In my previous post in the subject of inflation, we took the time to understand what is inflation all about. (Click here to read more about it). In this article, we will try to understand why inflation exists if it does not benefit the masses.
Here is my opinion in the subject. Inflation exists because it is benefiting the cooperation’s and it became a necessity for local governments survival. It is as simple as that. In the reality, in our current economical system 2 extreme groups exists that are correlated negatively. In one side are standing the cooperation’s and the elite which are doing everything in their power to create themselves more profit. While in the other side are the masses that are doing as much as they can to try to maintain a decent life in a system that is to big and complicated for them to understand. In many ways, this was always the kind of social structure in the western civilization.
Looking on it from this perspective, it can be easily understood why the concept of inflation has been pushed by the cooperation’s. A constant inflation benefit greatly their profit. In the end of it, there is a limited amount of option for the increase of profit. The devaluation of the employees wages is definitely one of them. Moreover, the concept of inflation benefits the elite and cooperation’s twice. It allow them to increase the cost of their products, while paying less the their employees. (as I mentioned in my previous post, with inflation in place by paying the same wage to an employee for years, the employee is earning less buy getting the same wage).
Now that we understood why cooperation’s benefits from inflation, let pass to the governments. As I mentioned previously, inflation became a necessity for the survival of the majority of the government’s. To really understand why, we will need to start with a few important points. First of all, democratic government should not be a profitable organisation. Which mean no surplus need to be created. In the end of it, the income of governments come from taxes, which is the income of the masses. Secondly, self interest should not enter the governmental sphere. The role of any democratic government should be to promote the common well of its citizens. Not the interest of the self interest elite or the survival of its own entity.
At our current state, the 2 points above are not representing our current system. Our government’s are maintained by lobbyist and self interest people. Which creates a reality in which the main interest of the system is to maintain the cooperation’s and the self interest of the momentary politician. Moreover, In many cases, the existence and the career of a certain politician is based on the funds of cooperation’s for campaign’s and power, which force the decision making to bend toward the cooperation’s. That is only half of the story. The second part have to do with the national debt.
The unimaginable amount of national debt hold by the majority of the countries push a non profitable organisation to pursue profit for the sake of its own survival. Moreover, the national debts themselves are so big, that it is impossible to actually pay them. In our current days, a government that manage to pay its interest rate is considered to be in a good state. Which means that not only a government is now busy making profit, but this profit goes just to maintain this twisted reality without deepening the debt itself. Here is where inflation come to play.
By creating inflation, the national debt of a country diminish in value while keeping the same number. It is a simple logic, if the dollar lost 50% of its value in the last 30 years (shown in my last post). A debt hold by a country 30 years ago has diminish in value in 50% as well. This reality make inflation a necessity for survival of governments. without it, they will not manage to hold their debts. It is as simple as that.
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