Capitalism Strikes Again

The province of Nova Scotia is in the process of increasing the minimum wage to something like ten dollars per hour or something like that.

One of the government's reasons for doing this is that it will match inflation rates. Which means that, as prices rise with inflation, the minimum wage rises so that stuff doesn't become unaffordable.

The main problem with this is that most people make their money by making and selling stuff. So with an increased minimum wage, it's now more expensive to make stuff. To offset this, company owners will either increase the price of their stuff or lay off lots of their employees. And the cycle begins again.

What causes inflation anyway? The simple answer is this: as the amount of money in circulation increases, prices increase accordingly. Deflation occurs when the amount of money in circulation decreases and prices decrease.

So, throwing more money into the mix is not going to fix the real problem of inflation. Inflation is a problem because it raises the price of stuff beyond it's actual worth into an area called "perceived worth," which is the amount of money people are willing to pay for it. The actual worth of stuff can be calculated by how much it costs to make it and then you can increase that number by as much as seven or eight million percent to make a profit. For example, at Little Caesar's Pizza(tm), it costs an estimated average of $0.18 to produce one bag of Crazy Bread (tm). The same Crazy Bread is then sold for $2.99 resulting in a profit of $2.81 per bag. (Cut that it half on Fridays and Wednesday.)

In actuality, the problem isn't inflation, it's the amount of money in circulation. And when you consider that as much as 75% of the money in circulation is actually artificial money--ie. Credit the problem of inflation becomes a little more understandable.