Wednesday, July 2, 2008

Commodity Prices and Inflation: What's the Connection
by: Frank Shostak - Ludwig von Mises Institute

"Contrary to the popular definition, inflation is not about a general rise in prices but about increases in money supply. The general increase in prices as a rule develops because of the increase in money. The harm that most people attribute to increasing prices is in fact due to increases in money supply. Policies that are aimed at fighting inflation without identifying what it is all about only make things much worse.

When inflation is seen as a general increase in prices, then anything that contributes to price increases is called inflationary. It is no longer the central bank and fractional-reserve banking that are the sources of inflation, but rather various other causes."