05-27-2016, 11:29 PM
(05-27-2016, 08:43 PM)Kinser79 Wrote: Deflation only becomes a problem for those who are heavily leveraged as it makes the price of money much more dear for them to pay off their debts. Inflation, however, taxes the poor most stealthily and most heavily destroying their purchasing power and consequently their demand--causing depressions of greater proportions.
This is why governments and liberals hate the use of commodity money because it limits government spending and power. When the gold standard was in operation prices declined one to two percent a year while nominal wages remained static. This improved life for everyone, particularly the poor. This made the accumulation of capital much easier, particularly the poor, and allowed people to save for the future. The bank panics, caused by artificial credit expansion, tended to last no longer than about two years unlike the eternal recessions that seem to plague the US after the twenties.
The Panic of 1819 was one of the worst and it was caused by the First Bank of the United States, an early experiment in central banking. Murray Rothbard did his PhD thesis on this topic and it is still considered the authoritative work on the subject even by mainstream economists and historians. This will no doubt annoy Odin and Eric the Obtuse.
Democracy is the theory that the common people know what they want, and deserve to get it good and hard. -- H.L. Mencken
If one rejects laissez faire on account of man's fallibility and moral weakness, one must for the same reason also reject every kind of government action. -- Ludwig von Mises
If one rejects laissez faire on account of man's fallibility and moral weakness, one must for the same reason also reject every kind of government action. -- Ludwig von Mises