Home builders and consumers have been complaining about this for some time; In the meantime, the media mainstream has also noticed: The devaluation is picking up speed. While some of the current price increases can be explained by supply bottlenecks, which are a consequence of the pandemic-related policy, there is one price driver that is mostly not mentioned: the ultra-loose monetary policy of the central banks. In the euro zone, the money supply grew by 12 percent to 14.5 trillion euros in 2020 alone.
In the US, the consumer price index passed the six percent mark in October. In Austria the rise in the price index is currently just under four and a half percent and thus at the highest level since 1992. At present, wage agreements cannot be high enough not to be immediately wiped out by inflation.
Meanwhile, politicians and central bankers continue to sing the songs of praise Deflationsbekämpfung. Deflation, so the assertion, would be the devil, since falling prices slowed people’s desire to consume, debtors plunged into problems and would trigger an economic downward spiral. As evidence for this thesis, reference is made to the “Great Depression” in the USA during the 1930s. At that time, the price index fell by up to 10.7 percent, while industrial production in 1932 even slumped by 32 percent for a short time. The fact that the “Great Depression” was preceded by the “Roaring Twenties”, in which the money supply was massively expanded by the FED and thus triggered an artificial boom that ended in a crash, is deliberately ignored in these analyzes. Note: Every crash is preceded by a debt-fueled boom – It was no different during the Vienna stock market crash of 1873 (which, by the way, is sung about in Johann Strauss’ “Fledermaus”, which was premiered in 1874: “Happy is he who forgets …”).
A little more than a month ago, the head of the German Bundesbank, Jens Weidmann, resigned from his position, a hardliner on monetary policy and an exponent of conservative monetary policy. His departure is an alarm signal. In any case, those in favor of a continuation of the ultra-loose monetary policy have a majority in the Governing Council. Nothing is too expensive for them for the money of German, Austrian and Dutch savers. Let us remind you of the threat made by Mario Draghi in July 2012 „Whatever it takes“that has since come true.
On the concept of deflation, demonized by the mainstream: A general decline in prices is the norm in an economy that is producing more and more rationally – all other things being equal. The entire 19th century, with its rapidly growing industrial production due to technical progress, was characterized by falling prices. The amount of money played no role. Because with the FED or the ECB comparable, disguised as central banks Inflationierungsbehörden, did not exist back then. Since industrial goods could be produced at falling prices, which became increasingly affordable for low-income groups, the prosperity of the working masses increased as a result of the deflation-related increase in purchasing power. The Marxist impoverishment thesis was no longer just theoretical, but also through the Market economy reality refuted.
If but Price deflation an increase in purchasing power per monetary unit, and thus an increase in prosperity, means its opposite – Price inflation – a decline in purchasing power and thus a lower standard of living.
The US economist Murray Rothbard, who dealt intensively with the Great Depression, pointed to this fact in a book published in 1963 with the title What Has Government Done To Our Money? there: “Increased productivity leads to lower prices and costs, thus distributing the fruits of the free market economy to the public and increasing the standard of living for all consumers. A violent support of the price level prevents this spread of higher living standards. ”
Conclusion: inflation never benefits the man on the street, it always benefits the ruling elite. It leads to one Redistribution from the bottom up. When politicians and central bankers have a lance for If inflation breaks, they are certainly not doing it in the interests of the majority of citizens.
