Opinion On “What This Country Needs Is a Good 5% CPI”
Money is one of our great inventions, an enduring pillar of economic progress. It makes all trading in goods and services much easier and more efficient. It also allows those who want to spend more than they currently earn to make a fair exchange of real purchasing power with those who choose to spend less that they currently earn.
If we allow the value of money to be shrunk, as Brett Arends advocates, then the trust that savers can place in holding money, as a way to recover in the future the true value of their current spending sacrifices, will be undermined. Instead, people will be forced to use alternative and less efficient ways to hold their savings, such as gold and real estate. It would do the same economic damage to the saving and borrowing process that replacing money with bartering would do to our current process for exchanging goods and services.
Yes, borrowers and those who speculated on real estate and gold and other assets would benefit from Brett Arends’ suggestion, just as an imposition of bartering would benefit certain classes in society. But the bigger picture is that this is not real economic growth, just shuffling wealth around. Tax policy would be a better and more appropriate way to achieve that goal setting theory. As for those who think we need to rescue asset owners from recent reductions in asset prices, well, asset prices have increased far more than general prices for many decades, since 1980. We allowed asset prices to get out of line, and now we need to face up to the reality that they need to return to normal levels.
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