What does all of this mean? For one, it means the cost of living is on a sharp rise. It would be hard to explain in a weakened economy how we are seeing such a sharp rise in prices. People are spending less overall than they were in previous years, as many struggle with the effects of a down economy. This should have the effect of lowering prices and the cost of living, and it would, if not for the inflation factor.
Many in the mainstream like to define inflation as a rise in prices. This assessment ignores the cause and identifies the symptom. Inflation is more accurately defined as an increase in the supply of money. As laws of supply and demand dictate, when there is more money competing for the same level of goods, prices rise. So we actually see rising prices as a result of inflation. Simply put, the Federal Reserve, our nation’s central bank, prints more money, and we in turn have to pay more to feed our families, heat our homes, and fuel our vehicles.
This is by no means a new phenomenon in American history. Since the Federal Reserve bank opened for business in 1914, the dollar has lost 95% of its value. This is a confusing track record for an entity who is mandated to “maintain low inflation and stable prices”. All Americans can likely attest to the fact that cost of living is on the rise, while wages struggle to keep up, if they keep up at all. For many Americans, jobs have been lost and wages have actually decreased as part of employer austerity measures. How are these citizens supposed to keep up with the harmful effects of inflation, such as a 18.7% price increase in food?
The truth is, though the Federal Reserve might be inflating the currency, (printing more money), so they can bail out Wall St. and help our government fund trillion dollar wars and entitlement programs without raising taxes, the people who are harmed most by inflation are the poor and middle class. Whereas a wealthier family might not have a great deal of trouble adjusting spending habits to accommodate a 1/5 price rise in food, a family living on a strict budget or fixed income might now find themselves unable to meet their other monthly obligations. A family in the lowest income brackets might find themselves suddenly unable to make ends meet. This family may be confused, and rightly so, as they haven’t lived more extravagantly - they simply find the prices to provide for daily needs have skyrocketed. Such are the hidden and insidious effects of inflation. Inflation is nothing less than a hidden tax on the people, harming those most vulnerable in our society.
Even more startling than the 18.7% price increase reported by the Commerce Department today are the numbers that show the United States money supply, M3. These figures are no longer published by the Federal Reserve on their website, perhaps because they are “the best description of how quickly the Fed is creating new money and credit”, according to Congressman Ron Paul. If we go to Shadowstats.com, a private website which still estimates M3, we will see some sobering numbers. If you refer to the below chart, you will see M3 hit 18% between 2009 and 2010. Although inflation can be unpredictable in proportion to the money supply, it can come as little surprise that we have experienced an almost 19% price increase between this year and last year.
Sadly, with the way the Federal Reserve has irresponsibly increased the supply of money and credit, we can only expect more inflation in the near future. With these numbers in front of us, and as evidenced by the ongoing collapse in Greece and the EU, we can expect 1970’s-like inflation at best and destruction of the dollar at worst. This signifies the potent danger a secretive quasi-private bank, the Federal Reserve, can wreak on our economy, and indeed in our very lives.
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