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  If steady price deflation were operative as is the case in a properly functioning consumer economy , where productivity improvements flow into lower consumer prices—the world would be quite different today and far more difficult for bankers and bureaucrats. With steadily falling prices, bankers must do proper credit analysis. They must set aside ample reserves and generally run their institutions more conservatively. Credit analysis is far more difficult in deflation as borrowers must continuously sell more goods to service their loans rather than relying on boosting prices. Secured loans become problematic as pledged assets devalue. Banking generally becomes a lot more work—and more risky. The period of 1865 to 1910 in the United States was a perfect example of this sort of environment. Record bank failures and enormous financial volatility accompanied steady deflation and one of the greatest periods of economic prosperity and innovation in our nation’s history. In short, deflat...

  Inflation Is a Giant "Skim" on the American People The price of a McDonald’s hamburger in the United States has inflated 3.75 percent annually over the last seventy years. McDonald’s has grown from a tiny hamburger stand in Des Plaines, Illinois, to the second largest fast-food chain on earth. Scale economies alone (never mind process and productivity improvements) should’ve allowed the price of a burger to decline materially over this period. Why didn’t it? What forces and institutions have conspired to inflate the cost of a simple meal by more than thirteen times over two generations ? Many Mises Wire readers know the answer, but few Americans are economically astute enough to understand or describe what Vladimir Lenin called the “surest means of overturning the existing basis of society.” Simply put, inflation is a giant “skim”—perpetrated in a symbiosis of money creation by bankers and government-affiliated central bank bureaucrats, the two institutions with the power t...