Financial Breathing » inflationary spiral http://www.financialbreathing.com Tue, 13 Jan 2009 17:33:49 +0000 http://wordpress.org/?v=2.7 en hourly 1 The Inflation Spiral http://www.financialbreathing.com/the-inflation-spiral/ http://www.financialbreathing.com/the-inflation-spiral/#comments Sun, 11 Jan 2009 23:22:22 +0000 Joel http://www.financialbreathing.com/?p=25 Technological changes in the United States occur at a mind-boggling rate. New products are introduced every day. But though production is high, so is inflation. As the situation worsens, new theories develop and the government generates ideas to control recession—and then fight inflation. Unfortunately, all of these ideas are treating symptoms, and none are treating problems.

If the economy is in an inflationary spiral, the controls choke off the money supply (primarily credit) in an attempt to stop the increases. This stifles those segments of the economy that are dependent on credit, as most are. The economy then plunges into a recessionary period, and it takes greater quantities of money to reverse that trend. Each time the economy inflates, it generates higher prices. Each time it deflates, it picks up higher unemployment. What does the future hold for us economically? We will explore this in the next chapter.

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