Reply #62: Article -- Asset Hyperflation ( insidious effects of rarely discussed) [View All]

[pat_k]

Asset Hyperflation
http://www.investmentrarities.com/bestofjimcook07-04-05.html

This article makes some points about the insidious effects of inflation that we rarely hear.

As noted in the article, inflation severs the the link between effort and productivity. The vast majority suffer while footing the bill for the "winners."

A couple quotes from the article:

"In a free enterprise system, with an honest and stable money, there is dominantly a close link between effort and productivity, on the one hand, and economic reward on the other. Inflation severs this link. Reward comes to depend less and less on effort and production, and more and more on successful gambling and luck."

"It is not merely that inflation breeds dishonesty in a nation. Inflation is itself a dishonest act on the part of government, and sets the example for private citizens. When modern governments inflate by increasing the paper-money supply, directly or indirectly, they do in principle what kings once did when they clipped coins. Diluting the money supply with paper is the moral equivalent of diluting the milk supply with water. Notwithstanding all the pious pretenses of governments that inflation is some evil visitation from without, inflation is practically always the result of deliberate governmental policy."

Mr. Hazlitt concluded his case against inflation. "It is harmful because it depreciates the value of the monetary unit, raises everybody’s cost of living, imposes what is in effect a tax on the poorest….wipes out the value of past savings, discourages future savings, redistributes wealth and income wantonly, encourages and rewards speculation and gambling at the expense of thrift and work, undermines confidence in the justice of a free enterprise system, and corrupts public and private morals."