In an economic environment characterized by sound money (money being a tool for communicating information about supply and demand and facilitating trade), better allocation of resources results in higher production and falling prices, which provide a steady rise in real wages and standards of living without favoring any class of people. On the other hand, an inflationary economic environment always benefits the rich and the financial elites (the inflation creators) at the expense of everyone else. In these inflationary environments, misallocations of resources to people in special positions of power significantly reduce overall productivity, and labor unions often exacerbate the problems by trying to raise nominal wages by limiting the supply of labor, further reducing the overall productivity. The reduction in productivity further destroys the value of money and often completely off sets any nominal wage increase they might achieve.
Posted on: Tue, 12 Aug 2014 19:07:27 +0000
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