All wars are inflationary, in fact they are the most inflationary spending of all. The money stays behind while the goods produces are sent away and blown up.

[youtube]http://www.youtube.com/watch?v=afWqKcqntfs[/youtube]

Dr. Martenson establishes inflation as a monetary phenomenon, defined as the decrease of the value of money, caused by too much money around in relation to goods and services. From 1665 to 1776, 111 years, there was absolutely no inflation. From 1665 to 1905, 240 years, the cost of living stayed roughly the same, aside from brief jumps during wars. Unfortunately for us, there was no settling in terms of inflation after World War I or World War II. The military apparatus was not dismantled, and inflation has accelerated to astonishingly high levels.

Comments by watchers:

Overall yes, technology has kept pace with inflation. If it didn’t we would have problems like Zimbabwe or Weimar Republic in Germany where people would have to spend their money immediately to avoid prices going up before they could spend it.

What we see is inflation on things that the government interferes with or that you can get a loan to buy. Houses, cars, government school, college, and medicine. Free market goods are exponentially dropping in price and increasing in performance.

But we now have so much government intervention (friction) and so much inflation (interest, fractional reserve, and government debt) that technology won’t be able to keep up. The interference is stopping the ability to improve technology and build businesses and non-profits that actually produce thing we use.

Break the ability to increase capacity and the whole system will fail from entropy or in this case inflation. Big business and big government is doing the exact wrong thing.

Automation and other increases in productivity have helped counteract inflation. Inflation first effects things that can be mortgaged, or are bought by the government. Houses, cars, medicine, education. Things like electronics drop in cost exponentially.

War does not have any gains, at best it redistributes things. War is inflationary for both side. They kill people and break things. Anti-productivity.

War is the most inflationary action possible. It redirects current production to destroy destructive capacity causing current and long term scarcity. War makes real inflation, not just monetary.

Social programs might lead to more inflation in the long run because there is incentive for a large number of people to continue it. Social spending misdirects investment resulting in shrinking capacity until the system collapses. The effect is delayed so people tend to not understand the cause.

~Mark Profit

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