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Thursday, 29 January 2009

Comment of the day

By Lola, over at Mark Wadsworth's, discussing bail-outs for the automotive industry and the state of the economy.

"This all goes back to inflation and what it really is. I always struggled with the view set out in my economics books that inflation is the of the rise in prices. I prefer the quantity and velocity of money idea. Price rises are the result of inflation not the cause of it. In other words too much money has been made, and its price has therefore reduced - oversupply. The things that were measured in that money, cars, labour (time) are still the same price, but now as the pounds are smaller more of them are required for any given value of wealth or labour. To solve this the supply of money has to be reduced (this is why the banks should either be allowed to go bust or be forced into debt for equity swaps - doing either of these will disappear excess money from the system).

Cars are bought on finance. 90% of them - btw I own all my cars outright! Finance requires money to expand. How is this going to be done when the forces of the market are forcing it to contract money supply, aka deflate?

Brown does not get this. This can be seen in his expansion of credit in Sterling whilst prices of goods were being kept low by inceasing efficiencies in foreign manufacturers. He thought he had mastered inflation. He does not understand what inflation is. Now that the World has cottoned on to his inflation we have to pay more pounds Sterling for our imports.

What really hacks me off is that UK car makers are now broadly as good or better than anywhere else in the world. It is not their fault that people have no confidence, and nor is the credit available for them, to buy cars.

So yet again we see lefty abandonment of sound money and the consequential fake money spent on overheads killing off good businesses and driving (pun intended) unemployment.

Vote Labour. Vote wealth destruction. Vote poverty."

28 January 2009 22:29

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