Monetarism

User avatar
Martin Hash
Nuke
Posts: 10204
Joined: Wed Jan 20, 2010 2:02 pm

Monetarism

Post by Martin Hash » Tue Jan 11, 2011 6:40 am

Monetarism, sometimes called “Supply Side” economics, focuses on preventing inflation. Conservatives find monetarism attractive because its primary purpose is to maintain the status quo. Inflation terrifies people who have money because it decreases the value of their money. People who loan money and people who earn money from debt are especially vulnerable because inflation steadily devalues the return. On the other hand, people who owe money are happy to see their debt burden lessened. Therefore, inflation benefits people who owe money and penalizes people who have money. As a defense, Supply-siders want to limit the amount of money, the supply, because things can only rise in price if there is the money to pay for it – limit the money, limit the price inflation.

Monetarists demonize inflation by advertising the few non-rich people it affects negatively - retirees who live off of an annunity (a fixed income), but Social Security is indexed to inflation (payments go up) so poor retirees are safe. However, inflation is not a "good" thing for an economy because no one is going to loan money during an inflationary period, and business will stagnate. At some point though, when the Middle Class (people who borrow money & have money) is gone, it will simply be rich verses poor - and every revolution in history tells us how that will turn out.

All of this boils down to the comprehension that the size of the National debt is a chimera because if it gets bad enough, inflation will kick in to eliminate it. Who gets burned? China.