Do We Need 3% Inflation?
“As long as it is kept within certain limits, inflation is an excellent psychological support of an economic policy which lives on the consumption of capital.” (Ludwig von Mises, Socialism, pp. 448-9)
What causes economic growth? Is it a reduction in tariffs? Is it a cut in tax rates? Is it cutting red tape and bureaucracy? While each might stimulate or encourage economic growth, none of these choices causes growth. Economic growth is the result of an entrepreneur employing a new method that reduces the cost of production. Costs can be reduced in several ways. Newly discovered resources will reduce costs. A new technique that saves time, labor, or resources also reduces costs. And, often overlooked, are the cost reductions, which come from resource allocation according to the law of comparative advantage.
To clarify, suppose that there is an entrepreneur who can make 1,000 units of cloth per day. If this entrepreneur spends $5,000 per day in wages and on maintenance of the capital equipment, then his average cost of production is $5 per unit of cloth. Further suppose that the market price for each unit is $6, leaving the entrepreneur a rate of return of 20% (setting aside other costs and taxes). Now suppose that an improvement in the capital equipment is developed. (The improvement could just as easily have been locating a new source of cotton, an increase in the workers’ skill sets, or an adjustment of production to account for the law of comparative advantage. The important point is that the cost of production falls.) As the cost of production falls, the entrepreneur has a decision to make. He could try to simply pocket the additional profit, but if he does, he is missing out on a much larger gain. If, instead, he lowers his asking price, he will attract customers away from his competitors. His sales will increase, and his revenues will also grow. (When “stealing” customers from other competitors, the demand is “elastic.” Therefore, as the price is lowered, the company’s revenues will increase.)
The business thrives and all the traditional stakeholders win. The workers have become more productive, and as a result, their real wages will rise. Customers can buy more cloth at lower prices. The investors and suppliers are also made better off as the business prospers. Over time, the competitors will have to adopt similar (or better) improvements or face bankruptcy. Society is made better due to the entrepreneur’s reduction in cost.
Economic growth is not homogeneous across the economy. Growth is “lumpy,” because it depends on the amount of cost reductions and in which industries they occur. As a result, the prices of some goods will fall dramatically, while other prices will fall just a little, and a few might increase. The overall aggregate will show price deflation, which is another way of saying that the purchasing power of economic actors will rise. This outcome means that more people have more to spend. They can buy more goods and services, or they can save the new surplus. As prices adjust at the microeconomic level, market disequilibria quickly disappear. As a whole, when the economy grows, we should see a general price deflation.
This conclusion is important because it tells us that there is no economic reason to expand the money supply. Any amount will do. While money is subject to the same rules of supply and demand, like all other economic goods, money is different in one critical aspect. When it is used, it is never used up. In contrast, when I use (consume) an apple, it no longer exists. It gets used up. When I drive my car, it, too, gets used up, albeit at a much slower rate. However, when money is used, it does not get used up. The dollar is precisely the same before and after its use. While the form of money may suffer from some wear and tear, the nominal value of the money unit does not suffer from this degradation. In other words, the spending power of a worn dollar, four new quarters, and a digital dollar in my checking account are exactly equivalent to each other.
Why do some argue that there is a need to increase the money supply? While there is no economic reason to increase the money supply, there is a significant political reason. One could just as easily ask why a criminal counterfeits money. The answer is obvious. He wants to increase his purchasing power at little cost. The same logic is true with the ancient quest of alchemy to turn lead into gold. Regardless of who can create new money, whether it is a criminal counterfeiter, a mystical wizard, or the central bank, the same economic principle applies: those who get the new money first win, and those who get it last, lose. This principle is called the Cantillon Effect, which was first described in the early 1720s. The Cantillon Effect demonstrates that when the new money is first spent, it is exchanged at today’s prices. The new buyer redirects goods and services toward himself by bidding the economic goods away from alternative uses. The bidding for goods and services also raises the prices in those markets.
In this second stage, other people now have the new money. They also spend it, bidding the goods and services away from alternate uses. Again, these actions place upward pressure on prices. Not all prices are affected to the same degree. (It is rare, but some prices might even fall.) Hayek (1969) asks us to imagine honey being poured onto a plate, accumulating in a mound and then slowly spreading outward. However, as the new money spreads throughout the economy, it does not do so uniformly or at the same rate. The analysis must use a step-by-step process because a macroeconomic aggregate analysis will miss the impact of these microeconomic effects. If the new money was injected into a different economic sector or even at a different time, the outcomes would be different. The important point is that some people face higher prices, but do not yet have access to the new money. As a result, their real wealth falls. Thus, the Cantillon Effect shows how those who get the new money first are the winners. And it also shows how those who get the new money last lose. Wealth is transferred from those who get the money last to those who get the money first.
In our economy, who is the first to use new money? Today, our money is not backed by anything. It is created from nothing. Fiat money literally means “money that is declared,” that it is spoken into existence. While we do not need magical incantations to turn lead into gold, we can create unlimited amounts of new money through computer keystrokes at the central bank and the banking system. The central bank of the US, the Federal Reserve System, caters to the federal government’s fiscal policy and the financial and banking system. These institutions receive the new money first. They gain at the expense of everyone else. Each new dollar diminishes the purchasing power of all other dollars. Everyone else’s wealth dissolves. Yes, indeed, there is a reason to expand the money supply. And there is a reason to convince the public that an inflation rate of 3% is better than 2%. Unfortunately, the reason is not a good one, unless, of course, you are a part of the small group that gets the new money first.
The Cantillon Effect demonstrates the short-term impact of monetary expansion. If, as I detail in my forthcoming book, monetary expansion persists, it leads to a business cycle. The long-run consequence of expansionist monetary policies is a reduction in savings, capital consumption, a lower future standard of living, and possibly the breakdown of the currency itself.
Writes Mises:
Inflation is a policy. And a policy can be changed. Therefore, there is no reason to give in to inflation. If one regards inflation as an evil, then one has to stop inflating. One has to balance the budget of the government. Of course, public opinion must support this; the intellectuals must help the people to understand. Given the support of public opinion, it is certainly possible for the people’s elected representatives to abandon the policy of inflation.
Alex Jones Issues Emergency Warning: If Not Stopped, The Globalists Will Collapse Civilization And Create Hell On Earth
BOOM: Trump Says DAY ONE He’ll Demand Resignations of ALL Senior Officials Involved in Afghanistan Debacle
Former President Donald Trump on Wednesday said he intended to hold accountable incompetent senior level officials who facilitated the botched military withdrawal from Afghanistan.
Speaking behind bulletproof glass at an outdoor MAGA rally in Asheboro, North Carolina, Trump said “voters will hold Kamala and Joe accountable,” before adding he intends to rectify the “Afghanistan disaster” by cleaning house.
TRUMP: “When I take office, I will ask for the resignations of every single senior official who touched the Afghanistan disaster. I want them on my desk at noon on Inauguration Day.”
— Greg Price (@greg_price11) August 21, 2024
pic.twitter.com/8AUIMNJ7FW
“I will ask for the resignations of every single senior military official who touched the Afghanistan disaster,” Trump said. “I want their resignations immediately. And I want them on the desk in the Oval Office – the Resolute Desk – I want them all at 12 o’clock, Inauguration Day, everybody involved with that disaster.
He continued: “When you have a disaster, so stupid as that, that causes such a problem. You don’t know what that’s done to the reputation of our country, the Afghanistan disaster.”
“This house cleaning will be a signal to the entire world and the American military and everybody else. They want people to be held accountable for failure and incompetence. And it’s just not acceptable that something like that could happen.”
The bungled military withdrawal, during which 13 US service members lost their lives, occurred during Biden’s first year in office, setting the tone for the chaos that would define his presidency.
Watch Trump’s full rally below:
— Donald J. Trump (@realDonaldTrump) August 21, 2024
Treason? Trump Hints Obama Gave Russia Plans to Build Hypersonic Missiles
Former President Donald Trump suggested former President Barack Obama may have been involved in the U.S. government giving away hypersonic missile technology to Russia in recent years.
Trump made the comment during a rally in Asheboro, North Carolina, on Wednesday while speaking about revamping American innovation in technology and robotics.
“Hypersonics, these are missiles that go 7 times faster than a fast, ordinary missile,” Trump told the crowd. “So fast, that for the most part, you can’t shut ’em down and you can’t shoot ’em down.”
Whoa…. ?
— MJTruthUltra (@MJTruthUltra) August 21, 2024
Trump said that Barrack Hussein Obama Committed Treason by Giving Putin the Plans to Build Hypersonic Missiles
“Somebody gave Russia all of our plans for hypersonic missiles.. and they built them and we didn’t.”
Someone in the audience Yelled out Bill Clinton….… pic.twitter.com/W5Kqq3U7Y2
“Do you know that was our technology that was stolen by Russia? And Russia has them, and I started them very quickly.
“But somebody gave Russia years ago, before me, all of our plans and specs for hypersonic missiles. And they built them, and we didn’t,” Trump explained.
At that point, someone in the audience yelled out former President Bill Clinton’s name.
“He said Bill Clinton,” Trump chuckled. “It could be. In all fairness, might’ve been a little after Bill Clinton…it could’ve been Barack Hussein Obama. Perhaps you should ask him.”
Trump’s remarks are astonishing given his classified knowledge as a former president and the fact no previous media reports have revealed the U.S. funneled highly secret military technology to Russia, which would amount to treason.
According to Article III, Section 3, Clause 1 of the U.S. Constitution:
“Treason against the United States, shall consist only in levying War against them, or in adhering to their Enemies, giving them Aid and Comfort. No Person shall be convicted of Treason unless on the Testimony of two Witnesses to the same overt Act, or on Confession in open Court.”
The current gap in the ongoing hypersonic arms race between Russia and the U.S. has come under particular focus during the Ukraine conflict.
Russia has demonstrated in recent months just how far its developments in hypersonic technology have come by using state-of-the-art Zircon missiles to strike targets in Kiev and Ukraine warships in the Black Sea.
This is why the Deep State is so determined to stop Trump from retaking the White House — he apparently knows about the treasonous elements in government who’ve sold out the American people.
Roger Stone: RFK Jr. Endorsement Of Trump Will Be MASSIVE
Roger Stone gives his take on report RFK Jr. will endorse former President Trump after announcing he will bow out of the 2024 race this week, and what that will mean for the political landscape ahead of the pivotal election in November.
Roger Stone: RFK Jr. Endorsement Of Trump Will Be MASSIVE@RogerJStoneJr pic.twitter.com/74OHCBv4bq
— Alex Jones (@RealAlexJones) August 21, 2024
Kamala’s Secret Masonic Police Scandal Gets Even Weirder
The scandal surrounding Kamala Harris’ connection to a secret Masonic police force is getting deeper as records reveal a close relationship between Harris and the Freemasons involved in the illegal police force.
As I recently reported, Kamala Harris was working directly with the Masonic group in Los Angeles that operated an illegal shadow police department that aimed to set up shop in 33 different states including Mexico City. Kamala Harris’ own staffer Brandon Kiel was arrested for his role in the scheme. The secret police force claimed to be a modern descendant of the Knights Templar, based on “bloodlines.”
Now, the scandal deepens. Muckracker.com (which cited my original report) followed up with an investigation into some of the videos put out by the Masonic group, and Kamala Harris’ name pops up repeatedly.
If you’re not familiar with the case, it’s quite a doozy. Then-California attorney general Kamala Harris’ deputy director of community affairs Brandon Kiel’s arrest in 2015 for “impersonating a peace office” sparked a brief wacky news item about the secret Masonic police force that involved Kiel and his top hat-wearing father-in-law David Inkk Henry (aka “David Henry X,”) who also got arrested. Kiel had his charges dropped on the same day that David Henry X suffered a pulmonary embolism and died at age 47 in 2016.
Muckraker points to several old Youtube videos in which members of the Masonic police department explicitly refer to their relationship with Kamala Harris, making it clear that Harris had deep ties to Kiel and the Masonic group, which debunks her office’s initial attempt to distance herself from Kiel.
In one video, Brandon Kiel, speaking in front of a crowd of Masons at a Masonic gathering, stated “The Attorney General appointed me. I have her authority.” Kiel then described a program that Harris’ office was working on that lines up with Kiel’s agenda of being “smart on crime and not tough on crime.”
David Inkk Henry, aka David Henry X, expressed his view that his arrest and the arrests of his Masonic Fraternal Police colleagues were actually motivated by a political power play against Kamala Harris:
I recently unearthed the Masonic Fraternal Police Department’s mission statement (ARCHIVED HERE) which states the following: “The Masonic Fraternal Police Department, (M.F.P.D.) is the Knights Templar’s!…When asked what is the difference between The Masonic Fraternal Police Department and other Police Departments the answer is simple for us. We were here first! We are born into this Organization our bloodlines go deeper than an application.This is more then a job it is an obligation.”
“The Masonic Fraternal Police Department (M.F.P.D.) is a Masonic Sovereign Jurisdiction (Municipality) located within the incorporated City of Santa Clarita, California. The Chief of Police is Honorable Grand Master David Henry 33(degree) was elected and is Governed by a Grand Supreme Council, and 33 Masonic jurisdictions. He currently oversees a 1/2 Million members throughout the United States,” according to the group’s website, which is no longer active.
“The Masonic Fraternal Police Department (M.F.P.D.) provides services to Masonic Sovereign Grand Masters and their Masonic jurisdictions, as well as other Fraternities, Sororities, and Greek Organizations. Masonic Fraternal Police Department will be located in 33 other states, including Mexico City,” according to the group.
In 2014 in Los Angeles, David Henry X introduced Kamala Harris’ staffer Brandon Kiel at a Masonic St. John’s Day event, where Brandon Kiel represented Harris’ office.
L.A. Watts Times reported on June 19, 2014 (emphasis added): “Grand Masters and members of the Order were escorted by a motorcade to Mt. Tabor Missionary Baptist Church. The Conference, founded by Grand Master Willie Gaulf 33° was designed to create unity among the Grand Lodges in Southern California…R.W. Grand High Priest, Brandon Kiel serves as the Deputy Director of Community Affairs for Attorney General Kamala D. Harris. Kiel informed the audience of the Attorney General’s unyielding commitment to education and the importance of each and every members obligation to ensure that every child is reading by the 3rd grade an (sic) at 3rd grade reading level, as well as having perfect attendance. Kiel provided shocking information about the staggering numbers of elementary school students who were truant in California and how the Attorney General needs their support to address this critical issue. Kiel received a large round of applause.”
Kiel and David Henry X also stood behind an LAPD sergeant during a press conference when rioters inspired by the Trayvon Martin case were rampaging around L.A.
What is really going on with Kamala Harris and the Masons? PATRICK REPORTS will keep you updated with our series THE KAMALA FILES….
Alex Jones Issues Emergency Warning: If Not Stopped, The Globalists Will Collapse Civilization And Create Hell On Earth
The Dragon Behind The DNC
Does the dragon in The Book of Revelation represent the Communist Chinese?
The Democrats have deep ties to Communism.
Kamala Harris and her Marxist cohorts are setting us up for the final battle.
Like John the Revelator, we are marveling at the beast