Linkage Between Monetary Economics And Labour Slavery, Circumventing It To Your Advantage--Part 3

THEORTITICAL FOUNDATION OF INFLATION
There are several ways to define inflation, with varying usefulness and ability to explain the phenomenon. According to Prof. Rothbard, inflation is the process of issuing money beyond increase in the stock of specie. In other words, new money substitutes are issued without backing of their specie. The great gain comes from the issuer’s putting new money into circulation.

The profit is practically cost­less, because, while all other people must either sell goods and services and buy or mine gold, the government or the commer­cial banks are literally creating money out of thin air. They do not have to buy it. Any profit from the use of this magical money is clear gain to the issuers.

The term "inflation" as defined by the British Currency School was used strictly to denote an increase in the supply of money that consisted in the creation of currency and bank deposits unbacked by gold. It became accepted in the English-speaking world from the mid-nineteenth century.

If the supply of Potatoes is as plentiful as the supply of Plantain in the Ghanaian market, the price of potatoes that is it exchange ratio between potatoes and money would change considerable. That means one will obtain potatoes at a much smaller sacrifice than required today. Likewise if the quantity of money is increased, the purchasing power of the monetary unit decreases and the quantity of goods that can be obtained for one unit of this money decreases also.

This Lug Von Misses assert in his paper economic policy thoughts for today and tomorrow 1958, that; “When a government increases the quantity of paper money, the result is that the purchasing power of the monetary unit begins to drop and so price rise. This he called “Inflation”

And further observed that there has never been any serious argument against the economic interpretation of the relationship between Price and the Quantity of money or the exchange ratio between money and other goods, commodities and services

Under present-day technological conditions there is nothing easier than to manufactured piece of paper upon which certain monetary amounts are printed where all the notes are of the same size, it does not cost the government more to print a bill of a thousand cedies than it does to print a bill of one cedies. It purely a printing procedure that requires the same quantity of the paper and ink

HISTORY OF GOVERNMENT ACTION AND INFLATION
In the 18th century, when the first attempts were made to issue bank notes and to give these bank notes the quality of legal tender — that is, the right to be honored in exchange transactions in the same way that gold and silver pieces were honored — the governments and nations believed that bankers had some secret knowledge enabling them to produce wealth out of nothing. When the governments of the 18th century were in financial difficulties, they thought all they needed was a clever banker at the head of their financial management in order to get rid of all their difficulties.

Some years before the French Revolution, when the royalty of France was in financial trouble, the king of France sought out such a clever banker, and appointed him to a high position. This man was, in every regard, the opposite of the people who, up to that time, had ruled France. First of all he was not a Frenchman, he was a foreigner — a Swiss from Geneva, Jacques Necker.

Secondly, he was not a member of the aristocracy, he was a simple commoner. And, what counted even more in 18th-century France, he was not a Catholic but a Protestant. And so Monsieur Necker, the father of the famous Madame de Staël, became the minister of finance, and everyone expected him to solve the financial problems of France. But in spite of the high degree of confidence Monsieur Necker enjoyed, the royal cashbox remained empty — Necker's greatest mistake having been his attempt to finance aid to the American colonists in their war of independence against England without raising taxes. That was certainly the wrong way to go about solving France's financial troubles.

There can be no secret way to the solution of the financial problems of a government; if it needs money, it has to obtain by taxing its citizens (or, under special conditions, by borrowing it from people who have the money). But many governments, we can even say most governments, think there is another method for getting the needed money; simply to print it.

If the government wants to do something beneficial — if, for example, it wants to build a hospital — the way to find the needed money for this project is to tax the citizens or find a private investor capable to invest in the building of the hospital. Then no special "price revolution" will occur, because when the government collects the money for the construction of the hospital, the citizens — having paid the taxes — are forced to reduce their spending. The individual taxpayer is forced to restrict his consumption, his investments, or his savings. The government, appearing on the market as a buyer, replaces the individual citizen: the citizen buys less, but the government buys more. The government, of course, does not always buy the same goods which the citizens would have bought; but on the average there occurs no rise in prices due to the government's construction of a hospital.

I choose this example of a hospital precisely because people sometimes say, "It makes a difference whether the government uses its money for good or for bad purposes." I want to assume that the government always uses the money which it has printed for the best possible purposes with which we all agree. For it is not the way in which the money is spent, it is the way in which the government obtains this money that brings about those consequences we call inflation and which most people in the world today do not consider as beneficial.

For example, without inflating, the government could use the tax-collected money for hiring new employees or for raising the salaries of those who are already in government service. Then these people, whose salaries have been increased, are in a position to buy more. When the government taxes the citizens and uses this money to increase the salaries of government employees, the taxpayers have less to spend, but the government employees have more. Prices in general will not increase.

But if the government does not use tax money for this purpose but rather resort to the uses of freshly printed money instead, it means that there will be people who now have more money while all other people still have as much as they had before. So those who received the newly printed money will be competing with those people who were buyers before. And since there are no more commodities than they were previously, but there is more money on the market — and since there are now people who can buy more today than they could have bought yesterday — there will be an additional demand for that same quantity of goods. Therefore prices will tend to go up. This cannot be avoided, no matter what the use of this newly issued money will be.

To Be Continued.....