If I have seen further it is by standing on the shoulders of giants.

Sunday, November 15, 2009

INFLATION - What does it mean to live in a world where your money loses value exponentially?

Most of us think of inflation as rising prices, but that’s not quite right. Inflation is not caused by rising prices. Rising prices are a symptom of inflation. Inflation is caused by the presence of too much money in relation to goods and services. What we experience is things going up in price, but in fact, inflation is really the value of your money going down, simply because there’s too much of it around. Inflation is, everywhere and always, a monetary phenomenon.

"By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some....The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose." -John Maynard Keynes (Economic Consequences of the Peace, 1920)

Crash Course: Chapter 10 - Inflation

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