Functional​ finance — how to cope with inflation

The Gower Initiative For Modern Money Studies posted the story on Facebook, Functional​ finance — how to cope with inflation.

The post consisted of the following quote on Lars P. Syll’s blog:

Less well worked out is a technique of dealing with the other responsibility of the creator of money – the responsibility for maintaining its value. The key points here are not in the direct supply of money, or even in the regulation of the level of spending. The key points are in the determination​ of wage rates​ and in​ the determination of rates of markup of selling prices over costs … Higher wages relatively to prices are necessary for long-run prosperity but​ raising wages will do no good because they​ will only lead​ to higher prices and inflation.

The dilemma can be resolved only by the government going to work on both money wage determination and on markup rates. Both are problems of monopoly and as such are inevitably destructive of a free economy. Markup rates must be reduced​ by antimonopoly measures … The most important help to the government in this will be the policy of maintaining​ full employment which will make it profitable for business to work with smaller markups.

The origin of the quote is Abba P. Lerner The American Economic Review Vol. 37, No. 2, Papers and Proceedings of the Fifty-ninth Annual Meeting of the American Economic Association (May, 1947), pp. 312-317.

That is a pretty modern insight considering that Modern Money Theory (MMT) covers the theory of money of the last 6,000 years.

Coincidentally, I saw the Now This video Lawmakers on Both Sides Grilled Insulin Producers on High Prices.

I cannot embed the Now This video. You will have to view it at the above link.

The inflation in insulin prices are probably the result of illegal collusion to fix prices between the different manufacturers of insulin. That’s not quite a monopoly by the standard definition, but they are exercising monopoly like power that is prohibited by our Anti-Trust laws.

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