Example of inevitable effect of monetary inflation

February 21st, 2007

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Back in Cause of inflation: Shanghai bubble case study, we said that:

The mainstream economists do not see monetary inflation as an evil?as long as price inflation is not a problem, they do not see the need to care about monetary inflation. But Austrian School economists see that the inevitable consequence of monetary inflation is price inflation because the former is the root cause of the problem and the latter is the effect.

Today, we look at an example of how monetary inflation leads to price inflation. As explained in this article in the Sydney Morning Herald, the current rental crisis in Sydney is an ?inevitable consequence of the housing boom and bust we’re experiencing.? The housing ?boom,? (as we had explained in The Bubble Economy) is the effect of monetary inflation.

As of right now, global liquidity is still expanding. So far, price inflation, as claimed by the US Federal Reserve, is ?under control.? Rest assured, it will only be a matter of time before price inflation creeps in again. Humanity has yet to find a way to repeal the fundamental laws of supply and demand.

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