Former IMF and World Bank Employee and the current Planning Commission Deputy Chairman Montek Singh Ahluwalia is one of the most blatantly pro-corporate propaganda pushers in the Indian establishment. After the diesel price was hiked in India recently, Ahluwalia has once again been pushing his distorted view of economics on to the Indian public.
Dismissing the contention that diesel price hike will push inflation, Planning Commission Deputy Chairman Montek Singh Ahluwalia today said it will have a benign impact on prices as consumers will be left with less money to buy other goods.
“When you have a suppressed price and you raise those prices, then the people who are paying that higher price will have less money left to buy other things and that will soften the pressure in the market on other prices.
“What is going to happen is that diesel prices are certainly going to rise but the inflation on other prices is going to be reduced…correcting those energy prices will lead to a boost of inflation is basically, in my view wrong,” he told reporters here.
What is being implied here is that people will start eating less food in order to keep the fuel tanks in their vehicles filled. If these statements were coming from any other person, it would have been laughed off as being downright ridiculous but since it is the official explanation of the ‘experts’of the Planning Commission, it is called ‘economic analysis’.
It is easy for the Government to blame businessmen, speculation and hoarding, and pretend that they are fighting inflation and managing “growth”, as money is a highly tangled economic subject. But, the real blame lies elsewhere. Prices would rise in general only if the money supply increases or the supply of goods come down dramatically. It is easy to find the culprit if one grasps the fact that a shortage of goods is an extremely rare occurrence and that it is not easy for an ordinary citizen to print money. Though the media uses loose terms like “food inflation”, inflation is everywhere, an increase in the supply of money and bank credit caused by the Central bank.
To understand inflation, one should first understand how money originated. In the past, a commodity (mostly gold or silver) evolved naturally as money through barter. For convenience, people kept the commodity in a deposit bank, which issued redeemable warehouse receipts, and these receipts started circulating as substitutes for commodity money. The Government seized the commodity and left people with fiat money which was made irredeemable through the abolition of gold standard, in course of time. As Ayn Rand wrote in Atlas Shrugged, “Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper.”
Money is manufactured in a complex process, in which government securities are purchased by the Reserve Bank of India (RBI), which is accompanied by the creation of new and additional checking deposits for the treasury. When the quantity of money is increased in this manner, too much money starts chasing too few goods and the purchasing power of money decreases, which leads to a rise in prices. It should be kept in mind that the rise in prices is merely an effect of inflation and the real cause is that the money supply has been “blown-up”, or overextended.
Inflation is purely a monetary phenomenon, no matter how hard the statists try to evade that fact. Intellectuals and politicians would want the public to believe that inflation is an act of God, over which we humans have but no control. Inflation however is a policy, and as any policy, it can be halted.
Our government goes on with its inflationary policies because it wants to tax the public, but lacks the temerity to resort to it in so explicit a manner. Inflation is in fact a hidden tax everyone pays irrespective of their incomes.
It is a tax, which hits the poor more than it hits the rich. The sections hit most by inflation are orphans, widows and the elderly who live on the buying power of life insurance policies, pensions and annuities. Inflation leads to a re-distribution of wealth from the poor to the state and its parasites.
In spite of all his experience in the field of economics, Montek Singh Ahluwalia does not seem to understand the fundamentals of money creation and inflation, or else he is deliberately distorting these fundamentals because that’s what the elite establishment heads want him to do, which seems to be the more likely case.
This is pretty much the situation all around the world where all the major economic decision making positions are held by people who worked for mega banks and supranational entities like the IMF and the World Bank. Whenever the government is faced with inflationary pressure due to excessive money printing by central banks, it introduces measures to increase the price of important commodities like fuel. Then these ‘agents’ of the big banks justify it with their ridiculous theories of economics and an unquestioning media helps in misleading the people by reporting these ‘theories’ as facts.
Regardless of all the complicated economics propaganda that is being pushed across the broad spectrum of the media, the truth is actually very simple and straightforward. Our currency is being systematically destroyed due to the out of control money printing by the major central banks of the world, especially the US Federal Reserve and the Bank of Japan, and this in turn is leading to heavy inflationary pressures on all the Fiat Currencies including the Rupee. The only way to escape this debt spiral is to switch back to using sound money like Gold and Silver. The people of India instinctively understand the value of Gold and Silver due to their traditional attachment to precious metals. This will play a very important and positive role in the near future.
by Vinay Raj
This article was posted originally on Transmissions Media and it can be re-posted anywhere as long as the author is credited and the source link is provided.