Defining Inflation

Inflation is a steady rise in prices, owing to which, incomes and savings of the population will depreciate. Even the weakest inflation is dangerous for the development of the modern monetary economy. Therefore, all countries (including the most developed ones), take anti-inflationary measures to reduce inflation rates.

What causes?

Inflation – a monetary phenomenon associated with issuance of excessive money for circulation compared with the supply of goods. This increase in money occurs for various reasons. And the first of them is the growth of incomes of the population, not supported by a corresponding increase in the production of goods. This excessive demand pushes up prices and increases inflation rate. This imbalance between supply and demand for goods and services can also be resulted by crop failures, import restrictions, or actions of the monopolists. Also, rising costs of the production and increasing expenses of enterprises for wages, taxes, interest payments and others highly contributes to increase of inflation rates. Furthermore, the increase in prices for imported components shows both an increase in world prices and weakening of the national currency. The weakened national currency can directly affect the prices of the final products imported from abroad. The overall effect of exchange rate changes on price dynamics is called the “transfer effect” and is often viewed as a separate inflation factor. An essential role in the development of the inflationary process is played by the so-called waiting moments. The expected rise in prices forces the population to buy goods. Thus, a deficit is created for some of them, and, consequently, prices are rising. It is difficult to bring down such inflationary expectations.

Inflation can take many forms. In a regulated economy (such existed in the USSR), as well as in wartime conditions, when prices are fixed, it can have a hidden character – this is so-called suppressed inflation. It is followed by the deficit of many products, a surge in shadow trade, a sharp increase in prices in the markets, etc. However, the repudiation of such regulation (after the war or in countries that have passed from an administratively regulated to a market economy) often generates “galloping inflation” with a frenzied price increase. It arises from the discrepancy between the supply of money and the insufficient quantity of goods.
The other forms of inflation include:

– Administrative inflation – the inflation generated by “administratively” operated prices;

– Galloping inflation – inflation in the form of spasmodic increase in prices;

– Hyperinflation – inflation with very high growth rate of the prices;

– Built- in inflation – characterized by the average level for a certain period of time;

– Imported inflation – the inflation caused by influence of external factors, for example excessive inflow to the country of foreign currency and increase in import prices;

-Induced inflation – the inflation caused by influence of factors of the economic nature, external factors;

– Credit inflation – the inflation caused by excessive credit expansion;

– Unforeseen inflation – the rate of inflation which has appeared above expected for a certain period;

– Expected inflation – the estimated rate of inflation in future period owing to action of factors of the current period;

– Open inflation – inflation due to increase in prices of consumer goods and production resources;

Negative Consequences of High Inflation

High inflation rate decreases purchasing power of all economic entities which negatively affects demand, the economic growth, the standards of living of the population, and moods in society. Depreciation of the income narrows opportunities and undermines incentives to saving that interferes with formation of a steady financial basis for investment. Besides, high inflation is accompanied by the increased uncertainty which complicates decision-making of economic entities. Overall inflation negatively influences savings, consumption, production, investments and general conditions for sustainable development of economy.

How to decrease?

Fighting inflation, as the experience of developed countries shows, is extremely difficult. It seems easy: freezing prices or introduce some form of regulation for prices. Unfortunately, this method is effective for a short time only. The freezing of prices will soon be triggered by an increase in the deficit of goods and will further exacerbate inflation. The other method of fighting inflation is through contractionary monetary policy. The aim of this policy is to reduce the money supply within an economy by increasing interest rates. This helps to reduce spending because those who have money want to keep it and save it, instead of spending it. It also means less available credit, which also reduces spending.

4 Indicators of Inflation and What They Mean For Your Financial Well-Being

Inflation

To define inflation is to state that the purchasing power of a national currency has decreased significantly. While our dollar has been on a steady decline for years, recently we’ve all felt the difficulties related to the current recession. While many economists refer to the “business cycle” in which recessions are expected on a cyclical basis, there are a few things you should know about the reasons for financial crisis today that may be indicators of inflation getting worse. Keep reading to learn more.

Indices

There are two main indices that economists use to diagnose recessions, depressions and recovery periods. The first is the CPI or consumer price index. Basically it’s a price calculation of basic goods and services consumers need throughout the year. While historically this proved to be among reliable indicators of inflation, recently two major elements were removed from the reported CPI figures: energy consumption and food. What this has succeeded in doing is providing a falsely high CPI as it eliminates the two largest expenses for individuals living in this country.

The second main index is the Gross Domestic Product (GDP) which monitors the pricing fluctuations in good made within the territorial boundaries of a nation. The GDP, in theory, should be comparable to the Gross National Product (GNP) which measures good produced by all companies within a nation, even if they are producing overseas. However, these two numbers right now have a larger discrepancy than ever before.

Four Indicators of Inflation

1. The first indicator is the excessive printing of currency. The privately owned Federal Reserve will purchase government debt in exchange for being granted rights to print more currency. This influx of new money is, in essence, a hidden tax. Our dollar’s purchasing power decreases with every new bill they put in circulation.

2. Increased labor and production costs are another sign that inflation is getting worse. This is a domino effect of devaluing money leading to increased raw materials cost leading to increased labor and production costs which finally leads to higher prices for you and me.

3. Increasing national debt is a sign that the economy is getting worse and inflation will continue to increase. As these debts must get paid, more currency is printed, and the cycle continues to spiral downward.

4. Increased taxes, usually aimed at the middle class, is another indicator that inflation will continue to get worse. This is nothing but a transfer of financial mismanagement from the people responsible and onto the already struggling citizens.

Viscous Cycle

While we may now better understand the indicators of inflation and reasons for financial crisis, as you can see you and I are stuck in a very difficult economic situation. Our spending power decreases, prices increase and our taxes go up. The good news is, it is still very possible to grow your money if you know how to use the current market to your advantage.

Inflation and Debt – Stealing People’s Wealth

Through the effects of a hidden tax called “inflation” (i.e. monetary theft by deception), the American economy is intentionally being destroyed from within and its people are being forced into servitude.

“Leadership” of both political parties (democratic and republican) have stolen the wealth of their citizens. More and more officials are enjoying “engineered theft”, including presidents, senators and Congressional representatives, governors, and judges. Bankers (international or transĀ­national) and the leadership of the American Bar Association play the controlling and directing roles, staying mostly in background shadows under various levels of concealment.

From the shadows, they direct the more openly greedy operators like the rapacious debt collectors. All participate in confiscating the real wealth of the American people through “inflation” and debt.

Inflation: Engineered Debt/Theft

Government-sanctioned monetary theft by deception is being instituted on a scale the world has never seen. If the cause of inflation were understood by the people, then totalitarian, socialistic government would be unattainable. This ruthless theft is not an accident! President Franklin D. Roosevelt stated,

“If it happens in politics you can bet that it did not happen by accident”.

Through governmental control of education, the true meaning of inflation over the years has been mistaught. Erroneously, people define inflation as a “general rise in prices”. A “general rise in prices” is the result – not the cause- of inflation. Others “define” inflation as…

– labor unions pressuring higher wages

– oil/gas prices

– automobile price increases

– greed

Inflation, Debt and Elected Officials

Elected officials …

1) promise not to raise taxes (gaining office by your vote)

2) then vote to increase federal debt (gaining your wealth by their vote).

Federal debt redistributes your wealth into their pockets via taxation/inflation. Given the current definition of inflation, who even thinks to blame politicians and bankers as the cause of inflation? The real inflation creators lie among elected officials –Presidents, Senators, Congressional Representatives, Federal Reserve corporate networks, and community bankers (using debt collectors as enforcement).

Inflation, Banking, Debt and John Maynard Keynes

John Maynard Keynes (pronounced “Kanes”) was a self-avowed socialist who served as economic advisor to presidents, prime ministers, and even dictators. Keynes explained the negative effects of inflation in his book, “Economic Consequences of the Peace.” On page 235, Keynes wrote:

“By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose.”

John Maynard Keynes was called “the father of deficit spending.” He advocated the absurd notion that governments could spend themselves into prosperity by going into debt. Keynes’ tragic economic theory actually helped conceal the inadequacies in the intentionally fatally-flawed Federal Reserve Banking System.

The Federal Reserve Banking System is directly responsible for the national debt of the United States and all other capitalist societies following Keynesian theory. Our national debt can never be “paid off” with current monetary debt instruments (Federal Reserve notes and bankers’ created ledger, or checkbook, money).

In 1967, Alan Greenspan, former chairman of the Federal Reserve Banking System, understood inflation in his “Gold and Economic Freedom”:

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept cheeks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. Gold is a protector of property rights. This accounts for the statists’ hatred toward the gold standard.

The money elite control governments by creating and controlling debt. The old proverb, “The borrower is slave to the lender”, still holds. The United States Corporate Government has spent itself into a democratic-socialistic system while the American people slept. (The United States became a “for-profit” federal corporation. See 28 USC Ā§3002(15)(A) for definition of “United States” as a federal corporation.)

Inflation Finances Tyranny through Debt Theft

Influential political scientists supported the change in the definition of inflation to conceal corrupt activities. If that hadn’t happened, citizens would’ve realized that politicians and banking officials were the real culprits creating inflation. People would demand honest banking reform back to the gold-silver standard of our Founders.

The only logical value for Keynes’ views is Keynes’ own explanation: By using this hidden tax called “inflation,” “that not one man in a million can diagnose”, governments and bankers (the current Administration is loaded with bankers) are able to secretly confiscate the people’s wealth by devaluing people’s assets (pension accounts, saving accounts, insurance payments) and decreasing the purchasing power of paychecks, stocks, bonds.

The bankers and their debt collector allies will keep plundering. Why not? Who’s stopping them? Either Americans legally repudiate debt structure, including inflation, returning to honest money or America will live in tents, as the rapacious, privileged few gain power through the politico-economic “engineered deceit” called inflation