{"id":18080,"date":"2016-02-22T16:04:46","date_gmt":"2016-02-22T21:04:46","guid":{"rendered":"http:\/\/olduvai.ca\/?p=18080"},"modified":"2016-02-22T16:04:46","modified_gmt":"2016-02-22T21:04:46","slug":"my-letter-to-the-wsj-re-inflation-is-not-indicative-of-an-expanding-economy","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=18080","title":{"rendered":"My letter to the WSJ re: Inflation is not indicative of an expanding economy"},"content":{"rendered":"

My letter to the WSJ re: Inflation is not indicative of an expanding economy<\/a><\/h3>\n
\n
\n

Re:\u00a0US Consumer Prices Flat in January, but\u00a0Offer Glimmer of Inflation<\/a><\/p>\n

Dear Sirs:
\nThis quote from Ms. Davidson\u2019s article perfectly illustrates the fallacy that higher prices are desirable:<\/p>\n

\n
\n

\u201dBroad-based price growth is signalling that the wage and price pressures are building, an indication that the economy is expanding at a solid pace and that recessionary concerns are overdone,\u201d PNC economist Gus Faucher said.<\/p><\/blockquote>\n

Higher prices are the result of a combination\u00a0of two\u00a0factors, both of which are undesirable\u2013lower output or an increase in the money supply which causes an increase in spending. The following simple formula of Professor George Reisman can be found on page 505 of his magnum opus\u00a0Capitalism: A Treatise on Economics<\/em>.<\/p>\n

P = Dc\/Sc<\/em><\/p>\n

P<\/em>\u00a0is the general level of consumers\u2019 goods prices, in the sense of the weighted average of the prices at which consumers\u2019 goods are actually sold.\u00a0Dc\u00a0<\/em>is the aggregate demand for consumers\u2019 goods. as manifested in a definite total expenditure of money to buy consumers\u2019 goods, and\u00a0Sc\u00a0<\/em>is the aggregate supply of consumers\u2019 goods, as manifested in a definite\u00a0quantity of consumers\u2019 goods produced and sold.<\/p><\/blockquote>\n

As further explained by Professor Reisman, \u201cAn expanding quantity of money operates to raise the general price level by virtue of raising aggregate demand relative to aggregate supply.\u201d<\/p>\n

In other words, the Federal Reserve Bank\u2019s policy of printing more money causes aggregate demand to rise, but the rise in prices does not\u00a0mean that more goods and services are being produced. It most probably means that more money is chasing the same or even smaller quantity of goods. In fact an increase in the quantity of money causes dislocations and disequilibrium in the structure of production, which\u00a0causes the supply of consumers\u2019 goods to fall.<\/p>\n

Therefore, an increase in prices, which is commonly called \u201cinflation\u201d, is nothing to be desired\u00a0by the general public.<\/p>\n

Patrick Barron<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

My letter to the WSJ re: Inflation is not indicative of an expanding economy Re:\u00a0US Consumer Prices Flat in January, but\u00a0Offer Glimmer of Inflation Dear Sirs: This quote from Ms. Davidson\u2019s article perfectly illustrates the fallacy that higher prices are desirable: \u201dBroad-based price growth is signalling that the wage and price pressures are building, an […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[111,12526,426,7617,12527,12525,861],"class_list":["post-18080","post","type-post","status-publish","format-standard","hentry","category-economics","tag-capitalism","tag-higher-prices","tag-inflation","tag-mises-institute","tag-price-growth","tag-us-consumer-prices","tag-wall-street-journal"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18080","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=18080"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18080\/revisions"}],"predecessor-version":[{"id":18081,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/18080\/revisions\/18081"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=18080"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=18080"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=18080"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}