Inflation and Productivity

I think that there is absolutely no free market in modern industrial states.Jean Kirkpatrick

During the past few decades Americans have experienced inflation that has decreased the value of their purchasing power. What would cost $1 in 1960 costs $6.68 in 2006.

Despite the reduction in the value of the dollar, Americans' standard of living has increased. How can this be? Increased productivity is the answer.

Without improving the production efficiency, the quality and efficiency of goods and services today would be the same as in 1960, while costing $6.68, (six times as much), for each $1 of 1960 dollars!

What has caused the increase in productivity? Greed and competition! Pure and simple greed. Greed equals profits. Without the desire for profits, as in socialized countries that lack competition and profit motives, the American efficiency would not have happened.

International competition has also spurned improved efficiency. The Japanese have displayed tenacious competition and the rest of the world has benefited by the Japanese demonstration of efficiency.

Still the U. S. dollar continues to weaken as it prints more fiat money to pay for its wars and domestic programs. What happens when the dollars weakens faster than increased productivity? As the dollar weakens Americans will have less value in the world. Other countries with a strong currency will increase their value. This simply means Americans will become poorer as other countries become wealthier as a result of a weak dollar.

This has been the history of governments that could not contain themselves. Their desire for expansion and more power has an enormous cost. Most grand schemers of empires believe their expansionism will be profitable, as the Spaniards sought gold, and as the U. S. seeks oil, they both have found out wars have unseen consequences, one of which is a financial strain on the treasury. Russia sold Alaska to the United States, and Napoleon sold the Louisiana Territory to the United States. Both Russia and Napoleon needed money.

We need fewer wars and less printed fiat money. What we need is free trade, competition, and profits.

We have intangible and very valuable resources in our society that is more valuable than our currency. These are; the rule of law, private property rights, desire, and the opportunity to learn. We should allow these resources to flourish and grow.

Bilbo Baggins