🚀 go-pugleaf

In article <1993Jan21.163707.23334@oakhill.sps.mot.com> dong@oakhill.sps.mot.com writes:
>In article 286@athena.mit.edu, cmk@athena.mit.edu (Charles M Kozierok) writes:
>
>>is inflation natural?
>>
>>i think the answer is: some of it is, but most of it isn't.
[del]
>
>It should be stated that the productivity of a country is 
>never constant.  Thus, to maintain constant/steady prices
>for products, the money supply must change with overall
>productivity.  Unfortunately, no govt. or mining company
>is able to that, so prices will naturally fluctuate.  Now,
>one needs to assess human nature.  Prices are sticky, in
>that retailers are more inclined to raise prices that to
>decrease them (witness auto prices).  Therefore it would
>seem that inflation (upward ratcheting) is more "natural"
>than deflation or price constancy.  
>--DonG

The upward ratcheting of prices has only been "natural" since the
installation of the Federal Reserve. Before this, the CPI was actually
experiencing a gradual fall.

If you can find a copy of the CPI for the past two hundered years or so,
you will see that when large amounts of fiat money were pumped into the
system, the CPI takes off (war of 1812, Civil War, after the Fed).

Productivity is not constant, certainly, but when productivity overtakes
the increase in the money supply, prices will tend to fall. Some people
take this as a pox on businesses, but the prices of production fall also.

The law of S & D prevents retailers from pushing up prices indifinately.
When large amounts of fiat money are pumed into the economy, they can and
actually have to raise prices to keep up with the artificial demand.

The inflation of prices America has experienced since 1913 is not
"natural."

Jim Hranicky (jfh@reef.cis.ufl.edu)