The Magic of Money

High Inflation is a Government Created Dark Spell

It stands to reason, without scientific proof, that if as many as possible people within a given economy are engaged in productive work, food will be grown, shelter will be available, healthcare will be affordable, children will be educated, the military will be funded, etc.

But here lies the challenge; many would rather not work. Or to be more specific, there are many jobs that most would rather not do, thus the need to pay them.

There are a total of 822 Star Trek episodes, and not once is there any indication that there are plumbers aboard the starships, doing what plumbers sometimes need to do. In the movie “Star Trek: First Contact,” upon traveling back in time, Captain Picard states that there is “no money in the future that I come from.”

Huh. So let me get this straight. The star fleet officers that call all the shots, and bask in the glory, are paid the same as those that ingloriously get their hands dirty.

They all get paid nada.

Given this lack of financial compensation, why would anyone be a future star fleet plumber? Perform the dirty work, receive no pay, and risk getting vaporized in outer space?

This of course makes no sense and explains why plumbers charge a lot in our present space-time.

The point being, that without money, or more specifically, the ability to easily transfer wealth with money, there would be no plumbers, and life for most would be less pleasant.

I am personally glad that we have money. Even if it is magically make-believe.

That’s right. Money is magically make-believe. It can only store and transfer wealth because we all believe that it can. But as history has repeatedly demonstrated, this magical property is usually of finite duration, and ceases to exist after the issuing government abuses it too often.

Money used to be metal coins and paper, today is mostly digital. My personal liquid wealth is for the most part represented as digital data stored on a cloud-based server, and by the simple act of editing this data, plus making corresponding changes to a plumber’s data, I can hire someone to unclog my toilet, or whatever.

It is this transfer of wealth, from someone who needs a product or a service, to someone else who can provide this product or service, that encourages productive work, whether that be cleaning out pipes, growing food or someday, guiding starships through outer space.

Which is exactly why it so destructive to an economy to transfer wealth to those that are not working, those who can and should be. Why would anyone unclog toilets if they could get paid the same to not work? We are not talking about welfare for needy recipients. This is about the transfer of wealth to able body adults.

Aside from helicopter parents, only the government is capable of such illogical, if not immoral, transfer of wealth. And because wealth cannot be magically created (as money can), that wealth must come from someone else.

No politician wants to take credit for encouraging able body adults to be unproductive, thus this wealth transfer needs to be accomplished quietly, in such a way that no one will notice.

Which is exactly what inflation, or the devaluation of money, enables.

It will be reasonably assumed that unless there is a catastrophic event in progress, the net wealth of a society is gradually changing, hopefully increasing. If the money supply within an economy dramatically increases, as ours has recently done, then the only logical expectation should be one of eventual high inflation, as there are more dollars are floating around to measure a relatively fixed amount of wealth.

The amount of wealth represented by each dollar decreases, the currency is devalued.

This is not rocket science. There are other factors that determine the rate of inflation in the short term, but in the more important long term, the relationship between the rate of inflation and the money supply, as approximated by M2, is indisputable.

Click here for deeper look at M2 and inflation.

Furthermore, paying able body adults not to work will result in a labor shortage, resulting in a shortage of products and services, adding fuel to the fire as this is a short-term upward force on the rate of inflation.

If a dramatic increase in the money supply eventually results in high inflation, why has the Federal Reserve, who is chartered to “stabilize” the dollar, allowed this to happen?

The answer is easy, it enables politicians to pay unproductive Paul to while productive Peter keeps working, without Peter knowing.

If the politician were to pass a law that raised taxes on Peter, transferring his hard-earned wealth to Paul, Peter would probably vote for someone else. But what if instead, the dollars given to Paul were magically created, without the inconvenience of new laws, or having to ask for Peter’s approval?

This is so easily done in today’s digital age, just a quick change of the Federal Reserve’s digital ledger, and abracadabra, the U.S. Treasury sends a check to Paul. Wealth was transferred from Peter (and everyone else) to Paul. Lucky Paul, we all know who he will be voting for.

The net result being a less efficient economy, and of course, future inflation. Plus, ill-informed politicians and a Federal Reserve chairman who confidently yet erroneously claim that the high rate of inflation is transitory, wholly due to supply problems, pent up consumer demand, etc.

Any reason other than the expanding money supply because they would rather you did not understand.

Speaking as an engineer, you cannot arrive at the correct solution if you are unable to identify the true source of the problem.

This is a dangerous path. Our economy can only function if we all collectively believe in the magical power of money. High inflation will diminish that faith.

High inflation will punish savers, the elderly, and discourage investment. It is the price we paid for our response to Covid but is now akin to waving a flag that says, “our economy is not as efficient as it should be.”

Perhaps encouraging bad behavior by foreign powers because a strong military depends on a strong, wealth producing economy.