Inflation is conventionally measured using some combination of prices, normally the CPI and/or PPI.
However, if my basic thesis is correct that fiat money creation is simultaneously wealth transfer, then the more important measurement of inflation is indebtedness. Specifically, are the producers of labor and materials owning progressively more of the fruits of their production, or less? Materially, we are surrounded with everything we could need. Yet most Americans are in debt up to their eyeballs. Our governments, State, local, and Federal are in debt. This, too, is inflation in my view.
This line of thought, while I have not seen it put in quite that way, is perfectly consistent with the thoughts of Keynes himself, in the book that made his name: “Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. – As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
“Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
I would further like to make a brief comment on Keynes. I was greatly influenced by the book “Keynes at Harvard”, but what he does not do in that book is discuss the actual mechanism of Keynes system. I have therefore set myself that task.
Keynesian economics is intended as a means of transfering private wealth to the public sector through inflation, delayed taxation, and unnecessary interest payments. When governments print money and generate inflation, they devalue private savings.
When they create “jobs” which are external to the actual market system, they disrupt that system. As an example, if local businessmen are forced to compete with public works jobs paying 20% more than they can pay, they will be bankrupted. This takes time, which is the value for socialists of long term public works projects. This process has been seen dozens of times in the developing world, as a result of IMF policies that are an extension of Keynes ideas. Keynes, of course, was the key voice in the IMF, along with friend and Soviet agent Harry Dexter White.
Since the projects are funded using deficits, they are paid for in the future, out of taxes, which is to say out of the paychecks of people with jobs in the private sector. Absent those taxes, that money would have been available for investment.
The key element, though, is inflation. Nothing wrecks private ownership and private enterprise more than inflation. This is obvious enough in the case of hyperinflation. Yet, the same effect–the gradual dissolution of private capital formation, and increasing reliance on credit–is seen when it is done slowly.
This brings me to a concept I call “Hyperkeynesianism”. Logically, if inflation is wealth transfer, an aspiring socialist would want as much of it as possible. Yet, price inflation is unpopular. Could one not simultaneously indebt the nation, disrupt private enterprise through public works projects, and generate wealth transfer, without generating actual price inflation? Yes: all you would need is a mechanism for spending on the one side, and for soaking up the cash on the other. Could the IMF or World Bank (I am unclear on the precise difference, which is a subject for future research) not do that? Certainly. Could foreign governments also do it. Of course.
It should be added that the crisis in Europe has had the effect of making the dollar relatively better than the Euro. This has led to warehousing of dollars as well. There are many more dollars out there, than are in our system presently.
We keep expecting inflation due to the money being spent, yet what I read is that the global supply of dollars is contracting. I don’t think this is accidental. This whole thing is a setup. Obama came into office with a plan, and he is executing it. That plan was formulated by John Maynard Keynes, as a gift to his Fabian friends.