Ok,  ok… many of you already know that inflation is a, seemingly mysterious, necessary evil that we all have to endure, but, did you know that it isn’t so mysterious? In fact it is blatantly apparent, who and how it happens, to any one who has read anything remotely related to the economics of the  Austrian school of thought - of which I am a proponent. Ludwig Von Mises states clearly what is at work here,”The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.” - and so it is.

In Canada we have a central bank; The Bank of Canada. Through this creation , the government gets its money to run the country when it does not have enough to pay for all of its promises. Just like you or I, when we need money and we have not saved any, we borrow it. The same is true of our government. But this is where it gets interesting. The BOC prints  money out of nothing and loans it - yes, I said out of nothing. They have the legal authority to do what you or I would be locked up for in the same situation - legal counterfeiting. By the press of a button, or rather a few keystrokes, the Bank of Canada fulfills every wish that our ruling class deem their flavor of socialist utopianism and we get to see the deliberate policy in action. Although you would never know it by the near flawless performance that both players display, as innocent bystanders in the equation. It goes basically like this: The government issues IOU’s in the form of Treasury Bills or promises to pay, then,  our central bank buys them up through the printing or creation of money backed by nothing other than thin air. The act of printing or creating money backed by nothing floods more and more dollars or credit into the market thus devaluing every other dollar in short order. So you see, inflation is a tax,  insidious in nature, hidden in the shadows and deliberate in its confiscation. To see it in action one only needs to pay attention to current events . Recently Canada has promised the IMF an approximate 200 billion dollar spending commitment to help prove to the rest of the world, that together, the G7 countries are serous in their commitment to prop up the swaying house of cards. In short, the money they print today will show up in the prices we will all have to pay tomorrow, and this cheap and easy credit will lead people to do things that they ordinarily would not do in lieu of real savings. These malinvestments move through the system to form the next bubble and the unavoidable economic reality that we observe today plays out all over again.

The Bank of Canada, in complete collusion with the Federal Government, are co-parasitical causes of inflation in our country; they have the power to stop or start it at will. This reckless monetary policy of artificial growth, by way of expansionary credit practices, spreads this disease - the seemingly incurable infection of Keynesianism . Or better known as the boom and bust cycle, for those who have to live through it. But, incurable it is not… we know it is completely treatable, if government chooses not to inflate - an unlikely scenario unless pressure is sufficiently applied by a properly informed electorate.

- Awake

This entry was posted on Friday, January 30th, 2009 at 9:29 pm and is filed under Vault. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.