In the course of researching a piece last month about inflation, I came across this chart:
... and this information:
But the money system stabilised again by the late 17th century. The Bank of England's website has a page that lets you calculate cumulative inflation for any period from 1750 onwards. According to them, a basket of goods and services costing £1 in 1750 would have cost (the equivalent of) £1.80 in 1900 - an average annual inflation rate of 0.3%.
... from which I surmised:
That period covers the tremendous increase in productivity introduced by the Industrial Revolution and further late-nineteenth-century scientific and technological developments, so inflation is not needed for business and prosperity.
Indeed, it's possible that much of that 80% cumulative inflation over 150 years (1750 - 1900) could be attributed to war financing and profiteering e.g. during the conflicts with France.
So, do we need inflation at all?
More people making and selling more stuff and services may turn over more money, but then there's more for that money to buy, and more income and spending on which taxes can be levied.
So isn't deflation more about (a) wealth trickling - or rather gushing - up the social scale and then being socked away in investments rather than spent to stimulate domestic demand, and (b) the offshoring of production, whereby the poor of other countries do the work and the middlemen here (via entities that may be also sited offshore) taking much of the turnover as their profit, which leads us not back to doh but to (a)?
I tried to graph these putative connections in June last year as a reckless simultaneous opening of all the lock gates, thus:
Well, maybe I'm wrong.
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