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The Hidden Hand Moved On

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Headlined to H1 11/11/08

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The ‘Hidden Hand’ Exposed?

“But the free market is not primarily a device to procure growth. It is a device to secure the most efficient use of resources.” — Henry C. Wallich, a Governor of the Federal Reserve System from 1974 to 1986.

Researching inflation has been an eye-opener: What is the best definition? Either we’ve lost the plot or there isn’t one, just some platitudes:

“The overall general upward price movement of goods and services in an economy, usually as measured by the Consumer Price Index and the Producer Price Index.”

“A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.”

They all come down to: ‘A sustained, rapid increase in general price levels.”

What causes it? Now, that’s a toughie.

“There is no one single, universally accepted cause of inflation” … So the modern economist gives us three:

1. Cost-push inflation, which is due to wage increases that cause businesses to raise prices to cover higher labor costs, which leads to demands for still higher wages to pay for the increase in prices, called the wage-price spiral.

2. Demand-pull inflation which results from increasing consumer demand financed by easier availability of credit – a little greed here – and,

3. Monetary inflation caused by the expansion in the supply due to printing of more money by a government to cover its deficits.

All of the above are pure hogwash especially the obvious wage-price spiral 'definition'.

Adding pewter to Roman gold coins (monetary inflation) didn't fool the merchants then, but economists generally agree that adding pewter (printing lots of paper money) causes a high rate of inflation in today’s money supply.

But because economic reality is so simple when viewed in relation to broader historical events – which it isn’t – it is fed to us in ‘economic theories' that have to sound complicated.

It does look circular, though and because so far no cause, no cure, I have had to either invent or find one for myself

THE STORY SO FAR:

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Tom is a contributor to public debate on issues affecting our survival; works with a London and a South African think tank, is a working journalist and author.
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Tom, we knew this, we just couldn't express it... by Jay Farrington on Tuesday, Nov 11, 2008 at 8:27:04 AM
Thank you - that puts me in pretty good company.&n... by Tom Dennen on Tuesday, Nov 11, 2008 at 9:00:32 AM
Well stated. Very easy to understand. Good writin... by kato krause on Tuesday, Nov 11, 2008 at 11:46:45 AM
Thank you.I know the hand in the pocket very well ... by Tom Dennen on Tuesday, Nov 11, 2008 at 12:07:14 PM