Deflation…

As the debate rages on, both inflationists and deflationists slug it out each poring over reams of data and making the case for their position.

As far as I am concerned, there is only one obvious parameter that cuts through the fog of confusion that reigns in the various monetary/economic measures that can be distorted at will. The one measure that is hard to fudge or distort is this. For as long as tax revenue continues to decline, that is the most glaringly evident sign of deflation. And granted, just like nothing goes straight up or straight down, deflationary pressures too ebb and flow. Nonetheless, the one single metric you can keep your eye on to make heads or tails of what is going on in the economy is tax revenue. For as long as tax revenue declines, it is the clearest sign that the monetary authorities are unable to inject inflation in the monetary system ergo the economy.

If tax revenue is declining, it follows that states are unable to meet their salary and financial obligations. Thus:

http://www.reuters.com/article/idUSTRE6604DY20100701

U.S. state and local governments employ around twice as many workers as the country’s manufacturing and construction sectors combined, so the switch to layoffs risks swelling already high unemployment in the United States.

“I can confirm that states are now moving to layoffs they had hoped to avoid,” said Philippa Dunne, who polls state leaders for the economic newsletter she co-edits, the Liscio Report. “To me, this is terrible timing because private hiring remains anemic, so piling on state and local layoffs is dangerous.”

The excerpt above is actually interesting on two fronts. First, it highlights one of the inherent consequences of artificial inflation pumping; that is, that in a fiat monetary system inflation gradually overwhelms all economic metrics till it becomes a goal unto itself. Thus along the inflationary trajectory, government progressively becomes the largest actor in the economy. Second, the excerpt provides evidence of waning state revenue which is the sign of declining inflation if not its absence.

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One Response to “Deflation…”

  1. Tim @ buy snowboard Says:

    hello
    My firends and I are getting together a decthalon of extreme and absurd events. What are some events we can do?

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