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Today we are experiencing the perfect storm in which both backsliding and monetary inflation erode our standard of living.
There are two forms of inflation.
Backsliding Inflation is caused by a decline in the efficiency of manufacturing and a drop in production. A break in the supply chain causes the cost of manufacturing to increase, which results in shortages and increases the price of goods.
Monetary Inflation is caused by an expanding supply. This comes about through undue increases in the value of financial assets, as well as the excessive issuance of dollars, stocks, bonds, cryptocurrencies, precious metals, and commodities.
THE IMPACT OF TECHNOLOGY
Technology has a deflationary effect.
Over the last 150 years, we have been able to work less and receive more for our labor because of technology.
Hours Worked Per Year
Advances in technology have the capacity to overcome our recent supply chain glitches along with the increasing ratio of retired citizens to workers.
But while technology can overcome backsliding inflation, we must also address monetary inflation to fully solve the problem of inflation today.
OUR EXPANDING MONEY SUPPLY
There are many ways we create money today.
Eleven of the most common are:
Fraction reserve banking
Mining gold and precious metals
Creating and mining cryptocurrencies
Securitizing financial assets such as issuing stock, corporate bonds, treasury notes, mortgage-backed securities, commodities, derivatives, and various digital assets.
When investors sense financial assets are overvalued, they buy tangible assets like housing, and prices rise. But tangible assets must be affordable for wage earners. Thus, when cashing in financial assets inflates the value of tangible assets to the point they are no longer affordable, values collapse and we have a recession. Recessions are a day of reckoning for over-expanding the money supply. Unfortunately, the carnage hits the middle class and the poor the hardest.
The solutions on this site - a payments tax, a balanced budget, paying off the national debt, and Banking 2.0 - combine to effectively fight the causes of inflation.
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