• RSS Ludwig Von Mises Institute of Austrian Economics

    • An error has occurred; the feed is probably down. Try again later.
  • RSS Republican Liberty Caucus

    • An error has occurred; the feed is probably down. Try again later.
  • RSS Freedom Watch

  • RSS Free Talk Live

    • Free Talk Live 2014-09-17
      Responding to Threats :: Tommy in Glasgow Discusses Scottish Independence Vote :: Secession Worldwide :: Sheriff Joe :: Cantwell Bearspray Story :: James in AZ :: Psychedelic Mushrooms Helping With Depression :: Taking Psychedelics :: FSP Central Planning?
    • Free Talk Live 2014-09-16
      The Outlaw Josie Wales Joins Us :: Kent State Bloody Sweater Controversy :: What happened at Kent State? :: Agents Provocateur :: How to communicate the violence of the State? :: Corporations :: Patient Persuasion :: Constitution :: Monopoly on Violence :: Military Defense :: Compliance :: Taxes Not Extortion? :: Legal Conspiracies
    • Edgington Post; James Jaeger 2014-09-16
      James Jaeger is a renowned director and producer of liberty oriented, Constitution focused films. https://www.youtube.com/user/OriginalIntentDoc http://moviepubs.net/dvds/
  • RSS Break the Matrix

    • An error has occurred; the feed is probably down. Try again later.
  • RSS Schiff Radio

    • A New Fed Playbook for the New Normal
      While many economists and market watchers have failed to notice, we have entered a new chapter in the short and checkered history of central banking. This paradigm shift, as yet unaddressed in the textbooks, changes the basic policy tools that have traditionally defined the sphere of macroeconomic decision-making. The job of a central banker is supposed to b […]
    • Doubling Down on Inflation
      Friday's release of disappointing August payroll numbers should have been a jarring wake-up call warning Wall Street that the economy has been treading on thin ice. Instead the alarm clock was stuffed under the pillow and Wall Street kept sleeping. The miss was so epic in fact (the 142,000 jobs created was almost 40% below the consensus estimate) that t […]
    • The Playlist for August 29, 2014
      Mixed Business - BeckYour Arms Around Me - Jens LekmanHard Times - Baby HueyNever Called You Crazy - GalacticRadio Retaliation - Thievery CorporationBillionaire - Travis McCoy feat, Bruno MarsI Am The Walrus - The BeatlesBig Boss Man - Junior Reid
    • The Playlist for August 28, 2014
      Las Vegas Strut - Jack AshfordKids - MGMTMercy - DuffyFunky - The Chamber BrothersYama Yama - YamasukiCompacto - CuruminRespect Yourself - The Staples SingersNorthern Girls - Belleruche
    • The Playlist for August 27, 2014
      Crazy - Patsy ClineThe World (Is Going Up In Flames) - Charles Bradley & Menahan Street Band I Wonder - First Rate Feat. Project RedemptionFear of a Brown Planet - Dan The Automator & Kalyanji Anandji Me And My Woman - Shuggie OtisWe Could Forever - BonoboThe Cat - Lalo SchifrinThe Suburbs - Arcade Fire

The Fed’s Misguided Battle Against Deflation

Ever since the economic collapse caused by the housing bubble, there has been an ongoing battle by the Fed to fight against deflation.  Using his monopoly power over our fiat currency, the Fed Chairman Ben Bernanke has been printing money like crazy starting with the first round of bail outs of the big banks, Fannie Mae and Freddie Mac, car manufacturers, and many others.   With the help of the mainstream media and Keynesian economists, they’ve been spreading all sorts of propaganda about the threats of deflation and why inflation is necessary.  But why would they want to scare people about the threat of deflation (defined as a decrease in the money supply) and its effect, falling prices?  Don’t falling prices drive people to the shopping centers in droves, like on Black Friday?  It surprises me too that people are actually buying into this BS that inflation is a good thing.  It’s like the master brainwashing the slave into thinking their whip is a good thing for them.

Two years after the recession began, Ben Bernanke once again is touting that inflation is too low.  Despite the Fed printing billions of dollars, people are still not spending enough, home prices continue to fall, and unemployment hovers around 10%.  Also, the latest figures from the government show that CPI (the Consumer Price Index) is at an all time low, thus the Fed has been patting themselves on the back for maintaining price stability.  Consider the chart below:

Because core CPI this year is less than 2%, Bernanke thinks that the Fed has a lot more wiggle room to inflate so he has recently announced QE2 (“Quantitative Easing #2″).  But if you think about it, what is this chart really saying?  It shows that our prices are always going up at various rates, never going down!  Even though core CPI is low this year, it doesn’t mean that inflation is too low.  It’s still rising, just at a smaller rate!  This is akin to saying that because government spending has only gone up 1% this year, government is getting smaller.  In addition, there still is trillions of dollars sitting in domestic and foreign bank reserves, as well as trillions of outstanding government bonds.  The moment this money starts flowing back into the economy, when velocity picks up, and people lose confidence in the dollar, expect our currency to drop like a rock and prices to shoot up exponentially.

Sadly, the government’s calculation of CPI is grossly misleading.  As you can see right away, the CPI doesn’t include food and energy prices, the second and third biggest expense Americans have after living expenses.  These were once included in the CPI, but are now removed because food and energy prices fluctuate too much in a given year.  The CPI calculation also uses hedonic regression to fudge the data.  For instance, they reason that if you buy a computer with twice as much power as your previous one, you really only paid half as much in “real price.”  Obviously, it’s in the best interest of the Fed to portray the CPI as low as possible, thus lowering the interest it must pay on Treasury Inflation-Protected Securities (TIPS) and Social Security cost of living adjustments.  Also it gives the Fed an excuse to keep on inflating.

However, a true view of inflation can be seen in the following commodity chart:

As you can see, commodity prices tell a different story.  All of these products are closely tied to inflation, and they have been rising at a substantially greater rate than CPI.  The Fed wants to make you believe that prices are getting lower with CPI, but really the cost to live is getting more expensive.  Last time I checked, people are still buying food at the market and using gas to travel.

Deflationists will claim that because of the housing bubble bursting, lots of money is being destroyed by defaulting home mortgages, and this is true.  However, a lot of this money was created thanks to the easy credit from the Fed, which printed it out of thin air and loaned it out for practically no interest.  This, combined with Fannie Mae and Freddie Mac, as well as government incentives to own homes, fueled the housing bubble.  To correct this bubble, deflation is necessary so that prices can drop and resources can be correctly reallocated to other sectors in the economy.  However, Ben Bernanke is not willing to let this happen and is determined to keep injecting the banks with cash to counteract the deflationary forces.

Essentially, our economy is headed for a cliff as long as we keep using inflation to fight against deflation.  Once QE2 injects another $600 billion into the economy and it continues to stagnate, what’s stopping Bernanke from doing QE3 and QE4?  As this happens, commodity prices will keep rising exponentially, more of people’s incomes will go into food and energy, and housing demand and prices will continue to fall.  Our standard of living will continue to decrease, and people on fixed income or low income will be hurt the most (ie senior citizens and the lower class).  People who have all their savings or assets in US dollars will see these wiped out pretty hard as the Fed inflates our economy into oblivion.  This has happened many times in history with Germany, Argentina, Yugoslavia, and Zimbabwe (they were issuing $100 trillion bills) and it can happen here too in the US.  All fiat currencies eventually collapse, and we are no exception.

About these ads

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 28 other followers

%d bloggers like this: