The dual nature of the dual form

Not to produce inflation, it would be easier to fix at the same time on the same mark of wages and prices. Then wages, its level and its growth would be a direct function of productivity (and ultimately - increase the supply function), and the price and the sum - a direct function of the growth due to the objective value of commodities, services and capital (in the end - the growth function demand).

As a result, then the mass of money in circulation - subject, of course, their velocity - always and everywhere would be equal to the sum of the prices of goods, services and capital in circulation. Cost volume of all liabilities would be consistent with the physical volume of all types of real assets (commodities, services and capital), cash assets - balance sheet liabilities, accounts payable - the total accounts receivable, demand - offer, and the offer - demand.

Secret manipulation

However, the fixed salary and the price at the same level for all kinds monetarists in principle unacceptable. It is unacceptable not because it is false or impossible, but because someone is unprofitable. In this formula, just concluded the mechanism of regulation of inflation, ignoring it - the secret manipulation. And the inflation rate is higher, the power and scale of the manipulation is greater, equal and opposite.

In short, in terms of monetary speculation on strict legal language qualified as fraud, everywhere operated walking truism have to raise wages because prices are rising, and prices are rising because the unions demand, and employers are forced to raise wages.

However, not every increase in price or wage growth - is inflation, not any kind of inflation - is the growth of wages or prices.

Of course, the salary (in the broader sense - income, payment obligations or liabilities) and, therefore, a lot of money in circulation should be increased. But not because not because of the alleged rising prices. And more so, not because this is required by the trade unions. Because based on innovation, technological advancement, professional development, etc. increase productivity and quality of the product (if they fall, of course, wages and prices should be lower.)

Respectively, and prices should not increase due to the growth of nominal wages, but because they actually grow non-inflationary factors affecting the increase, for example, demand, costs of production or the quality of its products.

There are, of course, many other combinations are presented in a general way as the cases of so-called non-inflationary growth in wages and prices. The mechanism of this increase is not considered here. We only note that it is not simple and varies in different modes. Take, for example, the simplest case - price change under the influence of demand. There is no need to explain why increased demand prices rise, and fall down, but there is a need to understand why the price increases demand increases (rather than decreases), and their decline - is reduced (not increased). Some economic explanations are not enough. In monetary terms, and psychological factors are important - gregarious, panic, excitement, conspiracy, etc. Occur from time to time reversal in prices, especially stock (often in collusion main agents), brings a lot of benefits instead of the expected huge losses and disappointments. Other non-inflationary factors are complex and go back to the analysis of the initial foundations for economic growth. Unfortunately, such a fundamental understanding of inflation in the past have not been properly investigated. Attention was paid (and continues today to accentuate) for fixing the external manifestations of inflation, the secondary to the primary causes and factors that generate it and explain.