Monday, January 13, 2014

A cynical case for inflationary monetary systems

You should not, necessarily, believe in the government's ability to "store value" for you.

By holding cash, you do just that.

By purchasing property, you make the decisions as to what will likely store value, or increase in value, whether in real or nominal terms. Of course interventionist government policies distort (read: essentially drive and control) and determine which industries will "profit" the most from the inflationary monetary system that underlies those gains. So the core problem may more accurately be identified as the spending policies themselves, rather than the simple existence of an inflationary monetary system.

Of course it is a small step to understanding the symbiotic relationship between the two. The policies can not be implemented without the printing of the cash. So in the "real" sense of the world we actually live in, they can logically be viewed as intertwined and essentially a single functioning system.

Not that drawing a distinction would even necessarily matter. Nothing is likely to change, certainly not any time soon. But in a theoretical sense, I wonder what a strictly controlled inflationary monetary system (ie. we will print 3% additional dollars every year and distribute them evenly among the population) combined with a non-economically-interventionist government would, theoretically, produce.

The questions regarding the effect on the poorest of the population, as well as the country's ability to compete economically with emerging economies (vis a vis minimum wages, both in terms of mandates and logically necessary increases due to the inflation) would of course have to be examined.

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