The True Meaning Of Inflation

John Tamny, FORBES:

Getting back to inflation, rather than a measure of prices that change for various reasons that have nothing to do with currency policy, inflation is at its core the painful process by which capital flows to the hard assets of the earth and away from innovative, wage-creating industries. As individuals we don’t so much hate inflation for the rising prices as much as we balk at it because our chances to capture good jobs and good wages are compromised for capital essentially hiding.

As the rising price of gold has revealed throughout the decade we’ve been inflating, no matter what the more quiescent government measures of consumer prices have been telling us. A weak dollar explains our economic unhappiness because a weak dollar is what has made capital disappear.

At this point the only question is which political party will pick up on inflation’s true meaning. Money quantities, economic growth and consumer prices are decidedly poor measures of inflation, but the dollar’s price in terms of gold is. Right now inflation is delivering pain throughout the economy as it always has through reduced investment in our economic future.

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