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If you listen to the top central bankers of the world talk for long enough
you will come away with the impression that central banks are attempting to
give us "price inflation", as if rising prices were beneficial.
However, nobody wants to pay more for stuff. In fact, rational people prefer
to pay less, not more. Therefore, when central banks claim to be giving us
"price inflation" what they are really doing is stealing the
"price deflation" from which we would otherwise benefit.
We are told that a general expectation of rising prices is important,
because if people start expecting prices to be lower in the future then they
will curtail their spending in the present. This, apparently, will lead to an
economically-disastrous downward spiral in which the general expectation of
lower prices leads to reduced spending and reduced spending leads to even
lower prices.
The economic 'logic' contained in the idea that expectations of higher
prices are needed to promote present-day spending explains why companies like
Apple can never sell anything. After all, who in their right mind would buy
an Apple product today when they can be sure that a better product will be
available at a lower price by this time next year?
And just imagine how bad it would be if prices trended lower throughout
the entire economy the way they do in the computing and mobile communications
industries. There would be almost no spending anywhere! That operation to
save your life that you have scheduled for next week could be postponed until
healthcare charges have declined to much lower levels. And all of the eating
you were planning on doing over the next few months could be delayed
indefinitely in anticipation of more attractive food prices. And there would
never be a good reason to buy a house or a car because each year you did
without these things, the more of a bargain they would become and the better
off you would be for not having bought earlier.
Also, try to imagine how bad it must have been before there were central
banks to guarantee a continuous rise in the general price level. If
expectations of rising prices are needed to promote spending and growth, then
in pre-central-bank days, when money often increased in purchasing-power from
one year to the next, there must have been almost no spending anywhere in the
economy. That is, there must have been relentless economic contraction.
Thankfully, we now have people like Ben Bernanke, Janet Yellen, Mario Draghi
and Haruhiko Kuroda to save us from such a predicament.
The point that hopefully hasn't been totally obscured by my sarcasm is
that central bankers are thieves. They are stealing our deflation. It isn't
fair to compare them with common burglars, though, because common burglars
don't claim to be doing you a favour while they make off with your valuables.
http://tsi-blog.com/blog/blog-default/
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