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<p>[QUOTE=&quot;passantgardant, post: 1140977, member: 30033&quot;]Inflation is always and everywhere a monetary phenomenon.&nbsp; Inflation is an increase in the money supply relative to the goods and services it can purchase.&nbsp; It&#039;s conceivable that inflation could be caused by a contraction of the supply of goods and services, but that is almost never the case and is always temporary (e.g. a drought causes the supply of wheat to shrink).&nbsp; Printing of fiat money is almost always the case and is almost never temporary because everybody is very careful not to destroy money.&nbsp; In the cases where credit has been given monetary status during a bubble and the bubble implodes, destroying credit (which seemed like money), the government inevitably monetizes the credit.</p><p><br /></p><p>What do you think caused the inflation of the 1970s?&nbsp; It was our removal of gold backing from the Dollar of course.&nbsp; Actually, it preceded that slightly, since the money printing went back to Johnson&#039;s Great Society and Vietnam War, and convertibility only ended when France called for redemption in gold the currency they held far in excess of gold reserves.&nbsp; So the monetary base expanded significantly, we removed all pretense that it was grounded by gold backing, and then it lost a great deal of its value on the open market.&nbsp; That was the root cause of the 1970s inflation.</p><p><br /></p><p>What changed in the &#039;80s and &#039;90s was that the U.S. government used the military to impose a system of petrodollar hegemony, essentially backing the Dollar with Middle Eastern oil.&nbsp; That&#039;s why our military has taken up permanent residence over there.&nbsp; But that broke down when the Euro gained traction as an alternative currency, Saudi freedom fighters attacked us, and Saddam decided to stop denominating oil sales in dollars.&nbsp; The last straw was when the central banks ran out of gold to sell on the open market to suppress the price.&nbsp; Britain dishoarded the last of theirs at the very bottom trying to defend the fiat currency.&nbsp; Since that time, circa 2001, fiat currencies worldwide, but especially the Dollar, have been falling rapidly relative to commodities and especially gold.&nbsp; It&#039;s not that they suddenly lost value, but that they&#039;ve been continuously printed for several decades and the charade propping up their *apparent* value broke down.&nbsp; You could no longer reliably buy oil with dollars and the huge supply of gold from the central banks stopped flowing, contracting the supply.&nbsp; The result is far more money in circulation versus the goods and services it can buy -- that&#039;s inflation.</p><p><br /></p><p><br /></p><p><br /></p><p>Well since the founding of our nation til the founding of the Federal Reserve, we had a very mild deflation.&nbsp; The Dollar gained somewhere between 5-10% value in that 120 or so years.&nbsp; And that&#039;s the natural way of things when you have a stable currency.&nbsp; Over time, technological progress and productivity improvements make everything less expensive because the supply of products and services increases relative to the supply of money.&nbsp; That&#039;s a good thing.&nbsp; Everyone loves that computers and home electronics get cheaper every year due to rapid technological progress and production efficiencies.&nbsp; That particular sector is gaining in efficiency even faster than the Fed prints money.&nbsp; But if we had a stable currency, then every sector would tend to get less expensive over time.&nbsp; Constant inflation is not a normal state of a free market economy, but only with fiat currency.</p><p><br /></p><p><br /></p><p>&nbsp;</p><p>The world goes on, but life doesn&#039;t necessarily go on for everyone.&nbsp; Hyperinflations kill millions.[/QUOTE]</p><p><br /></p>

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