Topic: Inflation-based economy is a SCAM perpetuated by banks & ruling elites (Read 2067 times)

FederalReserveRipsOffOurDollars.pdf

This document describes Some basic mechanics of the scam.

Mild and stable inflation is considered to be good for the economy.
Ever wondered why central banks don't have an inflation target of zero?

(Red colorization and emphasis mine.)

For that to happen, the total % increase of gold digged out of the ground would have to be bigger than total % increase of goods & services in the economy.

It is possible, but not very probably.

This

If people continuously dig out more gold than trade-able goods, then inflation is also possible

No, it is not a scam. Interest and fractional reserve banking is a scam.

Totally agree. Just some clarification for the trapped minds.

It is a matter of principal order of consumption /production.
In the current debt base scam-economy, (even a non) a producer can be a consumer by taking a loan, which supposed to be repaid (with interest) by production in the future. This causes several systemic flaws:
- the sole fact that i have to pay interest will cut off from some of my future production, in behalf the loaner, who produce nothing, just prints new money;
- this alone can increase the price of goods, by debting them with the interest rate;
- plus the money supply grows faster - for it takes no production to create "money" - than the production of new goods. Producers have to spend some share of the value of their products to repay debt, resulting in no actual growth of the value of consumable products on the marketplace;
- the present value of money is always higher than future value, so everyone has an incentive to spend it NOW (on consumer product, investing in making of those products), creating consumerism, by trying to avoid wealth depletion;
- this creates unjustified and distorted supply and demand curves, like example buying real estate for irrationally high prices, without real demand, and enters housing bubble...or ever increasing stock and bond market while real physical commodities crushing (like oil)... Also it indebted almost every single government in the world http://en.wikipedia.org/wiki/List_of_countries_by_public_debt which they can never repay.

In an asset based (no fractional reserving, only real savings - not consuming in the present) economy, production can only grow as big as there is real demand for it by savers' - who are consumers! - loans looking for a net increase in wealth, not for to avoid wealth depreciation, but to actually increase their wealth more than it would by deflating money.

People only consume what they think is better value in the present than the increased value of their future savings (marginal utility of present goods is higher than increased amount of future goods bought with deflating money).

In this model production has to be before consumption, since there is no debt to build upon production, we can only build upon savings - assets already made by productive work, not by "printing" money!.
That is a huge difference, and the reality and as You have mention, the last thousands of years show this is the only way in the long run.

We should really start discerning between deflation due to a collapse in aggregate demand and deflation due to an increase in aggregate supply. The former is bad, the latter is good.

In general I am of the same mind as the OP. We need to move away from the system of Big Debt.

Btw, it's pretty funny to see Bitcoin and other "deflationary" currencies being attacked while at the same time the current supposedly "inflationary" monetary system is suffering heavily from structural deflation, despite QE and ZIRP/NIRP. Looks like the collapse in aggregate demand due to Big Debt can't be solved through expansion of the money supply. The side effects (financial bubble) will only do more damage in the end.

Where does the supply and demand of goods and services fit into this? The primary driver of prices is supply and demand, and increase in prices is what causes inflation.

It definitely works for the banks but I don't think it's a scam perpetuated by them.

If you don't see or understand how the growth of population is related to deflation, then

Why and how population grew is another discussion for another time, you are messing with things that are not related to this discussion.

By "deflation" i meant decrease in prices caused by scarce money / goods supply.

So productivity and inventions stopped/slowed down in XIX century ? Did the industrial revolution stop at the beginning of XX century ?
That is so stupid that I will not even take you seriously from now on.

You forget to mention that the first few thousand years you mention human population didn't grow as it grew the last two hundred years. Deflationary economy can last only as long as scientific innovations allow producers to keep their profits on par, i.e. counteract declining prices by increasing productivity (what had been happening through the 19th century).

Just in case, deflation means decrease in prices. What you meant to say is correctly called contraction of money supply.

Actually this is blatantly false.

Deflation is only deadly to inflation-based economy, which should be kind of obvious. If you base the foundation of your economy on never ending supply of money created by governments & banks, then deflation (as in decrease in the money supply) WILL be deadly. No suprise here, really.

Human economy has been based on deflation for the first few thousand years as all resources (including gold, silver, diamonds and other precious things) are finite and cannot be created on demand. Only the last century is truly inflationary.

It has already been established long time ago (welcome Great Depression) that deflation overall is by far more damaging to the economy than small-to-medium inflation.

If you like this, please also upvote me on Reddit:
http://www.reddit.com/r/Bitcoin/comments/2wuybh/inflationbased_economy_is_essentially_a_scam/
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Think about it for a minute, here are some arguments:

How inflationary economics works:
1. Value of the currency falls -> Saving under the mattress is not feasible -> So we make deposit at a bank
2. Because you cannot save under the mattress, you need a loan to invest -> You go to a bank
3. Because of taking more and more loans ( see: Money creation, https://www.youtube.com/watch?v=jqvKjsIxT_8 ), a never ending and self-sustaining debt is created in the system. You cannot ever completely repay this debt and it creates otherwise senseless investments aimed at repaying the debt -> Bank benefits
4. Because the money keeps losing value, you have to spend it -> This creates stupid, otherwise pointless consumption and production of goods & services, that are not really needed.

Cui bono ? Who benefits ? Banks of course.

However it works completely different a world based on deflationary economics:
1. Value of the currency rises -> Saving under the mattress is a valid way to make money -> Bank loses
2. Taking loans is not viable, because you would have to give back more in goods & services (+ interest) than you loaned -> Bank loses
3. Investments can be financed from savings, not loans -> Bank loses
4. Because money keep getting more value, it is not profittable to invest in weak buisnesses and buying things that you don't really need (it's better to keep the money under mattress) -> This lowers the amount of mindless consumption and increases investments into technologies that make real difference and bigger profits.

Who benefits ? Everyone except banks and over-hyped companies.

So IMO not only the deflation-based economy decreases banks' power over people, but it also shifts investments from focusing on mindless consumption gadgets into creating real change and things that matter.

Maybe the time for this centuries-old scam to end is now.