Inflationomics

Governmental Influence

As inflation grows, so does government’s influence.  Why?  Because:

  1. Currency is created by government or its agents (at little or no expense) and spent initially by government.  Thus, government’s priorities (passing laws and enforcing them) become paramount.  Remember, governments are in the “business” of passing laws and enforcing them.
  2. Businesses tend to go where the money is—they cater to government whimsy.  When the government wants more uniforms, weapons, food, tools, toilet seats, etc., businesses are happy to supply those items—usually at inflated prices.  The more governments want, the more businesses produce for them.
  3. Due to legal tender laws, people are required to accept the domestic currency.  Refusal to accept the government’s inflated (depreciating) currency brings “enforcement” by government, thus expanding the participation and influence of government in everyday life.
  4. Most people look to government to protect them from evil—not create it.  When inflation grows, people expect the government to protect them from its mal-effects and they prefer to believe that inflation is caused by something other than government money-printing and credit expansion.  And, of course, they call for government to do something (that’s what they are paying their taxes for), which expands the government’s role in society and thus its influence.
  5. As government spending increases, so does government size.  As government grows, so does the number of rules it promulgates.  As the number of rules grows, so does the number of rule violations.  As the number of rule violations grows, so does the population of "criminals" and the need for more rule enforcers and prisons (except in California where they send their prisoners out of state because they can't afford to build more prisons).  As the number of government employees grows, so does the government’s influence.  Like inflation, it becomes a self-perpetuating cycle.
  6. For government influence to continue growing, the governments that are creating the inflation must deny that they are doing so and blame someone else for the inflation—businessmen, speculators, and foreign governments are some of the favorite whipping boys.  Hopefully, now that we have the internet, people will realize, sooner rather than later, that inflation is really a combination of money expansion and the requirement (legal tender laws) that people accept those inflated currency units no matter what their value is.
  7. For government influence to continue growing, governments must downplay the significance and quantity of inflation to maintain their credibility and ever-growing influence.  They may alter the method for calculating inflation (CPI) just to fool their creditors and dependents (Social Security recipients).
  8. For government influence to continue growing, governments must get more and more people dependent upon the government.  This can be done by expanding the role of governments in retirement (Social Security, Medicare), housing (FNMA, GNMA, VA), banking (FDIC, FSLIC), investment (SIPC, Dodd-Frank), food (food stamps, FDA), healthcare (Medicaid, mandatory health insurance), business (SBA, OSHA, unemployment compensation, and hundreds of other government bureaucracies), child rearing (Head Start, public schools, Child Welfare), and just about anything else you can think of.

At some point, however, it will become obvious to everyone that the government doesn’t really produce anything and that it acts as a huge brake on the productive elements of society.  At some point, the tremendous increase in government corruption and the abuses of power that come with ever-expanding government will also become obvious (see www.judicialwatch.org). At some point, society will collapse under the dead weight that is government.  Greece, Tunisia, Libya, and many others have already reached that point…who’s next for a change?  Who has the next biggest government burden/oppression?

Robert Jackson Smith

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