I heard a good definition of inflation on the radio yesterday. Inflation is not rising prices. Inflation is increasing money supply. That is, there is now more money, and prices rise to reflect that. I thought of a good example to support this. Say you get a $100 gift certificate from your parents who are living on a fixed income. You're going to be much more grateful than if they had won $80 million in the lottery and sent you a check for $1000. Even though the second amount is far greater, the natural man reaction would be to think that they could have given so much more. This makes me even more wary of hyper inflation coming to our country. The Fed has lowered their interest rate to practically nothing, thereby vastly increasing the money supply. The federal government is spending money in a way that would put a drunken sailor to shame. By some estimates, since October they've spent money equivalent to half the entire national output (GDP) for one year. And mostly they're printing money to do it, since most people can't or are unwilling to loan our government money anymore.
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If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. May your chains sit lightly upon you, and may posterity forget that you were our countrymen! - Samuel Adams
The Federal Reserve was established in 1913 to create inflation and its secondary role is to manage the public's inflation FEARS. Over the past 25 years especially, the Federal Reserve has done a fantastic job at both - inflation (money supply growth) has gone out of control and the public's inflation fears have been well contained.
The Federal Reserve Act, signed into law on Dec. 23, 1913, on purpose during the Christmas holiday season, when many opponents in Congress were at home, was unconstitutional since the Founding Fathers very carefully and very deliberately included in the Constitution of the United States a provision(Article 1. Section 8)that prevented the nation's politicians from surrendering the power to "coin" money to private individuals.
Yet many, and very possibly most Americans are convinced or could be convinced that inflation is a good thing. My banker friend in our stake presidency believes it is used to stimulate our economy. Now that it is becoming so rampant, many Americans are beginnng to recognize that this creation of more money for bailouts is legalized plunder. It is giving money to certain interests, and results in depreciation in value of our assets in dollars and cents. I can think several common items which cost 10x the dollars and cents than they cost 50 years ago, and which are easier to produce now than then.
My father was able to work his way through college without accumulating debt. How many people could do that nowadays? Our purchasing power is much diminished, and we're all the poorer for it.
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If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom, go from us in peace. May your chains sit lightly upon you, and may posterity forget that you were our countrymen! - Samuel Adams
