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Some concepts of inflation, currency and finance ... (2 / 3)

Read part 1

Keywords: money, cost, Friedman, Keynes, chicago boys, monetary, Central Bank, ECB interest rates

1er item: Fight against inflation? Yes but which one?

Have you ever interested in how the Central Bank or our governments interpreted "inflation" and measured?

If inflation is usually defined as a sustained increase in the general level of prices (that is to say the price of everything and vend- -s'achète exchange in an economy), in facts, inflation figures reported repeatedly in the media actually correspond to the "rising consumer prices." Thus prices of all traded products are not taken into account. And are carefully excluded from the calculation of the price that the fort is known about the "investment".

Reflect well there: a consumer, by definition, lose value over time (you do resell probably cheaper in a year at the time of purchase), while investment is by definition (or convention?) intended to match the reverse. But why? I reply with a joke: because for some are rich, they are essential while others are less rich or poor (Remember: by definition, wealth is relative).

Those attending will invest (in a system that no longer euthanasia annuitants) richer than those who only eat! This was to be demonstrated.

You do not understand why property prices are soaring and the official inflation does not exceed the famous 2%? Look no further: the purchase price of housing (new or old) is not taken into account inflation! Normal, say the economists, we consider this investment! Or 55% of the French are "owners" of their homes (in fact, often rent their banker who lent them money!). Suddenly, and fresh, the share "Housing, water, electricity, gas" is reduced to a trickle in the calculation of this pseudo inflation.

You want to know how high it is taken into account? The answer is on the site of INSEE, click here

Yes, if you happened to spend for your home, your water, your gas and your electricity, all together, more than 13,4% of your total expenses, then ... you should start listening critically figures ear given the inflation JT 20 hours. And especially not to draw too firm conclusions about the extent of your last raise!

In July 2879 2005 number of very serious economic problems magazine, an article originally published in The Economist was titled simply "The inflation measure remains controversial." Controversial is a small word! We learned that a study had been conducted in the US by an economist of HSBC bank, affecting real estate weighting of 30% of the total consumer price index (compared with our meager 13,4 %). Result, inflation jumped to more than 5,5% per year, over ... twice the level of official inflation to the crowds. A very slight difference! Of course, I can imagine what would be the inflation figure if one incorporated in addition to the price of all fianciers assets, particularly stocks and products in the financial sphere ...

For this restrictive interpretation of inflation (with a capital I), which excludes all that investment (or supposed), is not without consequences. Exclude property prices but also prices of financial assets (stocks, various investments, financial products, and ...) at a time when the financial sphere became dominant is not a flaw: it is a beam ! And obviously a support beam of the current financial capitalism ... In other words: it's (almost) anything!

What also recalls Article of economic problems cited above:

"The idea that central banks should monitor developments in asset prices today do not date. In a book entitled "The purchasing power of money," the American economist Irving Fisher argued in 1911 ... that those responsible for monetary policy should stop a price index based on a broad basket of goods and services which include also financials and real estate. "

Thus, after years 95 1911, we timidly spring the question to do most of all not to approach because of such a supposition, modern capitalism still do not want any more that there is almost a century. The so-called fight against inflation biased by the current measure (deliberate) is a real scam that dare not speak its name.

As then states the article, the idea of ​​establishing such a price index implicitly assume from a Central Bank (truly independent, including the financial markets and environments "investors") that the price increase of these assets, creating inflation, could be "detrimental". But this inflation there does seem to bother some, even those who proclaim themselves independent of financial markets. But are they really, culturally and personally? The supposed independence of the firms financial audits, as Arthur Andersen, not long resisted the cronyism and overlapping interests, including in the Enron affair ...

Yes, but not ... Because there is inflation and inflation, my dear sir. That real estate rises to heaven or that Jean-Pierre Gaillard choked with joy because the CAC 40 25% climbed in 2005, this is not inflation! Well, not bad, not that one, this is good, my good sir. One that does not euthanasia annuitants what, and for good reason: this one creates the rent!

The bad is that which sees the common people, who did the grunt and demand wage increases to maintain purchasing power. This one is bad, you are told. Do not insist, it is so, and it finally understands ...

2ieme point control of the money supply: Do not put too much money into the economy, as in all times and in all places, inflation is a monetary origin.

It is definitely very strange things in areas as rigorous and as scientists supposed that the economic and monetary policies. Take for example the ECB. Officially launched in 1998, she had set a goal (besides controlling inflation under 2%, in conditions as we know) a programmed evolution and sets the money supply, that is, -dire the amount of money in circulation in the eurozone, according to the precepts of Milton Friedman: growing money supply of a constant and predictable value, equal to the inflation target plus the growth target. Thus was set the objective of growing the money supply (called M3) of about 4,5% annually (2 2% inflation +% growth 0,5% + correction term).

In 2005, it took me to go take a look (certainly he must want because all this is not very publicized nor understandable at first, it is true) on the data in the field. And guess what we discovered: in 2005, the money supply has grown in Europe almost 8%.

isolated case you say? Nay. Because since its launch, never a year I say never well one year, the ECB has held its target of 4,5%! Always on top, and not a little.

The result from the theoretical progression described in 1998, approximately 20 euros% "extra" that were created and put into circulation, almost 1000 billion on a total money supply of about 6000 billion.

Read part 3

More details

- The author's website
- What the consumer price index?
- The European Central Bank website


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