8 Mart 2009 Pazar

Inflation

"The purely monetary connection between ruler and subject demonstrated the absence of any other relationship. The continuous depreciation of currency by rulers was an appropriate technique within such a relationship; for these methods, which give all the benefits to one side and the entire loss to the other. This has been traced to the fiscal policy of rulers who use the royal prerogative of coinage as a means of taxation without concern for the consequences of devaluation."
-Georg Simmel (from Philosophy of Money)

Inflation is defined as "an ongoing rise in the general level of prices quoted in units of money".
The magnitude of inflation—the inflation rate—is usually reported as the annualized percentage growth of some broad index of money prices. With prices rising, money buys less each year. Inflation thus means an ongoing fall in the overall purchasing power of the monetary unit.

In the modern world, Inflation is a printing-press phenomenon. Inflation is not a capitalist phenomenon. Neither is inflation a communist phenomenon...inflation is always and everywhere a monetary phenomenon. It occurs a more rapid increase in the quantity of money than in output. With today's paper money, it is governments and governments alone can produce excessive monetary growth, Milton Friedman (from Free To Choose and Money Mischief).

Inflation results from preoccupation with the short-run and failure to take a long-run view. Thus, both getting into inflation and then having trouble getting out of it are often political problems associated with the fragmentation of governmental decision making and with the short-time horizons of the decision makers.

There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.