Lets talk about the silent tax - Inflation and why it is killing our country. We don't make a darn thing in this country anymore and our chief export right now is DEBT. The silent tax, the stealer of wealth from the masses. INFLATION THE ENEMY of the working class.
I don't pretend to be an expert on macroeconomics. There are those much better here than I at breaking down the numbers. Let me pimp gjohnsit for a diarist who's on top of the trends and does great analysis.
No I mearly want to talk to Joe Sixpack and the everyday America crowd. How's your paycheck holding up these days?
Remember the good ol' summer days of recent past when you would see 20 somethings driving in their dual exhaust, gas guzzling, monster SUV towing a wakeboard boat. Probably asking themselves "why did our parents struggle all their life, this stuff is easy?"
Well kiddies, I hate to break it to you but it wasn't real. For all of our excesses we will now be subjected to a third world status.
Don't believe me? Lets see what Peter Schiff says about it.
In a healthy trade relationship, a nation pays for its imports with equal exports that result from real productivity that pumps up demand. In contrast, the current U.S. import boom has been created by the artificial demand of inflation, in which increased money supply has put more dollars in the hands of U.S. consumers.
More dollars in the hands of consumers. Hmmm, you mean like the idea of the so called "Rebate Check"?
The Wall Street Journal "The money to pay for these rebates has to come from somewhere, which means from other taxpayers or from bond holders who lend money to the Treasury", which is true enough, but that, "Either way, Congress and the White House are taking money from someone to pass out to someone else."
Did the WSJ say "taking it from someone to pass it out to someone else?"
Before we go any further lets clarify Congress and the White House can only take it from one place .... the tax payers. WE THE PEOPLE are what funds this whole mess. Somewhere down the road future generations will pay for this rebate check in taxes. In fact let me just throw it to one of my favorite economists The Mighty Mogambo Guru who sums it up thusly:
I sum up with, "That may be the way it USED to be, fella, back in the dinosaur days and then up until the 1980s; but in the last 28 years things have changed a LOT, and you would think you would have noticed it sometime along the way, but these days the way it works is that the Federal Reserve creates credit in the banks, somebody borrows money from the banks (and thus turns the credit into new money and new debt), with which the borrower buys the new government debt. No muss! No fuss!"
I know there are those that say they need this check and I am not one to deny that. Consider this ... say its not a $600 rebate check ... Why not make it a $million? Everybody in the USA gets a check for $1,000,000! HOORAAAAY!
But wait, if EVERYBODY... you, your wife, all your neighbors ... everyone down your street, in your town ... state... entire country all have a million dollars.... How special is your million dollars?
If everybody is a millionaire then isn't being a millionaire just average? Therefore everybody having the same amount of purchasing power is just going to raise the costs of everything you want to buy.
AND THAT... my dear readers... is the exact definition of inflation. Not the price of everything going up but more and more dollars chasing fewer goods. What is "inflating" is the amount of currency.
Where does all that paper currency come from? Some might say the banks? Nope, think bigger. From the government? ... wrong again, and read above. The government is us. How about the Federal Reserve? Yes, but where does the Federal Reserve get it from? Stumped? They make it up. That's right ... the paper you carry in your wallet is made from thin air. Some guy at the FR punches some digits in the computer and "poof" they created money. Except its not money ... money has rules ... one of which is "A store of value".
If money is created from thin air how can it hold value? Because Uncle Sam says it does? Sorry, it can't. Why? Because what holds the Fed and the supply of USD limited in order to keep the value? Nothing .. not one thing. They can print paper dollars at will. Which brings us back to inflation and those 'great' rebate checks.
Since the creation of the Fed in 1913 the USD has lost 95% of its value. In the last 3 years the dollar has lost 20% alone. Dont believe me?
With gold at an all-time high, the price of each gilded Oscar to be presented by the Academy of Motion Picture Arts and Sciences Feb. 24 has jumped to a record $500 from $400 last year, academy spokeswoman Teni Melidonian said.
Something that holds a check on all the paper printing and holds its value century after century. Gold for 5000 years runs a check against the abuses that those darn bankers can't resist. The ability to print more and more paper for the cost of the ink. Even Oscar is 25% more expensive this year.
So why metal? Because money creation still takes labor, it cannot be just conjured up on a computer.
Thats paper but what about that change in your pocket? Interesting... since 1963 all silver was taken out of pocket change. The Kennedy half dollars being the exception. Ever since 1982 all copper was taken out of pennies. Do you realize that a pre 1982 penny is worth TWO AND A HALF TIMES its face value? Your common everyday nickle since 1946 contains more value in its metal content than our USGovt can make them. That's right a nickle cost the US Mint 6.60 cents to make a $0.05 coin. COINcidently that same 6.60 cents is what it costs to produce the new Presidential $dollar coins.
From the USA Today December 14, 2006:
Soaring metals prices mean that the value of the metal in pennies and nickels exceeds the face value of the coins. Based on current metals prices, the value of the metal in a nickel is now 6.99 cents, while the penny's metal is worth 1.12 cents, according to the U.S. Mint.
Under the new rules, it is illegal to melt pennies and nickels. It is also illegal to export the coins for melting. Travelers may legally carry up to $5 in 1- and 5-cent coins out of the USA or ship $100 of the coins abroad "for legitimate coinage and numismatic purposes."
Violators could spend up to five years in prison and pay as much as $10,000 in fines. Plus, the government will confiscate any coins or metal used in melting schemes.
This is real gov't sponsored inflation. When the metal value exceeds the face value of the coin itself. These laws were put in place before when the cost of war and borrowed money ran our country into a stagflation. This is why the US Silver dollar (the dollar of the Constitution) no longer contains any silver. As the value of precious and base metals continue to run counter to the FED's inflationary policies you can expect these trends to continue. Someday our pocket change may be made of plastic.
What I have been talking about is QUALITY of money and NOT QUANTITY. Those 20 somethings that were driving big SUV's towing the ski boat thought that it was QUANTITY that was important. Unfortunately there are several generations that are about to learn the lesson that my grandparents learned some 80 years ago. There are no free lunches. Hard work and savings create real wealth. Its not how many dollars you have but how much those individual dollars can purchase.