The value of money

Pity the poor statists. They got their global crisis, but by the time it arrived they had squandered all the public trust. Yeah, we know it’s broken, but we sure as hell don’t entrust the solution to the people who broke it.

Big Government a Bigger Threat to Us than Big Business

Recent Gallup polls show a fall to barely 41 percent in the number of Americans who see their county as divided into “haves” and “have-nots.” Some 64 percent of Americans -- and 48 percent of Democrats -- see “big government” as a greater threat to the country than “big business,” a number near record levels. (Clive Crook – A Crisis of Leadership)

It's a pretty good article Clive Crook has written, but he stumbles in a few places, such as when he questions  free markets (why do people like him never question government interventions?)

Orthodox economics, according to recent reports, says markets are always right. Really? (Clive Crook – A Crisis of Leadership)

Yes, really. The market was right when house prices crashed. Free money stoked rampant speculation and irrational exuberance, and the walls came tumbling down. The markets are "right" in the same cruel way that the grocery store cash register says the groceries you bought add up top $210 when you only have $200 in your pocket.

It's no different with money and its market price.  The only thing keeping the dollar from crashing is that the Euro is even worse.  We are the least dirty shirt.

Theft by Government is Still Theft

Since the abandonment of Bretton Woods, the dollar has lost 77% of its value against the GDP deflator and 97% of its value relative to gold. In October 2011, real wages for ordinary workers were 6.7% lower than they had been 39 years before. This is all the cumulative effect of 1% lower growth rates for decades.

How can we reverse course? A modern version of a link to gold for the dollar is known as the “price rule.” That means the Fed is to be guided in its monetary policies by the market prices of a basket of price sensitive commodities, such as gold, oil, silver, copper, and other precious metals and minerals. When those prices start to rise, that signals inflation, and time for the Fed to slow down the money expansion. When those prices start to fall, that signals deflation and recession, and time for the Fed to step up money expansion.

The Fed would then be guided by markets, rather than by progressive bureaucrats who think they know it all and should rule over the rest of us in their wisdom (see, e.g., disastrous inflation/recession cycles of the 1970s). That would have the added advantage of enabling the Fed to dismiss most of its troublemaking staff, which could mostly be replaced by a few interns monitoring market prices. (The Monetary Foundations of Economic Prosperity)

The US Government is devaluing our savings and purchasing power while food and energy costs have risen around 10% over the past 18 months.  That's why you're feeling poorer despite the lollipops and sunshine being peddled by the Obama hallelujah choir in the press.  Government theft is eating us alive.  

China's Raising Prices, US Prints More Money

Anyone who supports Obama has no right to cry about Reagan's deficits

“The President's own budget documents project as well that by next year more debt will be run up in one term under President Obama than under all other Presidents in history -- from George Washington to George Bush -- combined.” (Peter Ferrara – A Big Question)

Pimco, the largest bond fund in the world, announced it will no longer buy US debt.  Pimco founder William H. Gross explains why...

Unless entitlements are substantially reformed, the U.S. will likely default on its debt; not in conventional ways, but via inflation, currency devaluation and low to negative real interest rates. (Pimco – Skunked)

That 70's Show:  Stagflation!

This was not America's worst recession, but it is the worst recovery.  Following closely on the heels of economic stagnation comes inflation.

Communist China can’t rely on slave labor forever.  The peasants have caught a whiff of prosperity and they want more. China's Communist Politburo is raising wages, and we're printing more money.  This is a silent tax, we all pay more for everything.

Even worse, our government allows China to blatantly manipulate its currency, putting our domestic manufacturers at a competitive disadvantage. This would be much harder for them to do if we did not need to borrow money from them.

Anyone who frequents local shops and restaurants already knows that mom and pop can no longer hold the line.  Prices are going up...

Still reeling from the recession, most mom-and-pop shops have held off on raising prices for fear of losing more customers. But business is finally starting to pick up, and after years of being squeezed by cost increases, a growing number of small businesses are hiking their prices.

"They've been squeezed so badly for the last two years, any uptick in demand means they're going to try to raise prices a bit," said William Dennis, senior research fellow with the National Federation of Independent Business. (CNN – Inflation Pressures Grow on Mainstreet)

Walmart to the Rescue

In the face of this economic misery, retail giant Walmart will fight heroically to continue to bring us low-priced goods. Imagine if there were no Walmart or other big box giants, and instead our nation was dotted with scattered and sundry mom and pops. They could not marshal the bargaining power of a Walmart or Target, nor the supply chain efficiencies. We’d be paying frightfully more for everything!

Just as John D. Rockerfeller brought cheap kerosene to the masses, big chain retailers help shield us from the stupid policies of our government.  We should outsource the federal government to Walmart.

How the DC-NY Axis of Evil Screws Ordinary Americans

Rising government debt creates more money, diluting our purchasing power and our savings

“To finance the government deficit, the Treasury now sells bills and bonds at a rate of about $120 billion a month, or about $1.5 trillion per year. But this new Fed-created money, which finances the government deficit, is not associated with any production of new goods and services. Thus, total monetary demand, or purchasing power, exceeds the existing supply of goods, equities, and services at prevailing prices, with the predictable result that prices rise."

Inflation enriches the fatcats...

At home, bankers and speculators have been and are the first in line, along with the Treasury, to get zero interest money and credit from the Fed. They are first to get bailed out. Then with new money, they finance stocks, bonds, and commodities, anticipating, as in the past, a Fed-created boom.

Being first in line has its advantages.  So the fat cats get the new money first, before the inflationary effects kick in, giving them maximum purchasing power...

Prices rise first for the most volatile goods, especially stocks, commodities, and financial claims, because they are relatively liquid vehicles for speculators and banks. This is the story of the past two years, with stocks and commodities advancing amidst a sluggish U.S. economy. This is also the story of postwar Fed-created booms. Each cycle experiences an inflation boom, often in different assets, e.g., Internet stocks in the late ’90s and real estate in the last boom and bust.”

After the fat cats have their investments safely locked away, the inflation trickles down to the rest of us, eroding our purchasing power and our savings.  Yeah, you can buy into the bubble, but the previously steep curve is already starting to dampen by the time your average Joe Schmo has a chance to get in on it.

But middle-income professionals and workers, on salaries and wages, and those on fixed incomes and pensions, are impoverished by the very same inflationary process that subsidizes speculators and bankers. Those on fixed incomes will likely earn very little or even a negative return on their savings. Thus, they save less.

It’s a rigged game, and those manipulating OUR US Currency control the game…

The inequality of wealth and privilege in American society is intensified by the Fed-induced inflationary process.

The subsidized banking and financial community, along with the chaos of floating exchange rates and an overvalued dollar, underwritten by China and other undervalued currencies, has submerged the American manufacturing sector, dependent as it is on goods traded in a competitive world market. 

In a word, the government deficit and the Federal Reserve work hand in hand, perhaps unintentionally, to undermine the essential equity and comity necessary in a democratic society. Equal opportunity and the harmony of the American community cannot survive perennial inflation.

We can dream of demolishing the Fed’s printing presses, or we can demand that the dollar again be pegged to something tangible, like gold, and convertible upon demand.  Or you can just sit there while your savings is stolen by the government.

All quotes taken from Lewis E. Lehrman's Weekly Standard article, Fiat Money, Fiat Inflation.

For those of you who do not understand currency and what the fed is doing, read this very informative article by Seth Lipsky, The Floating Dollar as a Threat to Property Rights. He does a great job breaking it down for us non-economists.