Inflation is an Artifice Caused by Government

On our last visit to the French countryside, in Normandy, we noticed a big pile of hay beside the road, with a sign on it: “Free Milk”

Another pile of hay had another message: “Farmers On Strike.”

The story behind these signs has a depression-era, black and white, look to it. Newsreels from the Great Depression show US farmers dumping milk rather than sell it at deflated prices. Now, French farmers do the same. Prices have fallen so low that many refuse to sell it at all.

But they can’t stop milking the cows. So what do they do with the milk? They give it away. Or, in a few instances, they throw it at the government’s farm agency offices.

Meanwhile, a story in The New York Times explains one of the reasons why milk has become so cheap. New technology makes it easier and cheaper to produce good milk cows.

Technology and globalization are inherently deflationary. The former increases productivity, thus lowering the cost of output. The latter lowers prices by directing business to the world’s lowest-cost producers.

Deflation is the natural order of things. Inflation is always an artifice caused by government. Central banks ‘target’ a certain level of inflation because they think – or say they think – that a bit of inflation helps create full employment. And it does, sometimes. But it does it by treachery. Inflation hoodwinks the working class. It reduces their real wages, making them cheaper to employ. Then, the proles wise up. They realize that prices are rising. They demand more wage increases. That is when inflation begins to get out of control and presidents get out the ‘Whip Inflation Now’ buttons.

Every time government offers to solve a problem, it inevitably makes the problem worse – except, occasionally, in rare episodes when a government-organized national defense pays off.

Bill Bonner
for Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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2 Comments on "Inflation is an Artifice Caused by Government"

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With computer prices (laptops for example), prices for a given level of technology have remained stable (not fallen) overall during the last twelve months. This is not what you would expect – a glut of manufacturing, and no discretionary buyers. But at the turn of the year, sales reps were advising that prices would actually climb to make up for lost sales. Your point is taken re: milk production. Inflation, though, is really made through monetary dilution, otherwise the trick doesn’t come off. This ultimately rests with central banks – who rules those? Governments? I think governments are by and… Read more »
Stuart Davies
Come on Bill, I know you know that the central banks are privately owned, and not in any way an agency of the government(s). Why can’t you, and everyone else who knows better, stop perpetuating this myth? Could it be that you are so obsessed with your libertarian dogma – that it it is always the government who is to blame for our economic problems – that you just can’t bear to admit this simple truth? To the extent that government aids and abets the banksters in their manifold scams (and this is to a very considerable extent), this is… Read more »
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