What Is Money? Part 13: Exported Inflation


Gary North
What Is Money?, Part 13 by Gary North
Saturday, Nov 7th, 2009

If you think people are confused about monetary affairs inside the borders of the nation they live in, you should listen to their explanations of money outside the country, beginning with the idea of “money outside the country.”

If you read the financial press, you will run across this phrase: “exported inflation.” We never hear the terms “imported deflation” or “exported deflation.”

Think about “exported inflation.” Except for Keynesians, most people see general price inflation as a bad thing. How is it that the free market leads to a situation in which something that is bad for the entire world takes place, and the sole beneficiary is the United States? Why isn’t a free market arrangement – international trade – beneficial for all parties?

My suggestion: let us look for something that is not free market or else stop talking about “exported inflation.”

PAPER DOLLARS

If someone hires an illegal immigrant – referred to these days as an “undocumented resident alien” – and pays him in cash, the immigrant may send some of this currency back home. He inserts paper money into an envelope, addresses it, sticks a stamp on it, and mails it to someone living in a foreign country. Paper money leaves the United States.

The person who receives this paper money probably does not report this to the tax collectors in her country. If she deposited it, she would have to report it, so she does not deposit it. She may not even have a bank account. So, she spends it.


Full article here What Is Money?, Part 13 by Gary North

Source: LewRockwell.com