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“Why is inflation bad?”

Posted by Tom Duncan
October 4, 2010

“Inflation is a process of continuous increase in the prices of most goods and services in a country. This does not necessarily mean that all prices increase. There may be some exceptions, such as computer prices which have actually declined in recent years. Inflation can therefore be described as a persistent general increase in prices.” Read more.

“Why is inflation bad?”
Via the South African Reserve Bank.

Image by Salvatore Vuono / FreeDigitalPhotos.net.

5 Comments

  1. Tom Duncan October 6, 2010 10:25 AM
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    Thank you for the update. I reposted a link to the 2006 article, as I enjoyed reading it and thought I would highlight it further.

  2. Reuven Brenner October 6, 2010 9:48 AM
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    Tom, hi:

    Thanks for posting that old article with Martin Fridson. To better understand my view, here is my speech few years back in Washington :"The Us Dollar Accidents Waiting to Happen" (reprinted by Cato). http://www.cato.org/pubs/journal/cj26n2/cj26n2-10
    Thanks, Reuven Brenner

  3. Tom Duncan October 4, 2010 1:49 PM
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    I had not thought about that when I posted it. I thought their list of the problems of inflation were worth sharing (and it is), but you're right. Reading it again in light of your comments does make it more enjoyable. Thanks for the comments.

  4. Paul in Lakeview October 4, 2010 1:37 PM
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    …"The South African Reserve Bank, like central banks in most countries, is therefore strongly opposed to inflation, and uses its monetary policy to combat it."

    Good thing for the reserve bankers that they slanted readers' understanding by avoiding the phrase "monetary inflation". Had they used it, they might have prompted embarrasing questions about who is to blame for the increase in the money supply in South Africa since 1921. If money and banking there work more or less as they do in the USA, then the answer is "the treasury department of the state and the reserve bank established by the state caused the monetary inflation, the primary cause of the 'continuous increase in the prices of most goods and services' in South Africa from 1964-1999' ".

  5. Paul in Lakeview October 4, 2010 1:35 PM
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    The document "Why is Inflation bad?" is quite humorous, though probably not by intention of its author(s) and editor(s) on behalf of the South African Reserve Bank, "established in 1921", as it reads at the bank's website. For example, on page two it reads that

    "For instance, R100 put underneath a mattress ten years ago can now purchase ONLY ONE THIRD of the goods and services that it could have done in 1987. (See Graph 1.)"

    The graph shows that 1986 had the highest rate of price inflation (of "Consumer prices") during the period 1964-1999. After 1986 there is a significant, long-term, downward trend in the rate, at least until 1999, the last year shown in the graph. How convenient that the reserve bankers should choose 1987 as the base year with which to do their calculation. (An updated graph, available at their website, shows the trend reversing in 2002 followed by another two years of declines. But the rate is ALWAYS positive.)

    Still not satisfied with their own self-incriminating testimony, the bankers assert in the final paragraph that…