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  • From: bob ford <bobford79 AT yahoo.com>
  • To: homestead AT lists.ibiblio.org
  • Subject: [Homestead] Defining Inflation
  • Date: Mon, 29 Sep 2008 08:29:32 -0700 (PDT)

This is from a scholar in Austrian Economics. There is a link to a long one
page article..........

*************************************************************************
Excerpts:

"The popular definition cannot explain why inflation is bad"

"If inflation is just a general rise in prices, then why is it regarded as
bad news? What kind of damage does it do? Mainstream economists maintain that
inflation, which they label as general price increases, causes speculative
buying, which generates waste. Inflation, it is maintained, also erodes the
real incomes of pensioners and low-income earners and causes a misallocation
of resources."......................

".........However, if we accept that inflation is an increase in the money
supply, and not a rise in prices, all these assertions can be easily
explained. It is not the symptoms of a disease but rather the disease itself
that causes the physical damage. Likewise, it is not a general rise in prices
but increases in the money supply that inflict the physical damage on wealth
generators. ......"

".......accurately measure inflation is an exercise in futility. Inflation is
not about a general increase in prices; it is about increases in the money
supply. Hence, whatever the improved index would measure has nothing to do
with true inflation, which is always increases in the money supply.
Consequently, to find out the status of inflation, there is no need for
various sophisticated price indices; all that is required is to pay attention
to the money supply's rate of growth. "

http://mises.org/story/908








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