One of the most important problems in economics is: How do we know if an enterprise is creating or destroying wealth? The line between the two is objective, black and white. It should be clear that if business managers canít tell the difference between a wealth-creating or wealth-destroying activity, then our whole society will be miserably poor.

Any manager will tell you that itís easy. Just look at the profit and loss statement. Profit is so powerful an incentive for managers, that one could never persuade them to operate based on any other indicator. And it would workóif economists had done their jobs properly.

But have they?

As we have argued many times, economists have given their apologia for the regime of irredeemable currency. Millions of trees have sacrificed their lives, so that economists could print their books and papers arguing in favour of debasement to promote employment, debasement to promote exports, debasement to boost GDP, and debasement in a crisis.

It reminds us of the old Steve Martin comedy routine, where he said he only smoked marijuana in the late evening. As he went on and on, he added more and more times when he would smoke it. So in the end, he conceded well at least he didnít smoke pot at dusk.

So, as you can imagine all this debasement causes a problem for anyone who tries to use the dollar as a unit of measure. So economists have proposed a solution. They adjust the dollar.

Like physicists who assume that pulleys are frictionless and massless, only with less realism, they assume that consumer prices would be constant but for the relentless debauchery of the central bank. So they use consumer prices to adjust the dollar.

Prices are measured in dollars, which are adjusted using prices. If this seems circular, well, it is.

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