Inflation is generally accepted as better than deflation from a societal stand point. The common example is, if you were a business looking to invest in infrastructure to create some product, in inflation, the potential gain from selling the product goes up relative to the infrastructure expense, whereas, in deflation, it goes down – and this encourages business development during inflation.
If you have a currency that gains value, this disincentivizes people from moving it, so you have to implement fines of holding. If you have a currency that maintains value, you have a similar situation. But, if you have a currency that loses value, the fines of holding are inherent, and this avoids the cost of the administration that would be necessary to implement fines of holding.
To approach this at a higher conceptual level:
- The purpose of currency is to facilitate exchange, and it does this by serving as an intermediary, wherein the seller of a product accepts the intermediary, currency, which can be used later when the seller buys something he wants with that intermediary.
- The ideal intermediary is some balance between having no stickiness (ie having no intrinsic value that would dissuade someone from parting with it) and maintaining value during the intermediation period.
We can contrast #2 with the misconception of savers that money is defined alone by its use as a “store of value”, which they tend to use to argue against inflation.
There are a lot of dynamics here for analysis:
- competing inflations – how to maintain a stable level of inflation in a global environment (where others are inflating their currencies to drive up exports)
- how to inflate
- government expenditure
- bank bad-loaning with government bailouts
- do these loans go towards domestic expenditure or foreign (ex. a chinese company getting a US loan to buy iron to import into China)?
- who controls inflation (non-government banks who seek to diminish sovereign control in an aim for world-serfdom (world-government))
And, these dynamics are generally categorized in one of two categories:
- how to construct an ideal economy
- how to deal with subversion (the subverting institutions away from their stated goals (government corruption))
Supluses can be tax receipt related, government program funding related, or other:
- We could have a surplus funded by chinese dollars from alaskan oil extractions tax receipts in where no government programs were reduced and domestic tax receipts were the same
- We could have a surplus where government programs were reduced and taxes were kept the same
- We could have a surplus were government programs increased but tax receipts increased to over government program expenditure
Milton Friedmen, My Notes
Milton Friedman, 1980
Miltons’s counters to the arguments against free trade are extremely weak:
~”Monopolies won’t form b/c other countries would frown on a country attempting to attain such a monopoly”. This is like a child’s argument.
He misinterprets Adam Smith to mean that government always interferes and that free markets left alone will operate just fine. Smith made numerous mentions to how ~[free markets] get taken over by monopolies as a matter of nature. Also, Smith simply points out how many of government interventions cause problems, not that all government activity causes problems. In fact, Smith mentions quite a lot about how central banking has had various good and bad effects. This makes me curious as to whether Milton actually read Smith’s complete work or whether he is responding to some spark notes like material.
Milton says new deal worked, but that it was inefficient. Does not explain how a free market would have solved the existing problems.
Milton does do a decent job at pointing out some of the problems with government growth and programs.