Why Government Solutions Usually End In Inflation

Mises Wire ^ | January 3, 2016 | Ludwig Von Miss

[OddLane]

An essential element of the “unorthodox” doctrines, advanced both by all socialists and by all interventionists, is that the recurrence of depressions is a phenomenon inherent in the very operation, of the market economy. But while the socialists contend that only the substitution of socialism for capitalism can eradicate the evil, the interventionists ascribe to the government the power to correct the operation of the market economy in such a way as to bring about what they call “economic stability.” These interventionists would be right if their antidepression plans were to aim at a radical abandonment of credit expansion policies. However, they reject this idea in advance. What they want is to expand credit more and more and to prevent depressions by the adoption of special “contracyclical” measures.

In the context of these plans the government appears as a deity that stands and works outside the orbit of human affairs, that is independent of the actions of its subjects, and has the power to interfere with these actions from without. It has at its disposal means and funds that are not provided by the people and can be freely used for whatever purposes the rulers are prepared to employ them for. What is needed to make the most beneficent use of this power is merely to follow the advice given by the experts...

[aposiopetic]

The fundamental error of the interventionists consists in the fact that they ignore the shortage of capital goods.
In their eyes the depression is merely caused by a mysterious lack of the people’s propensity both to consume and to invest.
While the only real problem is to produce more and to consume less in order to increase the stock of capital goods available, the interventionists want to increase both consumption and investment.
They want the government to embark upon projects which are unprofitable precisely because the factors of production needed for their execution must be withdrawn from other lines of employment in which they would fulfill wants the satisfaction of which the consumers consider more urgent.
They do not realize that such public works must considerably intensify the real evil, the shortage of capital goods.

[iowamark]

Ludwig Von Miss?

[OddLane]

Yup.

[arthurus]

Complete adoption of Socialism will,, indeed, end the Business Cycle. The tradeoff for that great economic benefit is that the serf class will see steady and irreversible economic decline as the State (the rulers) confiscate everything bit by bit in order to keep the enterprise going. But there will be no business cycles any more. An unchanging and steady decline to poverty and even is not a “cycle.”

[T-Bone Texan]

As a conspiracy theorist with a hatred of the Elites, I posit that all inflation is simply a tool to strip wealth from the producers of society and give it to the super-wealthy.

There is no reason for inflation. It is a weapon against us little people.

[bert]

-—The fundamental error of the interventionists——

Or there is no error at all because the intervention is designed to induce wage price inflation that devalues the currency and thus the debt denominated in the currency.

Royal debt has been a problem since the beginning of time. Various schemes for making smaller coins or alloying the metal or who knows what are used for devaluation. Devaluing paper money that has no value requires more effort.

Obama purposely left this painful devaluation to the next president.