Chapter 15 — Money and Prices
The distribution of new money by the national dividend is therefore a means of increasing the country's money supply when it is necessary, and of putting this money directly into the consumers' hands.
to be beneficial to the consumer, this distribution of money must
constitute a real increase in the consumer's purchasing power.
the purchasing power depends on two factors: the quantity of money in
the buyer's hands, and the price of the products for sale.
the price of a product decreases, the consumer's purchasing power
increases, even without an increase of money. Now, I have $10.00 with
which to purchase butter; if the price of butter is $2.50 a pound, I
have in my hands the power to buy four pounds of butter; if the price of
butter is lowered to $2.00 a pound, my purchasing power goes up, and I
can buy five pounds of butter.
if the price goes up, it unfavourably affects the consumer's purchasing
power; and in this case, even an increase of money can lose its effect.
Thus, the worker who earned $200 in 1967, and who earned $400 in 1987,
would lose out, because the cost of living had more than doubled in
those twenty years. One needed at least $772 in 1987 in Canada to buy
what one purchased with $200 in 1967.
consequent increase in the prices of products is the reason why wage
increases, claimed so much by workers, do not succeed in producing a
durable improvement. The employers do not manufacture money, and if they
have to spend more to pay their workers, they are compelled to sell
their products at higher prices in order not to go bankrupt.
for the national dividend, it is not included in prices, since it is
made up of new money, distributed, independently of labour, by the
with more money in the hands of the public, retailers could tend to
increase the prices of their products, even if these products did not
cost them more to produce.
a monetary reform which does not, at the same time, apply the brakes to
an unjustifiable rise in prices, would be an incomplete reform. It could
become a catastrophe of runaway inflation.
arbitrary setting of prices, a general ceiling or freezing, can also
achieve a prejudicial effect by discouraging production. Now the
reduction of production is the surest way of pushing up prices. The
legislator thus achieves the contrary of what he seeks: he provokes
inflation by clumsily fighting it; to escape sanctions, inflation takes
place, through the black market.
Credit puts forward a technique to automatically fight inflation: it is
the proposed technique of the “adjusted price”, or the compensated
discount, which would be part of the way money is issued to put the
total purchasing power at the level of total offered production.