The New Terrapin Gazette
Number 211 1 June, 2011
Each state necessarily treats free men as a mechanical wheelwork; because it should not do that, it should therefore cease.
Inflation is typically thought of as rising prices. You see references all the time to the consumer price index, and when gasoline and food become more expensive, you hear that inflation is responsible. In his recent meeting with the press, President Obama’s man Ben Bernanke repeatedly used this definition of inflation.
He was wrong. Rising prices are not inflation, and inflation is not rising prices. The two may go together, but they do not have to.
Whether Bernanke was lying, is ignorant, or simply used conventional language to try to explain complex matters is unimportant. What matters to you is that you understand a bit more about what inflation is, how it happens, and what its opposite is.
Note first that the prices of goods and services do not march in lockstep. Whenever some things cost more, others can easily cost the same or less than before. All this “cost of living” information is calculated by people who sample prices across the board, hoping to measure representative ones. If all prices remained the same with regard to each other, no sampling would be required: the cost of any single good or service would tell you all you might want to know about how expensive it has become to live.
The truth is that inflation refers only to the money supply, not to the prices of goods and services. That’s the defining fact that so many people either forget or ignore when they toss the word “inflation” around.
Consider the USA as an example, and consider a few scenarios involving inflation and prices.
Start with the fact that the number of dollars in circulation is discernible. If somehow that number increases, that’s inflation; when it decreases, that’s deflation. Inflation and deflation are movements relative to the previous measure of the amount or quantity of something (in this case, money). Prices are data stated in terms of units of currency and the quantity or type of a good or service. The difference between prices and inflation/deflation is fundamental — and those who confuse the two with each other are fundamentally wrong from the first. Once that error is made, nothing that follows can make sense — or be the basis for rational governance.
If the economy of the USA is growing, the money in circulation should grow along with it; that’s the ideal. Suppose, however, that the total amounts of goods and services offered grow substantially, while the number of dollars in circulation remains the same. Sellers will be competing frantically for those suddenly scarce dollars, and several things will happen: prices will fall, the returns on investment will fall, businesses will stop expanding, money will be harder to borrow (more expensive to borrow, for interest rates will go up to attract funds from lenders), and employers will try to reduce their costs. If the pressure on the money supply grows, unemployment will rise, businesses will fail, and investors will flee the stock market and other mechanisms that provide funds for growth.
The Great Depression in the 1930s was started by the collapse of a number of financial institutions in Europe, and worsened by a colossal margin call selloff in the US stock market. Those are the “causes” of the depression that are usually cited. What is not often mentioned is that as creditors clamored for their money, European gold began to move to the USA. Europe was paying its debts to US investors and creditors. The bullion was stored in banks. As Europe lost, the USA gained.
What happened next is counterintuitive, even mystifying. The gold in the US banks was not monetized — that is, it was not used to back the value of new dollars. Wealth was simply stored and not put to work. Instead of inflating the money supply, the government (well, actually the federal reserve, about which more later) sat on the gold in order to prevent what it feared the most: inflation. Why? Possibly because the wisdom of the time was crafted by the German experience with hyperinflation.
Thus while wages were falling, production was declining and unemployment was rising in the USA. As investors refused to risk their assets in funding new enterprises, the depression turned uglier. There simply was not enough money to do the nation’s work.
Businesses could not grow because banks could not lend. No one could foresee a demand for more goods and services, and scarce money became more and more powerful. Prices fell dramatically.
This concludes Part One of a series. Part Two may appear in the next issue, but then again it may be delayed. For now, here’s your homework: read this weblog post.
Good Advice On Weight Loss
Perhaps the most rational and helpful website for those who want to shed pounds is maintained by a Canadian physician. Here’s a quote from this page on the site:
If obesity were truly treatable as a disease of personal responsibility the world would already be much skinnier. Obesity is a disease of the environment, and you folks across the pond (in Great Britain) are doing a dandy job making your environment more, not less, conducive to obesity with your 2012 Cadbury Olympics, your regulatory free food marketplace, your pulverized flour and sugary school lunches, and your food industry funded “healthy active living” campaigns – because guaranteed, in Britain, it won’t be about modifying intake with Big Food at the helm, it’ll be all about exercise.
Whoa! “…it’ll be all about exercise.” What does he mean? It almost sounds as if the doc were saying that exercise is of no value in a weight reduction program! To get the central idea that he’s promoting, digest some additional quotes found here on his website:
Most of us folks, when we’ve exercised intensely, we tend to delude ourselves that we’ve earned some dietary leeway and indulgence.
That belief then leads to the suffix, “because I exercised”.
“I can have seconds … because I exercised”.
“I can have that (insert indulgence here) … because I exercised”, And guess what, have the, “because I exercised” indulgence and more often than not, while you’ll still be racking up the incredible health benefits of exercise, you’ll probably be kissing any theoretical caloric benefits goodbye.
Yes, he is saying that exercise is not the main way to lose weight, and he is not saying that it is essential to weight loss. Then:
…the indulgent calories you can consume in a few minutes, to truly be “balanced” through exercise, are likely going to require a heck of a lot of exercise.
Or put another way, it means that the calories burned through exercise are usually much lower than most of us would expect, and that while indulgence is an important part of a rich and complete life, your choice to do it shouldn’t be based on whether or not you’ve exercised, it should be based on whether or not you’ve decided the indulgence is worth its calories.
Weight gain and reduction are matters of what you eat and what you don’t eat, in other words. He’s in favor of exercise, but not because it is the secret to losing weight. He says it’s a way of getting in shape and being stronger and feeling better. If you want to see what he suggests you eat and what will make you overweight, take a long, careful look at his weblog. Highly recommended.
Here’s more of the same old same old: it’s politically motivated media censorship again, though some would say it’s not precisely censorship (what is it, then?). Phooey; you know perfectly well that if a Republican had been the focus of attention, the howling would be international. (Footnote: this scandal is unfolding rapidly as the internet outpaces the legacy news media, for whatever reasons. Never mind. The point has been made, and the politician involved is neither interesting nor particularly important, so The New Terrapin will ignore all but the most breathtaking future developments.)
Related: it pays to be a congressman, and it pays more if you are a Democrat than it pays if you are a Republican. Did you know that? Did the media tell you? Hah!
Keep this filthy business in mind the next time you have a choice between buying a product made in mainland China and one produced in a more decent nation. Don’t feed the dragon.
Mobile phones are a health risk because, as this newsletter has pointed out many times, they are not telephones, but transceivers. Now scientists are getting around to telling the public that there may be a problem. Note that in the entire linked article, no one is quoted as saying that the danger can be reduced by the use of earphones and a microphone. Note also, please, that “text” is not a verb.
It seems odd, doesn’t it, that Obama — a man who promised hope and change, and should be exquisitely sensitive about inequity — presides over “…a hierarchy of privilege more suited to a sultan’s court than (to) a self-governing republic”? Yes.
Next, a ray of sunshine falls on our dark, depressing world: some Germans have come up with a green plan that will save the world from climate change, see, and…aw, hey, come on! At least read it before you start laughing!
OK, as long as the discussion has turned to those madcap foreigners (inspirations for cartoonists everywhere), look what the Brits are saying about events in darkest Serbia. Gee Dad, it’s a Wurlitzer! Vaudeville is not dead, ‘cuz Harpo and Groucho have been replaced by Ratko and Branko and The Twisted Zamabronis, an extended Albigensian family of juggling contortionist diplomats.
Sheesh, who is this “Bibi” guy, anyhow? It says here that so far, it’s “Bibi, One; Obama, Zero.”
The masthead includes a quote from the works of Georg Wilhelm Friedrich Hegel.
The staff of The New Terrapin Gazette expresses its sincere gratitude to the many people who have gifted the world with Arch Linux, Emacs, Screen, and Chromium.
Publisher: The Eagle Wing Palace of The Queen Chinee