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Re: Keynesian Chickens Coming Home
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sczech
coin clipping
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Jan 31 08 9:04 AM
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Perhaps the simplest explanation of coin clipping and inflation is: people do not like to pay taxes. Taxes collected are never sufficient to pay for all the expenses governments incur. The way out of this problem is to go into debt and then repay the debt via inflation (coin clipping in ancient Rome) or outright government default. Nixon's closing of the gold window in 1971 was strictly speaking a default of the US Treasury on its obligation to exchange foreign holdings of US Dollars for gold. That default marked the beginning of the worldwide fiat system we now live in. It is an interesting accident in history that the year 1971 also marked the Hubbert peak of US oil production.
So inflation is simply a silent tax we pay as a price for our unwillingness to balance public budgets every year (no deficits).
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