By Daniele Pace *
In my new book, "The Fruiterer Conspiracy - Money and inflation", I face, with a fresh approach, the issue of the price in relation to the increase in the money supply.
One of the reasons why it does not want to leave to governments the ability to manage monetary policy is inflation, where excesses of currency would cause irreparable damage.
In reality, not only this cause of inflation has never been proven, but they were very strong the debates among economists who saw this theory as totally wrong.
Today, the sovereign debt crisis is proposing again the "clash" between those who support the validity of this theory and those who consider it entirely fallacious.
The book covers a brief history of the Quantitative Theory of Money, which led to this authentic dogma of the modern economy, its inconsistencies and its opponents, to develop a new thinking, a new approach to the problem, and get to innovative conclusions for those Economists who have never given validity to the theory, repudiated also by the statistics and logic.
This brings us to the theorem of the pre-existence of values of factors in the Fisher equation, decreeing in that way the inapplicability to the determination of a link between the money supply and inflation. And this is where the innovative and never advanced so far approach in the analysis of the Quantitative Theory of Money. Not only a relationship of identity as advanced by those who denounced the inconsistencies, but a logical theorem that part of the three absurd, key hypothesis, which would affirm the Fisher equation, to get to the thesis and prove the pre-existence of values and so their inclusion as constants in the equation.
Assuming in fact valid the interpretation of those economists who want the increase the money supply due to inflation, while considering other factors, we would have three absurd logic that is dictated by the facts and experience:
1. The central bank and the banking system would decide and would communicate the prices of goods and services.
2. The prices are self-adjusted without the knowledge of producers / retailers.
3. There would be the "Fruiterer Conspiracy", where manufacturers and traders, experts in monetary matters, without the knowledge of consumers, conspire to divide between them the money supply.
It is quite clear that neither of these absurd could be true, and that therefore the Fisher equation does not hold logically when you try to use it to justify the price increase. And since "logic and mathematics form the core of rational science and go together combining their fields", it is the logic to suggest to establish a relationship between the factors of the equation and the Field of behaviour in which they are determined.
We not know entrepreneur / retailer who sets their prices according to the money supply, nor as well it exist a paranormal phenomena in which prices must adapt themselves to it. The assumptions lead to the thesis that the logic states the pre-existence of factor P (and other factors) to be included as a constant in the equation as this is decided in advance by economic entities and not by the money supply, only variable. In fact, both governments and central banks, in their economic programs, use statistical data measured on the territory supplied by the National Institutes prepared for the calculation of inflation.
The conclusion is that the Fisher equation no longer has any validity both to demonstrate a relationship with inflation that in the calculation of the money supply, given the endogenous nature of the modern banking money. States are free to issue money as central banks lose the reason for their independence as the quantity of money is not determined in inflation.
To buy the book see the bottom af this article or the right site of the blog.
* Daniele Pace is an independent researcher and writer on the monetary theme. In November 2012 he published his first book, "The Utopian Money", and in 2014 "Dialogues with Auriti". He is a speaker at numerous conferences on the subject and collaborator of columns, active for the dissemination and teaching of the Popular ownership of money and its Induced value.
Introduction to inflation
What is inflation
The three "causes" of inflation
Price inflation and currency devaluation
Myths of inflation: the false equality between commodity-money and Fiat System
The birth of the dogma
The birth of the dogma: the Quantitative Theory of Money
The economic business-cycle and inflation
The fruiterer conspiracy and the pre-existence of values
The starting absurd: the logic and the price
An interesting article by Philip Pilkington
Field of Behaviour and price
Pre-existence of P in the Field of Behaviour
The Field of Behaviour and other factors
Pre-existence of P: the empirical investigation and the constant in the equation
Pre-existence of V and T in the exchange: Store of Value and circulation
The statistical data