[arthurus]

Inflation is in no way resultant from increased productivity except as increased productivity is used as an excuse for inflation. Inflation is an increase in the money supply.Period. End of lesson.It can be measured as an absolute increase in the money supply in which case if there were no inflation prices would continually decrease as supply increases and the money supply stays constant. It can be measured as excess increase in the money supply beyond that increase necessary to maintain a stable price level for increasing production. (Excess) inflation actually tends to decrease productivity as future prices become more difficult to predict and resources are diverted into less productive lines because of the nonmarket forces of inflation that distort the market.

Inflation in this normal measurement distorts the market. It causes wealth to flow to the money printers as the greater issuance of money is all money belonging to the issuer- it did not result from production of goods and services. If the government doubles the amount of money in circulation then the government possesses by that act one half of the value of the money in circulation by fiat.It confiscates value from those who buy and sell with the money.

Inflation as the necessary result of increased production is a sort of Keynesian sidetrack, I think. Keynesians tend to believe that the stock of wealth is constant and that it cannot be increased so that prosperity of one nation or one class must come at the direct expense of other nations or classes. Keynesians equate inflation with increased production. That is why this government has since FDR tried to manufacture constant inflation so that there could be more prosperity. They government thinks it is stealing from the rest of the world and makes that fantasy real by using inflation to reduce take more of the goods and services of the rest of the world. Only the dominant economy can do that and not forever. Eventually the inflated currency must collapse. This one is collapsing.

And as an aside, increasing productivity does not necessarily result in increased production. In a declining economy productivity tends to rise as the less productive workers are discontinued as less product is produced and sold. 1 worker who is twice as productive as each other of 10 workers is retained and three others are dropped. Production of the outfit decreases as productivity increases.

[muawiyah]

Deflation, however, will result when productivity increases as a consequence of automation, computerization, mechanization and/or roboticization!

Production may well decline as new products made in a more precise fashion by machines last longer.

Case in point ~ automotive engines (gasoline and diesel) are not only less costly (discounting for inflation) but they last longer. They are also vastly more productive than they were 50 years ago (in terms of MPG).

Employment in the truck engine industry has declined precipitously.

One interesting tidbit I hadn't expected in the automation of the factory I used to work at is that you can shut it down, leave it there for a couple of years DOING NOTHING, and walk in some morning and start it up without any disastrous consequences.

Even the machines that make the machines are far better, safer to use, and last longer. Retooling just isn't the problem it had been for such a long time.