Why Inflation Is Bad
When the Fed prints more currency notes (to pay for the war and the interest on all the T-bills we’ve dumped on the rest of the world) it devalues each existing dollar in circulation. This is an inflation in the money supply and its bad for us in the long term.
Here’s a quote from Ron Paul’s home page explaining why.
The greatest threat facing America today is not terrorism, or foreign economic competition, or illegal immigration. The greatest threat facing America today is the disastrous fiscal policies of our own government, marked by shameless deficit spending and Federal Reserve currency devaluation. It is this one-two punch– Congress spending more than it can tax or borrow, and the Fed printing money to make up the difference– that threatens to impoverish us by further destroying the value of our dollars.The Fed’s inflationary policies hurt older people the most. Older people generally rely on fixed incomes from pensions and Social Security, along with their savings. Inflation destroys the buying power of their fixed incomes, while low interest rates reduce any income from savings. So while Fed policies encourage younger people to overborrow because interest rates are so low, they also punish thrifty older people who saved for retirement.
The financial press sometimes criticizes Federal Reserve policy, but the validity of the fiat system itself is never challenged. Both political parties want the Fed to print more money, either to support social spending or military adventurism. Politicians want the printing presses to run faster and create more credit, so that the economy will be healed like magic- or so they believe.
Fiat dollars allow us to live beyond our means, but only for so long. History shows that when the destruction of monetary value becomes rampant, nearly everyone suffers and the economic and political structure becomes unstable. Spendthrift politicians may love a system that generates more and more money for their special interest projects, but the rest of us have good reason to be concerned about our monetary system and the future value of our dollars.
Finally a politician who understands how inflation caused by government sanctioned counterfeiting is bad for the us and is willing to tell the truth about it. Gasp, is there really an honest politician? I’d vote for him!
If you found this post helpful, consider donating to my coffee fund!![[del.icio.us]](http://images.del.icio.us/static/img/delicious.small.gif){kind=small}
- Turning Japanese Here's some interesting info from Bill Bonner, author of Empire of Debt: The Rise of an Epic Financial Crisis The Fed is still talking about the risk of inflation...while the risk of deflation rises daily. Deflation happens when liquidity dries up. Suddenly, money disappears. Lenders donât lend. Spenders donât spend.......
- Why Kiyosaki Is Buying Gold. Robert Kiyosaki has a column on why he's buying in gold. I don't know why it has tomorrow's date on it, but its pretty interesting nonetheless. Bet on Gold, Not on Funny Money by Robert KiyosakiTuesday, July 25, 2006 Gold recently dropped more than $100, or 14 percent, after hitting......
- Why The Government Wants A Weaker Dollar As I stated in my last post, the government is bankrupting our economy. I asked Chuck Butler of Everbank.com "why is the government trying to weaken the dollar and if there was any advantage to having a weak dollar?" He was gracious enough to answer my question: It's a political......
Related Websites
- Stop Trying To Make Money Blogging The ability to make money blogging is the number one goal that most all online bloggers hope to accomplish. And although there are a great number of bloggers who do make a very good living with their blogs, there are others who can't seem to make a dime with theirs......
- Credit Cards Are A Heated Topic Credit cards are a hot topic! You've got the people who love them, the folks who absolutely hate them, and all sorts who are in between. In the past couple of weeks I've written that credit cards suck, that credit cards users are the ones who suck, and that credit......
- The Federal Reserve is Engineering the Economic Collapse To most Americans, the Federal Reserve is just another name on their dollar bill. They don't know that this secretive private bank controls America's entire economic system. The Federal Reserve is no more federal than Federal Express. Created with no constitutional authority in 1913, the Fed prints money out of......
[All content is copyright of Living Off Dividends & Passive Income]
April 17th, 2007 at 6:06 pm
It would be true except that it’s the Treasury that is in charge of spending and borrowing not the Fed. And the Fed hasn’t increased the M1 money supply – currency and checking accounts – for the last couple of years. M2 – which includes savings accounts etc. has been rising still. Maybe there is an argument for the Fed to regulate these more – but a lot of the stuff out there in the popular financial media on macro policy is just flat wrong on these kind of basic facts.
April 17th, 2007 at 6:22 pm
I thought it was the M3 numbers which showed the money supply.
here’s the definition from wikipedia
“Money supply (”monetary aggregates”, “money stock”), a macroeconomic concept, is the quantity of money available within the economy to purchase goods, services, and securities. The money supply affects the interest rates. The two are related inversely, such that, as money supply increases interest rates will fall. When the interest rate equates the quantity of money demanded with the quantity of money supply, the economy is working at the money market equilibrium.”
Isn’t it true that the M3 numbers have been increasing and the Fed has stopped publishing them under the pretext that no one looks at them?
here’s the link for the wiki M3 data.
http://en.wikipedia.org/wiki/Money_supply
check out the ‘link with inflation’ section. it says
“if the money supply grows faster than real GDP growth (described as “unproductive debt expansion”), inflation is likely to follow”.
i read somewhere (can’t quote the source) that in 1960 the foreign held reserves of US dollars were 40 Billion. In 1980 they were approximately $400 Billion and right now I believe they’re somewhere in the $3-4 Trillion range.
Isn’t that inflation via the devaluing the currency (caused by printing more dollars)?
where else would these numbers come from?
April 17th, 2007 at 6:24 pm
here’s a link to the M3 numbers.
don’t know how accurate it is.
http://www.economagic.com/em-cgi/charter.exe/fedstl/m3sl
April 18th, 2007 at 4:12 am
I agree that M2 and M3 measures of money supply are growing rapidly. But that isn’t “printing” by the Fed. The Fed has some direct control over the M1 money supply by printing currency and regulating bank reserves. And they have held that constant (check the St Louis Fed website for great charts) recently. M3 even includes things like money market accounts which are mutual funds invested in short-term bonds and so aren’t bank deposits at all. So this is very far from the Fed printing money. When the Fed raises short-term interest rates it might encourage growth of these accounts even… It might make more sense to look at the expansion of all forms of credit and what the Fed might do to control that more. The more informed commentators do discuss that.
Out of control spending is clearly the Treasury’s and Congress’ problem. Those are the guys I’d blame. Ron Paul is a libertarian supposedly running on the Republican ticket. I don’t agree with all his positions or with all Libertarians positions though I lean more and more in that direction. I’m a libertarian leaning liberal – or classic liberal like the Economist magazine.