Price inflation

Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.

Ronald Reagan

 

The ASP Monetary Policy is based on a simple principle - that the Australian government should create our money and spend it into circulation. Many people have asked: Will this not create runaway price inflation? Our answer: No - since the ASP Monetary Policy has the following objectives:

  • Have the RBA control monetary inflation.
  • Control the money supply so that price inflation is zero.

Our policy regarding the Reserve Bank - is that the RBA will measure and control the total quantity of money in circulation, with the objective that price inflation must always remain at zero. In order to do this, the RBA will look at the following 2 factors:

  • The growth rate of the Australian population.
  • The amount of money circulating within the economy.

As the population grows - there is a need for the money supply to increase accordingly. Below is a table of the Australian population growth rate:

World Bank Oz population rate

 

Now let's impose these population growth rates on the RBA graph of "percentage change in broad money".

Monetary Inflation

 

If the RBA limits the growth in the broad money supply to the population growth rate - then the growth in the money supply will no longer be between 10% and 20%, but will be between 1.5% and 2% (i.e. monetary inflation will be reduced).

 

Inflation is taxation without legislation.

Milton Friedman

 

The RBA will also look at the amount of money that is actively circulating within the economy, i.e. the amount of money used by people and companies to buy/sell goods and services. The RBA will then adjust the quantity of newly created money - with the objective that there should be neither price inflation nor price deflation. The primary objective of the RBA will be to maintain the purchasing power of the Australian dollar.

As a result of the RBA performing these functions - the following will be the result:

  • Low monetary inflation - since the quantity of newly created money will be limited.
  • Zero price inflation - since this will be the stated objective of the RBA.

 

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

John Maynard Keynes