I think it was ok until they start speaking to the banker about five minutes in. Then the errors begin.
That 2% inflation a year is good. Why is losing 2% of my money good? Why is losing any percent of my money good?
That it can be controlled by the interest rate. He explains that if interest is high, people will be reluctant to borrow money. So that he is kinda covering up the fact that fractional reserve banking is the problem. If there was no FRB, then borrowing money from a bank would not increase the money supply.
He says that deflation is bad too, for the usual fallacy that people may wait a little while before spending money.or investing. What is the evidence for such a claim? Or that it hurts the economy in practice? Hazlitt’s book on inflation explains that deflation historically has been harmful only when it was introduced as a shock into the economy, such as a sudden return to the gold standard. Even then it was refusal of people to accept a drop in nominal wages and prices [of things they are selling] that did the harm, not the actual deflation. The reason deflation is “bad” is because the biggest debtor in the country, the govt, will lose money from it.
Other than that, there were some good points in that movie.
His emphasis that inflation is bad. Most of the movie was devoted to that. In the USA the theme is always that inflation is good.
His pointing out that inflation means the price of EVERYTHING goes up. Otherwise it’s not inflation.
His putting the blame for inflation squarely where it belongs, on an increase in the money supply. As opposed to blaming the consumer, for example.
Let’s go back a bit earlier to the “bread market” scene, while keeping in mind that, because inflation is theft, there are losers AND winners. Does this scene accurately portray all the economic actors?
The old lady represents the losers.
The teenagers neither win nor lose, because as soon as they get the new money, prices rise. The hidden assumptions here are:
(a) Everyone’s stock of money increases simultaneously;
(b) Everyone (including bread merchants and their suppliers) is aware that the windfall is universal.
Where is the winner? Presumably, it’s not even a human being, but some metaphorical “monster,” who just “gets pleasure” by showering everyone with new money. But from where does he get it?
Then, the ECB is portrayed as some benevolent and altruistic entity that keeps both the inflation and deflation monsters in glass jars, where they can’t run amok. The ECB is the crimefighter, the good guy.
What’s wrong with this picture?
Basically, everything except #1.
In #2, both assumptions are false. In addition, they contradict the old lady, whose stock of money doesn’t increase. In reality, some people get the new money earlier than others, and they are the primary beneficiaries. Anyone who spends the new money before prices inevitably rise is a “winner.” Others, like the old lady, are “losers.”
The video fails to distinguish between fractional-reserve inflation, which is limited by the reserve ratio, and central bank-created inflation, which is theoretically unlimited…which brings us to #3 and #4.
In a sense, there is an “inflation monster,” but it doesn’t give new dollars away “for fun”; it lends new dollars for profit.
To whom? To governments.
From where does it get this new money? It “creates” it by pushing buttons on a computer keyboard and crediting government accounts.
Is the ECB “fighting” this monster? No; it is this monster! Any central bank legally empowered to “monetize” government debt is an inflation (and deflation) monster.
The following passages are transcribed from a book I picked up for the specific purpose of quote-mining specious arguments. It’s a book on economics “for people who hate capitalism,” written by a left-leaning philosophy teacher.
In this chapter, entitled Incentives Matter, he attempts to undermine the idea that minimum wage laws create unemployment. He begins the discussion sarcastically:
After defining a “synthetic a priori judgment” as “…that’s when you figure out how things in the world must be, just by thinking about it,” then telling us that “In reality, things are a lot more complicated,” he tells us “…there is a very lively debate among economists about whether an increase in the minimum wage actually produces unemployment. For the moment, at least, no one has succeeded in providing convincing empirical evidence that it does.” (my emphasis)
Ok, so much for the foreplay. Here is the passage that I believe contains the specious argument:
If a higher wage was beneficial, employers would pay it. Minmum wages are about pushing wages above optimal. And the optimal wage varies between jobs and workers, minimum wage laws purposely don’t consider that.
Just because it worked for Henry Ford doesn’t mean it will work for everyone. Now the author admits that when he writes “could” have that effect. It’s at best anecdotal evidence. Maybe it works one time in a million.
In any case, when there is a minimum wage law, who will the workers reciprocate to? Will they feel grateful to kindly old Henry Ford, who was FORCED to give them the wage by law? Maybe he means they will rreciprocate and be more honest when filing their taxes, in gratitude to the govt.
And what of the new workers who will start out with the new wage? They will feel no need to reciprocate.
Finally, as extension of 1. it’s a question of looking at the big picture. Say 30,000 people won’t get hired, or will actually lose their jobs, as in the recent story of the Island of Samoa. And 40 people with existing jobs below minimum wage will feel grateful and work a bit harder. Was it worth it?