Instead of copying and pasting junk from the LvMI, why don't you make an attempt to provide a comparison and contrast? It's a grand thing to wave your arms and issue high-sounding pronouncements. It's yet another thing to explain exactly what you mean by them.
Are you really trying to explain concentrations of wealth through changes in the money supply?
Most of us in the real world would agree that tax incentives for the rich had much more to do with it and much more directly too.
I didn't copy and paste anything, I have a fundamental understanding of this subject. As far as "tax incentives", I don't know how this relates to the subject of how positive inflation involves a transfer of purchasing power even when the
price level remains constant.
What does this mean, Tippit?
Are you suggesting that, barring an increase in real economic output, the only way to concentrate wealth is to manipulate the money supply? Tax "incentives" have little or nothing to do with it? Are you certain of this? Or did you simply not intend to say that?
I'm not talking about tax incentives at all, you are. The point I attempted to make, which I thought was crystal clear, is that regardless of what happens to the general price level (inflation, or price inflation, whichever you prefer),
monetary inflation, which is defined as any increase in the money supply always involves a transfer of purchasing power, even if general prices and the cost of living never go up as a result.
I will try to give a clear example of why this is so. Lets assume that we have an economy in which real output is growing at 5% per annum, a completely static and sound money supply, and velocity which is more or less constant. In this scenario, we can expect the general price level to fall by roughly 5% each year as more goods and services compete for the same dollars. The benefits of technology and productivity gains in this case will naturally accrue to currency holders in the form of lower prices - in essence, everyone benefits from discounts. This is referred to as the "productivity norm". If you were a central bank and you wanted to target a rate of 0% price inflation, you would have to inflate the money supply by roughly 5% per year in order to accomplish this. Lets assume for the purpose of this example that this is exactly what happens. The currency holder will not notice any change in the general price level, because the productivity gains are offset dollar for dollar by monetary expansion. However, we still have real output growth of 5%, so where did the benefits of new technology and greater productivity go? It went directly to the recipients of the new money, whoever they may be. Currency holders who did not receive any of the new money pay an opportunity cost equal to the growth rate. Another way of saying it is that there is a transfer of relative purchasing power from the currency holders to the beneficiaries of the new money.
This is why monetary inflation is a regressive form of taxation irrespective of what happens to the general price level. Any time you have monetary emission, the recipients of the new money obtain relative purchasing power at the direct expense of those who have had their currency's purchasing power diluted. It's a simple concept.
This is more LvMI junk, Tippit. Since you don't explain who these "people" are, I have to assume you mean those who aren't bankers. If this were true, why aren't there more bankers on the Forbes list? When you go through the list, top to bottom, you have ordinary entrepreneurs like those who built Microsoft, Oracle, Dell, and Wal-Mart, among others.
Depending upon which "people" you are referring to, they could be a special class of those who benefit most from the Fed's monetary excess, or everyone else who doesn't. I'm going to have to admit that the Forbes list of wealthiest people in the world is a joke. The wealthiest people in the world like the Rockefelers and Rothschilds have disowned their great wealth and granted it to myriad foundations and trusts under the control of their agents, so as to confer the many benefits of asset protection. I know that I do it, and it is easy, and I know they do as well. Forbes only ranks those based on assets that they directly own.
By the way, you still have Ben Bernanke's joke he told at Milton Friedman's 90th birthday party in your signature line. I know I have a good chortle each time I read it there, since you still haven't figured out that it was delivered and received in good humour.
We've already been through this in another thread. It wasn't a joke. It was a sober admission that the Fed screwed up, and a promise that it would never happen under his watch. The context makes this so crystal clear that I have to assume you're either being dishonest, or you simply haven't read the article. If you have, then you have really poor reading comprehension. The entire article from front to back has Bernanke lauding Friedman and Schwartz for their expert analysis. There are admissions through the entire work where Bernanke agrees with F&S that it was the Fed's contraction of the money supply which caused the Great Depression. But one need only read the final few paragraphs to get all the context that is necessary!
Conclusion
The brilliance of Friedman and Schwartz's work on the Great Depression is not simply the texture of the discussion or the coherence of the point of view. Their work was among the first to use history to address seriously the issues of cause and effect in a complex economic system, the problem of identification. Perhaps no single one of their "natural experiments" alone is convincing; but together, and enhanced by the subsequent research of dozens of scholars, they make a powerful case indeed.
For practical central bankers, among which I now count myself, Friedman and Schwartz's analysis leaves many lessons. What I take from their work is the idea that monetary forces, particularly if unleashed in a destabilizing direction, can be extremely powerful. The best thing that central bankers can do for the world is to avoid such crises by providing the economy with, in Milton Friedman's words, a "stable monetary background"--for example as reflected in low and stable inflation.
Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.
Best wishes for your next ninety years.
I think any honest person with even mediocre reading comprehension knows exactly what Bernanke said, and knows that this was a tribute to Friedman and not a mockery. The joke is on you.
