Jul
26
Who’s Afraid of Deflation?
First, a bit from the Wall Street Journal:
The old bogeyman of deflation has re-emerged as a worry for the U.S. economy. Here’s something else to fret about: After studying more than a decade of deflation in Japan, economists have slowly realized they have no idea how it works.
The Powers That Be have been attempting to spur inflation since the start of the financial crisis. Printing money and pouring it in to the economy – using every desperate expedient they can find to cause inflation. It hasn’t worked, at all. Worries of utter and complete destruction are at the back of every inflationist mind. It is, as noted in the linked article, a “bogeyman”.
Now, why is deflation a bogeyman? An Instapundit reader provides the answer:
Inflation helps the government hide its spending, while easing the burden on politically influential debtors and those who’ve lent against property. Deflation helps savers, salary earners and those on fixed incomes.
This is all VERY well understood.
What “Ivy League” governing elites don’t know, is how to finesse the politics of debasing the currency without inciting the pitchforks-and-torches crowd, whose latest manifestation has been the Tea Party movement.
And that is spot on – Inflation is a bogeyman because the elites in government and financial sharks will be on the short end of the stick if our economy deflates. People who work hard, save their money and invest with care will be on top of the world – and that is a nightmare for people who either like to exercise power via borrowing and spending (government) or who like to pile up vast sums by playing the global financial markets (financial sharks).
It should be kept in mind what inflation really amounts to: picking the pockets of the hard working, sober people in our society. It is a massive transfer of wealth from the working poor and middle class to the fabulously wealthy. It has been the basis of our economy since FDR’s New Deal (and that, my friends, is what the New Deal really was – stealing money and using it to reward the least deserving; with a few crumbs tossed to the middle class to keep them from getting too angry).
The political and financial elites are worried that the game might be over for them – that the amount of fiscal irresponsibility necessary to spark inflation might be so large that it will create a revolution. Their whole world of power and privilege is on the brink of disaster.
And we should just keep pressing them to the edge of the cliff and over it. The eventual complete crash of the system will be painful, but it will give us our best opportunity of getting rid of the thieves and allow us to reform an economy for the benefit of the hard worker, the person who saves and the person who carefully invests his savings for the long term.
