It All Goes Back to Inflation. Please please please read this, it is of the utmost importance.
Shane February 28th, 2008
Inflation is the most amazing thing ever. It drives our lives unlike anything else, yet few of us understand it, economists will lie to you about it, and even people who claim to understand it, will disagree on it.
This is because, according to this book that I am currently reading, people are always trying to cheat the system. According to the author, the ‘new’ economists (the book was originally written in the 1940s) will promote bad economic principles, for various reasons. The author cites Ludwig Von Mises as a source, who is also often cited by Ron Paul.
What is happening is that our system is built on crap, lots and lots of crap, all designed to help specific groups, and not the general populace. Amazing really. I used to argue on a forum with a recently graduated (Dartmouth) Economist, and he would state things as fact, but according to this book, Ron Paul, the Ludwig Von Mises institute, and many other *truely* Free Market Economists, he is wrong.
This kid tried to tell me, for months and months, that inflation was good. By design, it pushes people to invest their money. What amazed me most, (I have written about this before) is that the government wants inflation, and our system is designed this way. It is truly amazing. Ok wait, lets start GeekMode™ for a second here:
We are, no joke, living in The Matrix. You there, reading this article. You are living in a dreamworld, a prison for your mind. You are a slave. Like everyone else you were born into bondage. Into a prison that you cannot taste or see or touch. A prison for your mind.
Ok lets end GeekMode™.
It is true, all dorkiness aside. You were born into a prison. You don’t realize it, but you were. We all were.
The first thing to learn is that the idea that prices always go up - that is not natural. Prices can go up for natural reasons, but the idea that they always go up, every year, is part of our economic system. It is designed that way. They want prices to go up. Why?
As the book says ‘Inflation is designed to deceive labor (the average worker) by reducing REAL wages (that is, wages in relation to purchasing power) by increasing prices.’
Key word: deceive.
There are a few key concepts here. Money is just a number, not real wealth. If the government printed a godzillian dollars, and gave everyone say, a million dollars for nothing, what would happen?
At first, people would go nuts, they would buy things at normal prices. But quickly, shops would run out of goods. Any business, seeing products flying out the door, will raise prices, to hopefully still sell all of their goods, but at the highest price possible. So prices start to go up. Eventually, the prices would go up to a point that people who were living at the same standard they were before they received the million dollars. Now a loaf of bread is $20, a car is $100,000. People think they are rich, but they are not. Their real wealth has not changed, they just have more paper notes in their pocket.
Inflating the system does not make people more wealthy, it just changes the numbers. This is another key concept. Until the money has been in circulation awhile, prices are normal, so the people who first receive the money will actually end up with more stuff. By the time the government gives the last million to the last citizen, the prices have increased, and the citizen gets nothing extra, actually, that person will actually be able to buy less than they did before, while the people who got their million first, end up with more stuff at the end.
People like me, the blue collar workers of America, we are the last ones to get the million.
Some people will say ‘but inflation hurts everyone, the prices go up for the rich people too’. This is true, sort of. The final trick is that people who can afford to invest their money, and make interest off of their investment, will keep pace with, or even out pace, inflation. Those who can invest the highest proportion of their salary into something will do the best. So Bill Gates will be hurt less than some guy making $200,000 a year, even though they both invest their money. Someone making $20,000 a year, who cannot invest at all, gets hurt the most.
The system is designed so that there is always more and more money being added to the pool, and by the nature of how it works, that money will not flow to the poorest, it will always flow upwards, to the rich. The repercussions of adding money to the system is most felt by those who receive none of the new money.
Yet, those people do not usually notice, until inflation gets bad, which is it right now. Why would there be a lot of money being added to the pool right now? What does the government need lots of money for?
War. Wartime seems to create economic growth, but in reality, it creates inflation. At first it helps, because jobs are added to companies that have military contracts. Those new employees go out and buy groceries, houses, cars. Local businesses see an increase in demand, business is booming they say… but then the prices start to go up, and anyone not getting a raise or rich enough to invest, will now make less money. You, me, and everyone else is paying for Iraq, every time we pay more for gas, food, everything. Inflation is a big part of the higher gas prices, make no mistake.
And thanks to the death of many Unions, people do not get a ‘cost of living raise’ anymore. As Henry Hazlitt states in ‘Economics In One Lesson’:
What they (the people inflating the system) forget is that labor has itself become sophisticated: that the big unions employ labor economists who know about index numbers, and that labor is not deceived.
But labor is deceived, remember this book was written in the 40s. As unions declined, it became every man for himself, and since none of us are taught monetary policy in high school (you did notice we all go to government run schools, right?) we never see the trick.
You there, the person who slogged through this long winded article! We are just slaves. Why is it almost impossible for the average American to survive on one paycheck? Did the government really do anything at all by raising minimum wage? That raise you received this year, that made you feel good, are you really richer than you were last year?
Ultimately there are ways that the government disguises inflation. Inflation is hard to measure, and of course, Reagan took housing out of the calculations in the 80s. The money that inflated housing prices had to come from somewhere, right? Yet how can the inflation numbers still say 3% or 4% per year? 
There are other ways, but there is enough to digest here already.
Hazlitt says, even the most hardened Economists find it impossible to factor inflation into everything. When we hear on TV that the economy grew 4% last year, do we remember that inflation was 4%, so that we really did not grow at all? When the stock market goes up and up and up, do we remember that without our inflationary system is artificially boosting those numbers, and that much of the money pushing the stock market to ever higher numbers is slowly, quietly, being sucked from the Average American? When we get a 4% raise, do we remember that we really are only treading water, and not really getting ahead? When the politicians and economists say they do not understand why the rich poor gap is widening so fast, will they think of inflation? No, no one does. Even professional economists will forget, and that is why the system works.
This system only came about in 1913. Ever heard the phrase ‘the Roaring 20s’? I would think it is not coincidental that this system was put in place in 1913, and within 20 years, the US had a huge boom in its economy, and then a HUGE bust. Booms and busts, sound familiar?
You were born into a prison. One that you cannot taste or see or touch. A prison. For your mind.
GeekMode™ is so much fun.
