It would be nice if Puru had studied economic history. If he had he would realize that the 19th century deflation was caused by tremendous increases in productivity, vast increases in exploitation of natural resources and, of course, colonized peoples. The inflation of the Pound is similar and the Brits had no Fed. Inflation was created to solve two problems. The need to pay for war and the need to keep the economy from collapsing.
Keynes was right. Capitalism without induced demand enters a Marxist predicted collapse. Of course, the use of amphetamines to keep the economy expanding has limits, which loans from China no longer seem o work.
The bankster rulers could care less about inflation. Almost all their real and personal property appreciates and there are the ones that determine when war starts and when the economy needs a boost.

124c4u,

This pseudo economic political ranting is tiring.

We get it. You don't like capitalism, imperialism etc.

Shadow Minister
Thanks. I have never read a more brillant, incisive critique.

This is what Ron Paul has been on a about for decades.Since the instigation of the US Federal Reserve in 1913 the money supply above pop/GDP increases has exploded by factor of 25 times.$1.00 now will only buy 4 cents worth of goods compared to 1913.It is the Fed and it's ability to create money from nothing that depreciates our currencies.

If you counterfeit money you go to gaol.These Reserve banks do it with impunity,diluting the value of our currencies.The Fed is responsible for the the GFC and the huge bubble of derivatives ie money based on money expectation,which have no value in terms of productivity.That bubble has yet to burst since the bailout money has not been loaned for job creation in small businesses but rather to make the bubble bigger.

Nothing will stop the collapse of the US dollar.Once it begins to slide,we all will be in big trouble.

Good article.

Arjay,
The problem is not the tool, the Fed. The Fed is wholly owned and operated and by the banksters. If the Fed was done away with something else would be invented to replace it. Each country has a central bank and it serves their banksters just as the Fed does the US banksters. The Fed was invented to reduce the violent booms and busts of the 19th century, not very successfully. Except for Jackson's closing of the National Bank monetary policy had nothing to do with the crashes and booms.

124c4u.The problem is not the Fed? You like others are under the illusion that the Fed like our RBA is owned by the people.No so.The US Federal Reserve is made up of 12 private banks and the US Govt has only a board of Govt officials who are compliant to the agendas set by the Fed.The Govt Reps headed by the likes of Elizabeth Coleman[the Chief Inspector] are toady boys to the people of real power.

This GFC is corruption of monumental proportions of the likes we have never seen since the Great Depression.The bailouts went to the banksters and their mates funded by the tax payer.Trillions of dollars in super disappeared in derivative ponzy trading scams,yet not a word from our elustrious leaders who were complicit in this fraud.

Both sides of politics are guility of betraying the Aust people.It is a matter of us having the courage to hold them to account.

Puru Saxena 25 September 2010 On Line Opinion

Thank you for your contribution.

I could not but note an old man at a market picking an orange and delicately replacing it, repeating this ritual with other costly items and finally buying a quarter of a cabbage.

On his way out I saw that he was the ex local tailor.

I saluted him and in the chat ensued he said that he had saved all his life to avoid the indignity of the dole but, he added, “I do not know how long I can avoid it, as my money buys less and less”.

I could understand him deeply. My contribution to the wealth of the nation was of another kind.

I cleaned toilets at one of the major rail stations in town and now cannot escape the bitter experience of the old tailor.

You, Puru Saxena, will not go through a similar experience. The line that separates the robbed from the robbers has you on one side, the tailor with me on the other.

And much that we would like, there is no point in questioning the robbers for the very explicable loss in the purchasing power of my and my friend’ savings.

The bankers and stock exchange gamblers, will undeterred continue to fumble with the wealth of the nation

Puru Saxena 25 September 2010 On Line Opinion

Thank you for your contribution.

I could not but note an old man at a market picking an orange and delicately replacing it, repeating this ritual with other costly items and finally buying a quarter of a cabbage.

On his way out I saw that he was the ex local tailor.

I saluted him and in the chat ensued he said that he had saved all his life to avoid the indignity of the dole but, he added, “I do not know how long I can avoid it, as my money buys less and less”.

I could understand him deeply. My contribution to the wealth of the nation was of another kind.

I cleaned toilets at one of the major rail stations in town and now cannot escape the bitter experience of the old tailor.

You, Puru Saxena, will not go through a similar experience. The line that separates the robbed from the robbers has you on one side, the tailor with me on the other.

And much that we would like, there is no point in questioning the robbers for the very explicable loss in the purchasing power of my and my friend’s savings.

The bankers and stock exchange gamblers, will undeterred continue to fumble with the wealth of the nation

For many years people have noticed that increases in interest rates effect people differently, some not at all. Business whatever their circumstances may claim the increase as a tax deduction, and possibly render it harmless to them. Many people with home mortgages, credit cards, personal loans etc have to accept the rate rise into their affairs as best they can. In many cases this is disasterous, or at best horrible.
That interest rate increase, although applied to supposedly curb the money increase by putting the breaks on bank lending, actually transfers money from those who can least afford it to highly profitable banks.
If banks through creating credit have a role in the increase of the money supply, then that increase can be curbed by restricting the ability of the banks to lend, not by castrating many of their borrowers.
Australian trading banks are no longer fettered by the "fractional reserve banking regulation", apparently they can lend $20.00 for every dollar of asset they own. They could lend $12.00 of that to industry, only after lending $12.00 to housing.
This could be why so many non-bank, non-deposit takers opened up as home mortgage suppliers.
Within those terms it is worth noting that loans are assets to banks.
The RBA needs to be reinvented as the Australian Reserve Bank, and used for the betterment of Australia, not as bookkeeper for a foreign debt that cannot be paid, or as an excuse that empowers private banks to act as tax collectors when introducing compulsion on citizens to pay them money that rightfully must go to the ATO.
An Australian Reserve Bank using the value of our country could issue credit to our Federal Government for any good purpose, and at minimal interest. Is that blind utopianism, or just anti-greed.
In the News Weekly July 25th, 2009, are two very important articles. Six economists renew call for a 'people's bank', by Patrick J Burne.
The other, "Rebuilding a functioning financial system", by Colin Teese.
The book is "Debt and Delusion: Central Bank Follies that Threaten Economic Disaster". Author is Peter Wharburton. (Penguin 1999).

I don't think anyone could reasonably deny the disaster that is inflation. The example of the oranges is however incomplete.
Provided the incomes of the orange buyers is also multiplied by the same factor, it doesn't really matter how many zeroes there are, -at least until that economy is compared to, or forced to compete with, another.
The problem with expanding the monetary base of any nation, is what the extra money is used for. If it increases real productivity, (creates more oranges) there isn't really much of a problem. If however, the extra money is used to pay off bankers and speculators debts, and consequently widen the already egregious gap between rich and poor, then obviously there is a problem.
Douglas Adams, in his 'Hitchhikers Guide to the Galaxy' trilogy (of four books) pointed the way out of this dilemma. What we need to do is colonise another planet.
First we build a great big space ship. The first people we send out to start the colony must be the most useful, and highly paid and productive, such as:
used car and real estate salespeople,
politicians and bureaucrats
bankers, money managers, financial advisors and speculators
accountants and lawyers, etc. etc. etc.
Once these useful people have established the new colony, the rest of us can rush to join them...
I think we could call it the Botany Bay Solution.
Benito, I agree.

Benito you are 100% correct."the RBA needs to be reinvented as the generator of credit instead of the book keeper of foreign debt."
Kevin Rudd did not have to borrow from China for stimulus inflationery creation.He borrowed from China so we could purchase more consumerables from that very same country to keep people in the importing and retail industry in jobs.

It is totally unsustainable,yet our pop media herald his policies as being a saviour? It is total insanity! -2+-2 does not equal +4.
It is -4.

Arjay,
I SAY AGAIN
*
The problem is not the tool, the Fed. The Fed is wholly owned and operated and by the banksters.
*
The banksters of most all countries are being bailed out by the people. Neither Iceland nor Ireland are under control of the Fed but that are facing economic disaster to pay off international millionaire banksters billion dollar bets.

124c4u Obama should have nationalised the Fed as the poms did with the Bank of England.The whole banking system and their Wall St hangers on are totally corrupt.

Those banks who create money from nothing should be paying a tax back to the community for the depreciation of their currency.Every 10 yrs our currencies halve in value because of surplus money of inflation generated by the banks.It is just a form of counterfeiting and ordinary people go to gaol for it,while the banksters profit for doing nothing.