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I respectfully disagree with a key point of John Burns argument.
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John Burns
Posted 11/26/2012 00:29 (#2717454 - in reply to #2717402)
Subject: RE: have we not been in inflation for some time?



Pittsburg, Kansas

You are close.

We will continue on this course until the dollar explodes.

Debt based monetary systems where (nearly) all money is created as a debt instrument require that the money supply continually expands. The reason is because of interest. When the Fed creates new money it is created as debt by purchasing debt instruments of the Treasury. Interest accrues on this debt. But where does the money come from to pay off the original debt and the newly accrued interest? In a debt based system there is never enough money to pay off all the debt and the accrued interest. So the money supply has to expand fast enough to service the interest payments. Therefore in a debt based monetary system inflation is baked into the cake from the beginning. If money supply does not expand then eventually the debt defaults as there is not enough money in the system to keep up with the interest payments. Certain elements of society benefit from such a system. Can you guess who? I can tell you it is not ordinary citizens and it is the ones that get to create the money and get first use of it.

Here is a good short article on the subject.

John

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