GLOBAL RESOURCES ANALYSIS


EFFECTS | INCREASING INFLATION


Inflation is often called the hidden tax of governments. Taxing economies outside the IRS. Webster's definition of inflation in 1983 was: "An increase in the amount of currency in circulation, resulting in a relatively sharp and sudden fall in its value and rise in prices: it may be caused by an increase in the volume of paper money issued or of gold mined, or a relative increase in expenditures as when the supply of goods fails to meet the demand." Webster's definition of inflation in 2000 was changed to: "A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services." Remarkable is that in the 1983 definition the cause plays a central definition role and in the 2000 definition the effects plays a central definition role. Money supply has been seen as the current main reason behind inflation, but PeakOil will bring back the dual caused definition, adding the sentence "A relative increase in expenditures as when the supply of goods fails to meet the demand." again to the definition. Inflation in times of positive economic growth are always forgiving to governments, but no government can walk easy away with high inflation rates in times of negative economic growth. PeakOil certainly will increase inflation rates severely 'as the prices of goods and services will increase rapidly by lower supply of goods to the market'. Inflation rates higher than the actual economic growth, hurt the positive economic growth and turn it into negative economic growth (as in economic crimp or decline) till demand and supply are equaled.


Author: Gijs Graafland


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