Wednesday, June 27, 2007

What 70 Hard-Won Greenbacks Will Buy Today

In this article, Mark Crovelli makes the observation that, whatever the government chooses to say on the subject, prices ARE rising. I, too, have noticed this in my daily life. I used to rarely pay more than $.89 per pound for fuji or gala apples (generally, one or the other is cheap); now I never see them for less than a dollar, while granny smiths, which were previously an ultra-cheap alternative to these (not to mention those god-awful red "delicious") have risen to the level previously occupied by fujis and galas. I'm definately paying more for fast food; it wasn't long ago I could eat--and eat well--for less than three dollars. Now I drop four and change any time I go anywhere, including Taco Bell. New video games once averaged out at $45.00 or so for top-tier titles; now you probably won't pay less than $60.00, and $70.00 is becoming increasingly common.

It is becoming increasingly obvious that government reports of low general price increases are little more than propaganda. Inflation is always here, but it has sped up in the last few years.I take issue with blaming the Federal Reserve for this higher-than-usual rate of inflation, however. While the FED is inherently inflationary (and not the guardian against inflation they try to claim to be), the current trend is injurious not only to the public, but to the cartel of banking interests that makes up the FED. What's behind the current inflation is not monetary policy from the FED (outside its enabling role, that is), but fiscal policy from Congress.Simply put, all that spending they are doing--particularly the war, but that's hardly the only spending that has increased under the present administration--is being done not with taxes, not even with borrowed money, but with money printed from nothing and spent into the economy. Let me review again, how it works.

Congress overspends. The difference is made up through the selling of treasury bonds. This absorption of available capital by the government would result in a rising interest rate, left as it is. This rising interest rate would slow economic growth, in addition to making it increasingly difficult for the government to finance its own loans. This is the direct result of any kind of borrowing (a reduction in available money, and the resulting increase in the price of money, ie. interest rates), but the destructive uses the government puts it to means that money will never actually be returned; no profit is made, no supplies increased.The FED attempts to avert rising interest rates by buying up treasury bonds. The money they buy it with comes from nowhere; this is where US Dollars see their birth. More dollars are circulating, but this increase in the money supply has no relation to any increase in available goods. Thus, prices rise, while interest rates are held low.

It comes down to the fact that the crisis is caused by Congress. The FED does its best to hide the crisis, which enables Congress to continue, making the problem worse. I have little doubt that a day is coming--and possibly soon--when the probem becomes so large it can no longer be hidden. In the meantime, the rest of us will experience a steady drop in our standards of living. It's a bad situation, overall.

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