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Inflation as only Ducktales can explain it. What I like about this is how simple and plain it is. This is common sense.
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The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.
~ Thomas Jefferson
Usually I think Glenn Beck is a bit over the top and pro war. This time he is right on the money.
Inflation/deflation actually has nothing to do with prices. A price is the value a person assigns to an object. This value changes over time, with adjustments in supply and demand, and with changes in production costs. Prices always vary and, in a capitalistic society, tend to decrease dramatically.
Inflation is an increase in the amount of available money in circulation. This erodes purchasing power and makes every dollar worth less. It also makes debt easier to pay off. This is why you cannot save and get rich. Our money is simply devalued too quickly to keep up.
Deflation is a decrease in the amount of available money in circulation. This adds to purchasing power and makes every dollar worth more. It also makes debt more difficult to pay off.
The Fed has inflated our money and financed it with debt. Welcome to the US and our fiat money system.
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The US True Money Supply can be seen here. Talk about inflation. Dang. But I do have some other thoughts on the current economic situation.
One one hand we have Bernanke and his cronies inflating the life out of our money supply. Everyone knows this is bad. Nobody in their proper mind thinks that this is good. (As a side note, if economists would just agree that the definition of inflation is an increase in the money supply I think this whole debate – of whether expanding the money supply is good or not – would finally go away.)
On the other hand we have a scared public – both national and international – who are afraid to spend. So, despite the fact that the money supply is increasing dramatically, the cash is simply not circulating. This is hedging inflation to some degree.
On the mystical third hand we have the appointment of Paul Volcker as the head of President Obama’s Economic Recovery Advisory Board. Volcker is an avid inflation fighter from the Reagan days.
My conclusion (more of a guess I suppose)? The government is going to expand the money supply. Once things start freeing up and moving they will attempt to allow the dollar to devalue just enough to make the US debt manageable. Then, using a Volckeresque strategy, the US will see a rapid increase in interest rates reminiscent of the 1980s in order to scare off more inflation.
It just seems like everything is pointing in this direction.Welcome to the world of fiat money folks.
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This morning I had a rather invigorating meeting regarding my 401(k). This wonderful meeting stirred up some thoughts on the subject of saving for retirement.
Is it not odd that you cannot simply save money and grow wealthier because you have worked and saved and earned? In order for any of us to gain real wealth we have to stash our money away in a place where we cannot touch it (some type of retirement fund) where it will hopefully (cross your fingers) gain a substantial amount of value (hopefully more than inflation) over our lifetimes. Basically, we all invest to hedge against inflation. Wouldn’t be nice if this wasn’t the case? Oh, wait, historically it has always been the case that saving meant you were gaining wealth. This is always the case until governments start debasing currency.
That’s right – in the olden days it was mixing copper with gold, zinc with silver in order to make every coin worth less than its face value. Now it’s the printing of massive amounts of currency by central bankers. Now simply think about this – every time a new dollar is printed, each dollar in your pocket is worth less. Why? This is basic supply. The more of something there is, the less each unit is worth.
So there are my thoughts. Savings should equate to wealth. Inflation equates to robbery of your money by central bankers. Investing in retirement funds is a nuissance forced on us becuase of government intervention.
Hard work no longer pays off. It’s only if you get lucky that you actually get to keep your own money.
