I've hesitated to post on this one because you've used such loaded terms in describing the issue that you're after. "Malthusian" is rarely used as anything but an epithet among conservative economists!
Its a complex situation, but rarely is there the "severity" of problems indicated by your adjectives unless any of the policies--and *any* of them can be misused--are not taken in balance but are considered gospel truth. As an example, not raising taxes when they're needed--whether to fund foolish social services or foolish wars of opportunity--is usually a bad idea, and is one of the main sources of the effect that you're hinting at.
Governments can affect "inflationary pressure" in one of two ways:
- Lowering interest rates on government loan instruments--mostly providing liquidity to banks who turn around and loan money based on the fact that they can get higher rates from borrowers--fuels growth because it lowers the cost of borrowing. If this happens, the economy will overheat, increasing demand for labor and resources beyond the supply, thus raising their costs and thus raising inflation and reducing the value of the currency.
- Government spending money that is not supplied either by loans that are actually funded or by increased taxes. This is what is happening in spades in Zimbabwe where the government merely prints money as needed and inflation is running so high that prices change on an hourly basis. No stable government ever does this, BUT borrowing money with abandon can achieve at least part of this "goal" because people lose faith in your currency if your GDP does not grow as fast as you are borrowing funds. The US has managed to get by on borrowing because the economy is so robust and strong, but as that economy has faltered over the last 18 months or so, the value of the dollar to most other currencies--especially the Euro--has dropped dramatically, resulting in at least part of the inflation of oil prices because oil is dollar-denominated.
The fact is that these techniques must be intelligently balanced to maintain a *steady* growth rate in the economy. China is very successful right now, but their growth rate is far higher than average and has resulted in inflationary pressure on the Yuan (which is artificially tied to the dollar, much to the chagrin of most other countries, although to the benefit of the US), but all economists consider this situation to be unsustainable, ultimately resulting in a burst of inflationary effects that will be detrimental to the Chinese economy.
Note however that this is entirely due to a *successful* economy where consumption is actually *suppressed*. Its a wonderful counterexample to the loaded and negative verbiage in your original post.
In the US and Australia, we should be happy that the Chinese are doing these stupid things to their currency because in the short-term its allowing us to avoid pain. But in the long term its going to be ugly for everyone....
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs,
Buffy
