Alexander Mizan

The Unsustainable Lie of Inflation

Paco,

I tend to agree with you that the government in the last few decades (probably since Nixon took us off the gold standard completely) has shown consistent euphoria in printing dollars and devaluing the currency vis-a-vis real goods. I also agree that real wealth is derived from efficiencies, technological and educational, not from economic policies.
Yet, I think you should reexamine your thesis when it comes to controlled inflation coupled with responsible fiscal and monetary policies.Studies in history, psychology and economics have clearly shown that the best environment to operate an economy is in fact controlled inflation.
The reason for this is that an economy can only grow when people are willing to spend money. An economy where people expect money to be worth more in the future than the present is going to be inherently stagnant. Due to game theory, the people who save while the rest are spending are better off, but if all of us were saving and nobody spending we would have a phenomenon of a protracted recession or depression.
That would result in economic contraction and lack of productive investment because nobody would be willing to invest or consume. With lack of productive investments, you would not see the technological breakthroughs that do in fact bring progress, prosperity and eventually wealth to a society as a whole.
I think the problem lies herein and if we exclude the last 2 years, I think the Fed has been a responsible actor in managing monetary policy. The underlying problem lies in the fact that the last 20-30 years, the percentage of REAL productive investment in technology, R&D, education etc has declined vis-a-vis consumption.
This is a direct result of government policies that focused more on maintaining consumption rather than investment and unfortunately that is the responsibilty of the government and sorry to say the people that voted for it. I can still recall a previous President calling for the American People to "go out and shop". And this comment is not partisan. I think the leaders available that can re-focus on the long-run well-being of their voters are greatly diminished compared to the 40s, 50s and 60s but that has to do more with the people who elect them. Unlike Nazi Germany, we do live in a free country, so the ultimately responsiblity falls on the shoulders of the American people who fail to vote out the incumbents and ask for REAL change.