Politicians and mainstream economists are persistent in their warning of the so-called “deflation danger” – the idea that falling prices are calamitous for economic progress and that a perpetual, ceaseless price inflation is needed in order to bring us back to prosperity. Often, a deflation figure as small as 0.6% seems to be sufficient to trigger alarm – something of an hilarious travesty when, regardless of the merits of the deflation thesis, this figure amounts to little more than a rounding error.
Author’s Note: This is the first in a series of short posts which will seek to rebut popular, but wrong, economic beliefs.
One of the positive indicators of our so-called economic recovery bandied about not only in the media but also by our monetary lords and masters at the head of central banks is the idea that rising prices are a sign of economic recovery. This mistaken belief is part of a wider myth that views the economy as little more than a giant number – a number which, if going up, means things are good and getting better, and if going down means the situation is bad and getting worse.
In a recent article for Free Life, I noted that, for me, the urge to pen a rebuttal to the work of others come not from trawling through the drivel of a statist, leftist or mainstream pundit. Rather, it comes in response to a libertarian who has spouted some piece of nonsense in spite of being in a position to know better. Today, we will address something similar of this ilk in the realm of economics from Alistair MacLeod, Head of Research at Goldmoney.
In addressing the parasitic nature of the state, libertarians focus on many of the state’s specific characteristics in order to demonstrate its destructive effects upon civilisation. Whether it is nationalised industries, market interference, the minimum wage, anti-discrimination and egalitarian pursuits, the business cycle, or whatever, there is a treasure trove of libertarian literature available that explains and elaborates the deleterious effects of these particular state endeavours. However, a more difficult question is which of these areas, if any, are the most important? Which of them amount to mere nuisances that can be circumvented (or otherwise put up with) and which, if any, of them amount to a significant transfer of wealth and power to the state with seemingly permanent effects? Furthermore, is there any one issue that libertarians should stress above all others if we are to deliver a real and significant puncture to the state’s ever-inflating balloon?
In response to the state-induced cost of living crisis, there have been prominent calls to cut the rate of various taxes that the state imposes upon its working citizenry. One such area where this has been most pronounced in the UK is the rising cost of petrol, in which fuel duty and VAT can amount to up to 40% of the price paid at the pumps.
In response to large profits posted by BP and Shell, the UK government is considering a so-called “windfall” tax on oil and gas companies. The aim of this measure is to redistribute, to consumers, the proceeds from those profits so as to ease the burden of the spiralling retail cost of fuel and heating.