MCViewPoint

Opinion from a Libertarian ViewPoint

Looking at the Economic Myth of the “Soft Landing”

Posted by M. C. on September 14, 2022

If inflation is defined as increases in the money supply rather than increases in prices, then it becomes clear that all that is required to counter it is to close all the loopholes for the generation of money out of “thin air.” The increases in the money supply and not increases in prices inflict damage to the wealth generation process.

Originally, paper money was not regarded as money but merely as a representation of gold. Various paper money receipts represented claims on gold stored with the banks. The holders of paper receipts could convert them into gold whenever they deemed necessary. Because people found it more convenient to use paper receipts to exchange for goods and services, these receipts came to be regarded as money itself.

https://mises.org/wire/looking-economic-myth-soft-landing

Frank Shostak

According to commentators, countering inflation requires monetary authorities to actively restrain the economy, with “experts” believing that higher interest rates need not cause an economic slump. Instead, they believe that the Fed cab orchestrate a “soft landing.” It is questionable, however. that a soft-landing scenario is possible.

Money Printing Creates Economic Damage

If inflation is defined as increases in the money supply rather than increases in prices, then it becomes clear that all that is required to counter it is to close all the loopholes for the generation of money out of “thin air.” The increases in the money supply and not increases in prices inflict damage to the wealth generation process.

Originally, paper money was not regarded as money but merely as a representation of gold. Various paper money receipts represented claims on gold stored with the banks. The holders of paper receipts could convert them into gold whenever they deemed necessary. Because people found it more convenient to use paper receipts to exchange for goods and services, these receipts came to be regarded as money itself.

By fulfilling the role of the medium of exchange, money enables something to be exchanged for it and this, in turn, enables the received money to be exchanged for something else, also by means of money. If the receipts for gold that are accepted as genuine money are backed by gold. there will be an honest exchange—i.e., something for something or wealth for wealth.

In contrast, receipts not backed by gold, which are employed in an exchange, set in motion an exchange of nothing for something. The unbacked receipts are not proper money, which is gold. By means of the unbacked by gold receipts, goods are diverted from wealth generators to the holders of the unbacked by gold receipts. This in turn weakens wealth generators and in turn weakens the process of wealth formation.

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