ABSTRACT
This chapter shows however that industrial productivity not only counteracts inflation but also generates taxable economic activity that will help pay off the ever-expanding Federal debt. Inflation is the easily foreseeable consequence of higher wages that are not accompanied by higher productivity. The Roman government was forced to subsidize the Roman working class to make up the difference between their “real wages” and the wages required to keep up their relatively high standard of living. The Federal Reserve's only weapon against inflation consists of its ability to regulate the money supply via the discount rate and by selling or buying debt, but industrial productivity can also suppress inflation regardless of the money supply and/or velocity. Industrial productivity can in fact increase the velocity of money enormously, which increases taxable economic activity to counteract the deficit. If revenue, profits, labor costs, and material costs increase due to higher productivity rather than higher prices, then MV can also increase without inflation.
