What Is Inflation?

Price InflationPrice Inflation Versus Versus

Printing Money InflationPrinting Money Inflation

Price InflationAccording to Wikipedia According to Wikipedia

http://en.wikipedia.org/wiki/Inflation, http://en.wikipedia.org/wiki/Inflation, "inflation" has this definition:"inflation" has this definition:

"In economics, inflation is a persistent "In economics, inflation is a persistent increase in the general price level of increase in the general price level of

goods and services in an economy over a goods and services in an economy over a period of time."period of time."

Price Inflation

We will call this definition, We will call this definition, ""price inflationprice inflation." ."

It is, to be sure, what the vast majority It is, to be sure, what the vast majority (the bottom 99.9999% of us) (the bottom 99.9999% of us)

feel the greatest economic impact fromfeel the greatest economic impact from

Price Inflation

and is generally what most people mean and is generally what most people mean when they use the term, "inflation," as it when they use the term, "inflation," as it results in us spending more and more of results in us spending more and more of our money on less and less goods and our money on less and less goods and

services. services.

Price Inflation

Price inflation robs us of the wealth that Price inflation robs us of the wealth that we create and results in a lower quality of we create and results in a lower quality of life for everybody because it diminishes life for everybody because it diminishes

our ability to freely participate in our ability to freely participate in commerce with each other.commerce with each other.

“Printing Money”Then on the same Then on the same

Wikipedia page, the following is also Wikipedia page, the following is also said about inflation:said about inflation:

"Economists generally believe that high "Economists generally believe that high rates of inflation and hyperinflation are rates of inflation and hyperinflation are caused by an excessive growth of the caused by an excessive growth of the

money supply."money supply."

“Printing Money”

““Excessive growth of the money supply,” Excessive growth of the money supply,” is generally what economists are is generally what economists are

referring to when they use the term referring to when they use the term inflation.inflation.

The Distinction

Since it is all too common to apply these Since it is all too common to apply these two concepts interchangeably, and two concepts interchangeably, and

confusingly, to the term, "inflation," confusingly, to the term, "inflation," we will make a distinction between we will make a distinction between

the two concepts here.the two concepts here.

The Distinction

As noted earlier, an increase in prices will As noted earlier, an increase in prices will be referred to here as, be referred to here as,

""price inflationprice inflation."."

"Excessive growth of the money supply," "Excessive growth of the money supply," will be referred to here as, will be referred to here as,

""circulatory inflationcirculatory inflation."."

Austrian School Debunked

The mantra that many economists, The mantra that many economists, particularly the particularly the

so-called Austrian School, so-called Austrian School, have been repeating is that have been repeating is that

price inflationprice inflation is the direct result is the direct result of of circulatory inflationcirculatory inflation, , or by the government or by the government

"printing too much money." "printing too much money."

Austrian School Debunked

It sounds good on paper, right? It sounds good on paper, right?

Austrian School Debunked

In theory, In theory, circulatory inflation circulatory inflation

*could* *could* cause price inflation. cause price inflation.

Austrian School Debunked

In some parallel universe. In some parallel universe.

Austrian School Debunked

If If circulatory inflationcirculatory inflation existed there. existed there.

Austrian School Debunked

First of all, the government First of all, the government does NOT print money. does NOT print money.

Austrian School Debunked

With the exception of minted coins, With the exception of minted coins, all of our currency is issued by all of our currency is issued by

privately held banks privately held banks at at INTERESTINTEREST. .

Currency IssuanceSince all of these Since all of these

privately-published representations privately-published representations (which we call currency) (which we call currency) have to be paid back to have to be paid back to

private banks at private banks at interestinterest, , which is paid along with the principal which is paid along with the principal

out of circulationout of circulation, it is , it is mathematically impossiblemathematically impossible

for circulatory inflation to exist. for circulatory inflation to exist.

Businesses As PsychicsSecond of all, Second of all,

are we to believe that are we to believe that manufacturers and other business manufacturers and other business

owners possess some magical telepathic owners possess some magical telepathic power to detect when the the supply of power to detect when the the supply of currency has been expanded and then currency has been expanded and then

automatically raise their prices to automatically raise their prices to compensate? compensate?

Businesses As Psychics

Is that why prices have been increasing Is that why prices have been increasing as much as 10% annually? as much as 10% annually?

It's Math!

Since we have been obligated Since we have been obligated to pay back these to pay back these

representations of entitlement representations of entitlement with interest with interest out of circulationout of circulation, , the inevitable result is, in fact, the inevitable result is, in fact,

circulatory DEFLATIONcirculatory DEFLATION. .

It's Math!

In other words, paying interest on In other words, paying interest on every single unit of every single unit of

currency in circulation causes a currency in circulation causes a DECREASE DECREASE

in the volume of currency.in the volume of currency.

It's Math!According to According to

http://australia4mpe.wordpress.com:http://australia4mpe.wordpress.com:

"..."...circulatory inflationcirculatory inflation or even or even hyperinflation is indeed a mathematical hyperinflation is indeed a mathematical impossibility under any interest based impossibility under any interest based

monetary system."monetary system."

So Why Do Prices Go Up?

So, under the current monetary system, So, under the current monetary system, if if circulatory inflationcirculatory inflation is is

mathematically impossible, mathematically impossible, then what then what doesdoes cause cause

price inflationprice inflation??

So Why Do Prices Go Up?

One Word:One Word:

So Why Do Prices Go Up?

*Interest**Interest*

So Why Do Prices Go Up?

Since Since interestinterest is embedded into is embedded into every single business transaction every single business transaction in the economy, it is, by and large, in the economy, it is, by and large,

the leading driver of increasing prices. the leading driver of increasing prices.

Presidential Ironies

In a 2012 debate with Mitt Romney, In a 2012 debate with Mitt Romney, President Obama said:President Obama said:

““It's Math. It's Arithmetic.”It's Math. It's Arithmetic.”

Presidential IroniesBarack Obama's 2008 campaign Barack Obama's 2008 campaign returned a package returned a package *unopened**unopened* containing mathematical proof containing mathematical proof that the current interest-based that the current interest-based

system will result in system will result in monetary failuremonetary failure, ,

knowing knowing FULLYFULLY what the package what the package contained and knowing contained and knowing

whowho it's sender was. it's sender was.

Presidential Ironies

But that is a topic for yet another video.But that is a topic for yet another video.

What Is Inflation?

And some of you say, And some of you say, "Well, inflation is just fact of life.""Well, inflation is just fact of life."

What Is Inflation?Visit:Visit:

People for Mathematically Perfected EconomyPeople for Mathematically Perfected Economy Facebook PageFacebook Page

And Ask Questions!And Ask Questions!https://www.facebook.com/groups/pfmpe2012/https://www.facebook.com/groups/pfmpe2012/

What Is Inflation?

And some of you say, And some of you say, "Well, inflation is just fact of life.""Well, inflation is just fact of life."

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