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Tuesday, December 1, 2015
Deflation caused by economy growth makes people richer, right?
I'm having a real understanding problem after studying some libertarian views. Some libertarians in my country (Germany) publicly talk about the fact that we could be around 6 times richer with the economic growth alone. They explain it with the fact our economy had an average growth of around 3% per year over the last 60 years. The result according to them should have been a currency value around 6 times as much. The reason for them that it didnt have such growth was the inflation of the currency through central bank and private banks. Makes kind of sense. Then I read stuff from Jörg-Guido Hülsmann and find a video of him talking about deflation. He says that deflation, even caused by economic growth in a free market will not only lead to falling prices but also to falling wages. This is - according to Hülsmann - because the employers anticipate falling prices even more and adjust their future prices and therefor their employees wages as well immediately. He explains, that the wages for the workers will fall less than the prices for goods, because the goods will be either used by the consumer goods producers OR by the production goods producers NOT BY BOTH (less competition). But the workers will have the choice to work either in the one or the other area and therefor will be able to negotiate better wages. My question: What is true? And is there a possibility to show other people how much more money people could have by now in a free society with an ordinary job (taxation left out)? The first methode was always quite compelling but I dont know anymore if its true to austrian economics or if Hülsmann is. Maybe I just didn't understand it right aswell? Any help is welcome, thanks alot!! P.S. here is the video of Hülsmann at the right timestamp: https://youtu.be/LhKC6F_-uzk?list=PLDFA82051066933E9&t=1191