis and slow recovery should not be an excuse to revive failed Keynesian policies but instead to examine critically a denationalization of money.

Krugman continues to be the idiots’ goto person for economic advice. Mind you the man has been wrong about almost everything he’s stated.

Let’s consider inflation for a moment. Very few people ever take the time to analyze what inflation is, they usually just accept it as a natural thing that happens and is unavoidable. Inflation is theft performed by the state, plain and simple. Scarce goods have a tendency to be worth more than abundant goods and money is no different. If there exists only 100 ounces of gold in the world then each ounce is going to be valued extremely high whereas if gold was as abundant as water nobody would give it much thought. The United States dollar is similar, when the state prints more of them each dollar becomes less valuable as they are now more abundant. The inflation of the United States dollar is directly controlled by the state who could choose never to expand the supply and thus save those holding dollars from having that holding constantly devalued. Instead the state prints money willy nilly, which devalues the value of dollars and thus punishes those who hold them.

Why does the state do this? Easy, their cronies don’t suffer the affects of inflation. Inflation of the dollar doesn’t kick in until those dollars begin to circulate. The first receiver of newly printed dollars actually has more purchasing power since the supply hasn’t increased as those dollars haven’t begun circulating. Once the first receiver spends those newly printed dollars they being entering circulation and that is when they devalue already circulating dollars. Basically, if you’re the first receiver of newly printed dollars you have a tremendous advantage and the first receivers are those politically well-connected. It’s a corrupt little system where politicians can exchange purchasing power for whatever it is they desire at the expense of everybody else.

This is why it’s smart to convert your dollars into something valuable. Every day you hold a dollar its purchasing power is reduced. Keynesian economists like Krugman claim constant devaluation of money urges people to spend it more quickly and that somehow is better for the economy. What those idiots don’t see is that inflation discourages individuals from saving money to be invested in larger projects down the road. Instead of relying on debt individuals would have the option to save their money unti they have enough to make a big purchase such as a home or factory.

When Krugman says we need more inflation he really means we need more theft. What he advocates is stealing purchasing power from individuals who hold savings of any amount. Policies like this encourage debt spending. Why save money to purchase a television if that money is constantly going to be worth less and less? Why not just put that purchase on a television and repay the debt over time with constantly devaluing money? Keynesian ideas are what got us into our current economic mess and if we continue following those ideas we’ll be in complete economic collapse before we know it.

Written by Christopher Burg

April 26th, 2012 at 10:00 am