[GJM] Another Response on Inflation Controls.

[Zack Johnson]

 In Western industrialized economies government
spending is essentially half of all spending.  What is
counted as the money supply is the residuum of the
spending by all sectors of the economy, and its
reflux.  The totality of transactions is a multiple of
the quantity of money when counted this way.  Let's
say the multiple is four in an economy where half
the spending is by government.  That means that, if
the government stops taxing but keeps spending, the
quantity of money will double every six months.  It
is absolutely impossible for there not to be
hyperinflation in such a situation, despite the
imposition of controls such as Mr. Searle proposes:-

"With respect, I have tried to explain in simple
English how an effective though admittedly
unpopular approach (rather like taxation) would
probably be vital in the initial introduction of a tax,
and interest free economy. It would probably
involve the electronic lowering of the Price Ceiling
so that any rapid price rises would be capped
automatically. This process may be repeated several
times if necessary.  Thus, in spite of any
inflationary pressures businesses would have no
choice but to lower their prices to certain levels or
risk being fined out of existence in a very short
period of time!! Yes, a 'draconian' measure if you
will....like the non-payment of income taxation, and
the possibility of the jailhouse!"

There are literally hundreds of examples throughout
history where the authorities have tried to impose
controls such as these, and every one of them has
failed miserably--the most recent example being
Venezuela, which has the highest rate of inflation in
the Western Hemisphere.  Yes, if sufficient
penalties are imposed, businesses will lower their
prices below their costs of production, but they also
stop supplying goods and services.  So this
inherently rich oil-exporting country has shortages
of everything except oil.

With all due respect, Mr. Searle does not appear to
be very knowledgeable about how economies work,
but rather appears to be an utter ignoramus.

Why is his junk tolerated on this list?

Zack Johnson
Certified Public Accountant
Monroe, Louisiana

  ----- Original Message -----
  From: "robert searle"
  To: discussion at globaljusticemovement.net
  Subject: [GJM] Another Response on Inflation Controls.
  Date: Tue, 26 Feb 2008 13:36:04 +0000 (GMT)



  Dear All,

  Zack Johnson is at it again! Anyway, I will
  attempt the "impossible" by trying to satisfy his
  questioning though his mind seems to be clearly set in
  "old paradigm" economics to use Rodneys expression.


  1) It appears that his first query is how the
  inflation control system relates to Government.
  Ofcourse, this has been explained before...but never
  mind we shall do it once again!

  The answer is this. The inflation control system
  should be separate from the Government if desired. In
  other words, a private commercial company. Indeed, it
  would probably be part of the banking system. It too
  like the FED is a business per se though it may give a
  false impression of being some kind of governmental
  organization.

  Who though conducts inflation control policy....the
  private sector, or the government? It can be former,
  or a bit of both...It does not matter too much. What
  matters if whether the use of direct super-flexible
  controls allow things to run "well".

  It should be noted that in the UK, and many other
  countries the tax authorities have powers to check
  private bank accounts. Similiarly, the inflation
  control agency connected with a democratic government
  could do likewise if absolutely necessary.

  ii) With respect, I have tried to explain in simple
  English how an effective though admitedly unpopular
  approach (rather like taxation) would probably be
  vital in the initial introduction of a tax, and
  interest free economy. It would probably involve the
  electronic lowering of the Price Ceiling so that any
  rapid price rises would be capped automatically. This
  process may be repeated several times if necessary....

  Thus, in spite of any inflationary pressures
  businesses would have no choice but to lower their
  prices to certain levels or risk being fined out of
  existence in a very short period of time!! Yes, a
  "draconian" measure if you will....like the
  non-payment of income taxation, and the possibility of
  the jailhouse!

  However, there would be special back-up with any
  businesses that get into trouble with the above. Yet,
  basically hyperinflation, and devaluation of currecny
  is essentially "impossible"...............

  Moreover, it does not matter how much new
  non-repayable money is transmitted as it is indexed
  linked electronically to inflation levels. Thus, it
  cannot be devalued, and ultimately cannot be spent if
  the resources are not there . Thus, there a huge
  number of dormant accounts would come about...

  Again, I must stress that I have repeated all this
  before, and I hope I do not need to do it
  again..............

  R.Searle

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