Wednesday, February 29, 2012

Inflation: From Whence?

Inflation is a condition that comes about when there is more money in circulation in the economy than is necessary to cover the amount of wealth in the economy. Everybody should know that wealth is not money; wealth is what money can buy.

Just as is the case with individuals, governments become indebted when they borrow money. And, like individuals, governments borrow money when they want to spend more more money than they are able to expropriate from the private sector in taxes. In the U.S., banks don't print currency; only the U.S. Treasury can do that. Moreover, governments the world over have reserved the authority to print currency to themselves. Because only they can control the amount they print, governments are the only entities that can cause inflation. There is no incentive in the private sector to do that. It would be insanity.

No comments: