Inflation: Why Do Prices Keep Rising?

Inflation is the oldest known form of wholesale robbery of the people. Historically, this robbery has been carried out behind an array of smoke and mirrors, while the corporate media does its job of throwing “learned dirt” into the eyes of the people.

The people stagger out of the grocery store staring at the check out list, shaking their heads in disbelief. No one has to tell them we are caught in a dangerous spiral of inflation. The government spin masters show us figures to prove there is no or little inflation. Their figures conveniently leave out “volatile” items such as food and fuel. Looking at inflation we must proceed from the old warning that figures don’t lie—but liars can figure.

What is inflation? How and why does it take place? Inflation is the fall of purchasing power of a currency. Before we go any further we must restate some obvious facts. When you purchase something with paper money, that money represents a definite amount of labor time of a certain quality. So essentially you are exchanging your spent labor for a different kind of spent labor—your brick for a dollar and the dollar for someone else’s cup. Gold, in different quantities, has long been accepted as expressing all forms of value and is the foundation of exchange. Since there is not enough gold or precious metals to conduct the trillions of dollars worth of exchanges that take place every day, nations print paper money and make adulterated silver or copper coins which represent the value of gold. The Romans found out that when they began adulterating their silver coin, the denarius, prices rose. The death penalty for raising prices did not prevent inflation. They found out that no political law could set aside an economic law. However, the capitalists are still trying.

The United States has had a powerful, stable economy. The saying “sound as a dollar” expressed the confidence the world market had in the dollar. Although it was a complex process, this confidence in the dollar allowed the United States to move off the gold standard and for all practical purposes the dollar replaced gold. When inflation under President Nixon rose to 4% he imposed price and wage controls. Today, 5% is considered normal. What happened? The wars, the looting of the public treasury and the recovery of Europe from WWII forced the government to print more paper money than there was gold to back it up. Therefore, prices rose and the value of the dollar fell accordingly.

Today with corporate power becoming the government, expenditures are exploding. For instance, the Iraqi war is costing $341, 400,000 per day. The bill is met by speeding up the printing presses, with the consequent fall in the value of the dollar and corresponding rise in prices.

There is another, more serious element in today’s inflation. We had mentioned that, essentially, buying and selling is the exchange of labor in different forms. That spent human labor is known as value. In the long run, price and value have more or less reflected one another. The introduction of robotics is destroying any way of measuring value, since some commodities are made with labor and identical ones are not. So the market place sets not only price, but also value. Oddly enough two tendencies evolve. One is inflation, because of greater and greater deficit spending. For example, this year, our economy will grow by about 1% while the economies of Middle Europe, China and the Far East will grow at 10%. Who is going to invest in the United States? Printing more money that only fuels inflation will make up the shortfall.

The other tendency is the opposite—deflation. As robotics expand, more and more commodities are produced that have no value. Yet, in the marketplace, they are sold beside identical commodities that do have value. The result is labor-produced commodities are sold below their value and this forces down wages, which in turn creates a glut of commodities which force down the price of labor below its value—that is, the cost of its reproduction. This vicious cycle is the cause of the growing world poverty in the midst of mountains of necessary goods.

What is happening and how it is happening are two different things. This round of inflation is part of the ending of the wage-labor—capitalist—system. It will not happen overnight, nor will it be a steady, stable process. It will be a series of partial recoveries followed by backsliding until the economic revolution forces a political revolution which will construct an economic order compatible with robotics and the other forms of productive electronics.