A TV and in the newspapers there is one thing that always unanimity among economists and their condemnation of deflation. It
can discuss and have different opinions on economic issues such as debt, deficits, tax rates, work flexibility and the optimal level of inflation, but on the verge of deflation is law unanimously. This is something unspeakable in their eyes the devil incarnate, the representation of absolute evil.
To hear these economists should add to the long list of plagues of Egypt and Master Yoda series they describe as the dark side of all economic policies. Thus they urge the entire nation under the rule of the state to launch a crusade against it. No doubt it was realized is clear and unambiguous; deflation is bad. Dare to debate it is sin.
Why this fierce hatred of deflation?
This deflation as they decry is that following a process of inflation. That is to say a voluntary process of monetary expansion (it has increased the amount of coins). Here I will only outline cycles of growth and recession that economists Austrians have theorized many years ago.
Central banks have created a surplus of imaginary money, mostly by a profusion of credits, which reflect in no real wealth (no more cars, roads, milks, houses and engineers before).
Then suddenly, and wrongly thought it was richer, a range of investment started (creating many companies), consumption has increased (the debt ratio has risen), the scholarship racing, the state has swelled exponentially and ultimately prices rose. It is a period of euphoria, it's called a boom.
But all this is based on imaginary money, and thus on wealth as much imagination, so at some point, reality must take over. We realize as the character played by Louis de Funes in Zizanie that the checks were made of wood, and a party that has been done can never achieve everything should be wound up in disaster. And as prices rose, they must therefore fall, as wages (which are just price), to return to their real levels says: all the money in excess imaginary logically has evaporated, it reviled as the famous period of deflation: it's called the crisis.
For Austrians economists, the crisis and deflation that goes with it, is the period of liquidation of bad investments, in short, anything that will not exist, and many companies are bankruptcies. The social consequences can be very painful, but necessary to restore the economy on a real basis.
What are our states to solve this problem: they inject more money by their famous stimulus. They try to maintain at any cost structure of the economy faltering in the end only make the problem worse. The illusion is maintained by a massive infusion of poison that caused the harm.
But why this insistence? Why not let the economy return to his true level? The American President Harding adopted this policy in 1920 and the U.S. did very well worn.
In fact the extent of the consequences of deflation goes well beyond a simple restructuring of the economy. And that's what Jörg Guido Hülsmann explains in his brilliant essay, Deflation and Liberty : deflation causes a social upheaval in the country concerned has hit its elites.
Deflation is terrible for those who are in debt. While inflation is called euthanasia of rentiers (ie a form of theft in the background), deflation could be described as the scourge of debt.
And in our societies who have astronomically high levels of indebtedness?
The answer is simple: banks and states. The European banks have leverage ratios apocalyptic and it is unnecessary to specify the current level of debts and deficits of the States composing the Union, it makes almost daily headlines. For them
deflation is death. Their debts become non-refundable; these failed institutions would be wiped out. And all those who benefit from their largesse would die in their wake: the parastatal institutions (such as social security), the subsidized enterprises, public service, labor, intellectual elites (sociologists, journalists, opinion makers), etc. ... the list can be endless. And that's a lot of world to the head of these institutions would be ejected. We understand a little better their fear of deflation. It would be a social revolution, there would be a paradigm shift.
is why these elites who cling to power, like inflation. This makes debt and allowing them to remain in power. But beware! Not too much inflation, otherwise the social consequences are too frightening to find the ideal level to stay in power without too much damage to the economic system is their Holy Grail is the famous optimal level of inflation (as we often hear, "some inflation it is no harm ").
Note also that different countries this optimal level is different, it is not the same in German than in French, I'll let you guess who he is at the highest.
The fact that deflation eliminates the offending institutions is as much economic as moral question: in fact the two are inseparable. They have not adapted to reality. They consumed more resources that they have produced. They are bankrupt. They remain artificially through taxes and inflation, and this latest weapon is nothing but a form of robbery in which victims and perpetrators are almost invisible: the indirect violence is in complete contradiction with liberal precepts. Tyrants always remain in power through force.
In a free market society, such behavior immoral and leads to general impoverishment, is quickly punished. These elites, always within the framework of a free market society, are replaced, as explained Jörg Guido Hülsmann, by new elites, to be virtuous. By
elite in a free market society I do not refer to a caste violence by submitting to other people, I mean those who by their qualities, and their virtues render services to larger numbers in this vast process free trade.
They will thus gain, without violence, the upper hand .... until the day the market will punish them again (so maybe that too, in this specific situation, they will use to avoid inflation not be downgraded).
Warning! by market I am referring not a magical entity as an Olympian god who would organize the world, but a society of free trade agreements with private ownership of means of production where the flight and the force (except in cases of self defense) are proscribed consequences.
Then these economists, so why are they afraid of deflation? Some might say that many of them are paid by these institutions? They would be trained in their fall in case of deflation.
I do not think too much conspiracy theory, I think today, resuming Noam Chomsky (who in his leftism has jolts of insight) that this hatred of Deflation is immanent to the system.
Inflation (control) is the weapon of the rulers to maintain power, deflation is their problem.
By this rotation of elites in the peaceful market society we realize that the crisis is not only an economic revival but also a moral renewal that ensures progress intellectual, artistic, and social and is one of the definitions redemption. This is what deflation can achieve.
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