From: Ophis (hidden@lucifer.com)
Date: Sun Oct 26 2003 - 11:49:35 MST
Newspapers, economologist, officials of the government and the EU have been telling us for years that we shouldn't ask for raises because that would would push the "inflation rate" up. Also, they have been arguing that if unemployment goes down "inflation" will go up. All along, *almost all* prices have been going up with a rate close to 3%. They all call it "inflation rate" and they tell us that we should consume less and accept zero raises if we want it to drop. Is all this false? Or at least the "no raises" part?
There is no magic here. What you've been hearing from all these "experts" and "officials" is -over time- simply false... unless someone (hint: the government). If you think about it, what you quote them saying simply doesn't make sense. Let's look at an example:
Suppose that we are in a limited economy just you and I. I make bread and you make wine. I need your wine and you need my bread. I have $50 and you have $50. Our economy isn't going to be sustainable (all things remaining equal, which I agree they never do) if I charge you $51 for my bread. There simply won't be enough money around (unless we print new funny-money and decide to accept it as real money) for us both to survive.
The same thing happens in the real economy. I can't just raise my prices because the breadmaker employee union has made me increase my employee's wages. The only way a producer can raise prices is if there is an increase in demand for the product. As a breadmaker, if I raise my prices without there being in increase in demand, I'll see a decline in sales.
Of course, we can suppose that all my competitors have to raise their prices too. So now ALL bread prices are higher and as a consumer, if you want to buy some bread you have no option but to pay a higher price. All bread makers will then see a decline in the demand for bread because people will start buying alternative products instead of bread (like pop-tarts or something).
The appropriate response of the breadmakers at that point would be to lower the price of bread to gain market share in the overall bigger "food" market place.
All this said, all producers of all things cannot all increase their prices at the same time (as we've seen over the course of history). There simply isn't enough money to go around for this to happen (unless the government prints funny-money).
This is where the "cheat" comes in. Governments DO print new money all the time (banks do too under our fractional-reserve system). This is, obviously, what causes inflation. Printing new money of course is nothing else but a hidden tax. By printing a new dollar, the government has effectively taken a little bit of value out of the dollar in my pocket.
The other perverse impact is "when" and "where" government decides to "spend" this new money. I've not seen much government investment in the bread-making industry lately but I've seen a lot of spending in the military. So in effect, the government is taking a little bit of value out of the breadmaker's savings and giving it to the military-industrial complex.
What's a breadmaker to do when this goes on for years and years? Well, hire a lobbyist in DC of course! So at some point, the Amerian Breadmaker's Association (fictitious association as far as I know) hopes to apply enough pressure in DC to justify the government enacting new regulations that favor the breadmakers.
When government is in charge of the economy like this, we end-up with a favors-based system. That's what's wrong with "Capitalism" today. It isn't Capitalism, it's some sort of perverted favor-based power grab system that some have dubbed Corporatism. I don't like that name myself because it hides the Government's central role in it.
However we name the system today, it's a bad system and new government policies are exactly what we DON'T need to fix it.
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