The word “inflation” is used every day, and just about every time it is mentioned, it has a slightly different meaning. Most use the word “inflation” to describe the rising costs of goods and services in one way or another. However, none of the explanations define “inflation” for what it really is, where it comes from, or how it can affect the public.
Below are some of the definitions retrieved from the internet.
The Central Bank/Federal Reserve states that “inflation is the increase in the prices of goods and services over time.”
The International Monetary Fund (IMF) defines inflation as the “measure of how much more expensive a set of goods and services has become over a certain period, usually a year.”
According to the Bureau of Labor Statistics (BLS), inflation is explained as “Consumer inflation for all urban consumers that is measured by two indexes, namely, the Consumer Price Index for All Urban Consumers (CPI-U) and the Chained Consumer Price Index for All Urban Consumers (C-CPI-U).”
U.S. Department of Labor (DOL) maintains that “Inflation can be defined as the overall general upward price movement of goods and services in an economy.”
The Street specifies inflation as “a measure of purchasing power.”
Although it cannot be denied that the above definitions are all symptoms of inflation, none seem to define the word or explain the cause-and-effect of how inflation is created and who pays the price.
Inflation is NOT Raising Prices
Inflation is NOT the rising cost of goods and services, as the cost of goods and services is regulated in this country by supply and demand. Costs do not change. In fact, with the latest technologies being implemented across the economy, including production methods, the costs of goods and services are being reduced. The introduction of low-cost computer technology has made this possible.
Think about McDonald’s self-service kiosks, the end of ‘Full-Service’ gas stations, and barcodes used to control inventories and reduce errors and minimize loss. Another analogy is the value of gold. Until recent years, nobody knew much about gold. How much existed, where to find it, what it could be used for, or how best to mine it. Today, gold has not increased in value. In fact, we now know much more about gold. We know the quantity of gold on earth, how much has been mined, and how much is still available to be mined. It is also known that the optimal methods of mining it are.
Costs of goods and services are regulated by ‘Supply & Demand’ as mentioned above. Anyone with market experience knows this simple fact. When supplies are low and demand is high, prices can rise, and vice versa, causing temporary price movements. However, it does not change the product’s value. Other factors that can affect price movements include taxes, embargoes, and regulations. These price movements do not change the product’s value; they only change the cost, which can temporarily increase or discourage demand.
The Role of the Privately Held Central Banks or the Federal Reserve
In his book The Creature from Jekyll Island, G. Edward Griffin stated, “Then the Federal Reserve System would create new money that would immediately enter the economy and dilute the value of the money already in the system. People considered this inflationary because the prices of goods and services were rising, but this was a devaluation of the currency”.
The author argued that when the Federal Reserve System creates money, it devalues the dollar rather than causing inflation, implying that devaluation is worse than inflation. The author did not mention deflation, which many economists considered the worst outcome of the 2008 meltdown.
Considering the above, one can reasonably conclude that currency creation is closely related to the population growth rate. Obviously, more people working and contributing to the economy increases demand, while fewer people working decreases demand. In other words, the currency has a direct effect on the economy and on its own value.
Governments’ Influence on the Value of the Dollar
Government influence leads to government spending. When government spending grows faster than the population growth rate or exceeds the baseline budget, there is a correlation effect. Such that it increases the supply of money while reducing the demand. As reported in the last blog post titled, ‘Medicare Going Direct’, the government uses an accounting process called baseline budgeting. Baseline budgeting utilizes current spending levels as the “baseline” for establishing future funding requirements. Thus, assuming future budgets will equal the current budget multiplied by the population growth rate multiplied by the current inflation rate.
Governments like creating more fiat money because it is an invisible way of confiscating wealth from the people without raising taxes. This is accomplished by devaluing the currency through the process of creating money out of thin air. Governments, through devaluation, create more money when needed, usually during times of war, which creates profit for the rich, contributing to larger wealth gaps, which is their real intent.
Plea to the Readers
Please, for one’s own good and the good of related family and friends, share this blog. Demand a stop to government overspending before children and grandchildren are left to struggle in the ‘Great Depression II’.
