69. Yes, Inflation Is Real.

Yes, Inflation Is Real.
Bob Komives
::

No matter how we do our national accounting, inflation is real. A national budget runs a real deficit if national expenditures fail to balance themselves through income: growth in wealth caused by the communal and private reinvestment of knowledge. What is today commonly labeled "deficit," or "unbalanced national budget," is an accounting fantasy spun from unreal definitions of income. These fantasy deficits get blamed for inflation. Though I dismiss deficit spun of fanasty accounting, I do not dismiss inflation. It is a real phenomenon. It can hurt us. It can also tell us how successful has been our investment.

Inflation may indicate that communal investors made bad investments. A project that fails can cause inflation even if paid for with cash in hand. While the cash-in-hand project creates no new money, it does redistribute, use up, or alter resources. When the project fails, the old amount of money now chases after fewer available goods and services. Inflation will haunt a nation that achieves its fantasy balances year after year but fails to produce and protect wealth with the meager investments that it does make. Frugality at the expense of wisdom will decrease wealth.

Inflation may indicate that the marketplace does not accurately reflect real wealth formation and loss, that successful investments have not produced sellable goods and services fast enough to match the expanding currency circulating in the marketplace. Some benefits and costs do not reflect themselves in the markets or are slow to do so. Just as money should never be mistaken for wealth, the marketplace should never be mistaken as the only conduit for wealth, and monetary inflation should never be taken as the sole measure of successful investment. The low rate of inflation that modern marketplace countries tend to experience even in the best of times may reflect this divergence between total benefit and marketplace benefit.

While inflation never indicates that there has been too little monetary recall or too much fantasy deficit, it is an important concern for managers of money-based economies. We had best avoid inflation. We avoid inflation best when we invest well.

:: Bob Komives, Fort Collins © 2006 :: Plum Local IV :: 69. Yes, Inflation Is Real ::
With attribution these words may be freely shared, but permission
is required if quoted in an item for sale or rent

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::