@silverfly, here is why I don’t care for Ron Paul in a nutshell.
• He’s an originalist who seems to treat the original Constitution the way Christians treat the Bible… the original Constitution which of course outlawed women from voting and said that slaves were 3/5 of human beings. I have no respect for this kind of ideology.
• His ideas on the gold standard are simply childish, ignorant of history and, if enacted, would ruin the world economy. Before fiat money the American economy was not this shining example of free market perfection; there were even more bubbles and busts than there are today. Add to that that holding up a random shiny metal we dig out of the ground as the basis of our currency is arbitrary and not workable in any modern context.
• He’s a social conservative. He is opposed to abortion. He has a history of somewhat appalling racism. His views on civil rights are troubling.
• He has a religious-like faith in the Invisible Hand of the Free Market, which is why he opposes almost all government regulation. He thinks that the problems on Wall Street which led to this financial crisis would not have happened if only the market were free of regulations (absolute bullshit as any history of the US shows; the laissez-faire economy of the 1800’s was characterized by rampant collusion and corruption; Adam Smith himself says we should regulate the credit market).
About the only thing I agree with Paul about are his views on war, and even then I find many of his views childish.
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So, about inflation. I think it shows a lot of maturity to admit at the outset that you don’t know that much about economics and you’re open to learning. I’m just going to post some scattered thoughts on what you’ve written.
• First of all, inflation is not just a rise in prices. You brought up the fall of buying power of American households since the “golden days” of stay-at-home-mother 50’s… first of all, I’m not sure this is even an accurate characterization of the times-gone-by since there were many poor people in the 50’s who didn’t have white picket fence houses. Secondly, this ignores the large increase in living standards since then and technological advances (consider the purchasing power of computers and electronics). But most importantly, you’re ignoring the elephant in the room: for a small subgroup of people—the richest—purchasing power has dramatically increased since the 50’s. Income inequality was much smaller during the 50’s.
• You brought up CPI; the reason the Fed uses core inflation is because commodity prices like oil and food swing wildly. Look at gas prices—remember how they went up in the summer? Remember how gas prices almost always goes up in the summer? Remember when people were screaming about CPI inflation? ANd now gas prices are down and CPi has become closer to core inflation. For long term, that’s why we use core inflation. It’s not arbitrary and it’s not changing the measuring stick.
• You are making very wild pronouncements for someone who hasn’t studied much about economics: “Throughout the world’s history (inflation) has never worked.” Do you have any examples of situations with no inflation? Here’s a thought: the Great Depression was characterized by negative inflation. Japan’s terrible recession of the 90’s, the “Lost Decade,” was characterized by negative inflation. The height of our financial crisis, the second-worst recession on record, was characterized by negative and very very low inflation. What happens when inflation is low? It means that future buying power is presumed to be better than current buying power…. so people and businesses stop buying and selling, and the economy grinds to a halt (or grinds further to a halt).
Again: nobody is advocating runaway inflation. Nobody wants inflation higher than 5%. But you have to realize that there are tradeoffs to inflation, and in certain circumstances, inflation can be a good thing. You are treating inflation as the arch-demon of economic policy, as the greatest of all possible evils. But when we are in a deflationary scenario, when the economy has grinded to a halt, when credit is very hard to get—you know, like today (this is what the term “liquidity trap” means)—inflation can spur consumer and business spending. That, in turn, can spur the economy. And that’s clearly the lesser of two evils. If you want to argue that low to moderate inflation is actually worse than the Great Depression, the Lost Decade, and the Great Recession, I think you need to have your head examined.
Finally, no, inflation is not the reason for the collapse of Russia, Germany, Greece, Rome, and Argentina. Take Germany: Hyperinflation in Germany only lasted between 1921 and 1923. Where’s this collapse? Look at Greece: what does inflation have to do with them? Greece can’t even print their own money; they’re on the euro. I think your inaccuracy comes from this almost emotional opposition to inflation. Since inflation is this great arch-demon for you, surely every economic ruin must somehow be attribuble to the root cause of inflation. Except they’re not.
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