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INFLATION: Blame Fed’s disastrous policies

Letter by Nathan Jordan, Tacoma on April 22, 2011 at 1:25 pm with 33 Comments »
April 22, 2011 2:17 pm

The government – Republicans, Democrats and the president – are all pointing fingers at those they believe are responsible for rising oil prices.

Sure, they can find scapegoats in speculators or oil producers, and sure, they can mislead the country via the media into believing such nonsense. But when one looks further one can see that not only is the price of oil rising but also gold, silver, cotton, wheat, corn and sugar.

For instance, if one were to look at the 20-year chart of cotton prices, one will see that the price  has exploded since July 2010. Commodity prices are rising. Can the finger be pointed squarely at speculators and producers? Can all commodity prices really be attributed to both? Or is there something more sinister going on?

Rising prices are due only and completely to inflation. The Federal Reserve has been creating currency out of thin air for too long, and now we are seeing the disastrous results of such policy.

If we don’t identify the real problem, in time it will be too late. So let’s stop pointing fingers and passing blame. Let’s look at the three fingers pointing back, the three fingers that rest directly on the Fed and the government of the United States.

Leave a comment Comments → 33
  1. BlaineCGarver says:

    Commodities rise and fall on speculation only.

  2. aislander says:

    Hair-splitting, Blaine. People are speculating that the dollar is becoming weaker. Obama has to pay for his profligacy somehow, and he (and the Fed) are doing it by stealing the value of our investments and bank accounts and jobs. Think you’ll be getting that raise anytime soon?

  3. lovethemountains says:

    What? Inflation? Haven’t we been told inflation is under control? I guess the price of my favorite breakfast cereal going up nearly a dollar in the last year is just a mistake in pricing. Let us eat cake.

  4. nwcolorist says:

    The standard definition of inflation is too much money chasing too few goods.

    The trillions of dollars the Bush and Obama administrations have thrown into the system has provided the “too much money” part. The “too few goods” part needs to catch up.

  5. Inflation is not that bad if you strip out energy and food.

    Any how if you can complain about the cost of cotton, can I complain about how much my house has lost in value? I will take a lot of cotton shirts to equal what my house lost in value.

  6. “The trillions of dollars the Bush and Obama administrations have thrown into the system has provided the “too much money” part. The “too few goods” part needs to catch up.”

    And yet the velocity of money has been going down since the 1st quarter of 2008. The drop in the velocity of money has almost stopped in the last year, but it still dropped.

    At any rate, I think you are going to have a hard time sustaining inflation in the US without a growth in the velocity.

    Maybe we will get that increase in velocity this year, but the chart on Wikipedia is showing the velocity from 1st quarter 2009 to 1st quarter 2010 as still dropping.

    Also, the CPI index shows an importance number for shelter as being 31 out of 100. The cost of housing is going to be a huge damper on the overall inflation rate for a while longer.

    Like I said I can buy a lot of cotton shirts for the amount my house dropped in value.

  7. If we must point the finger at a single individual most responsible for the economic crisis it is, without a doubt, Alan Greenspan.

  8. I don’t agree with you beerBoy.

    Read the book “All the Devils are Here” by Bethnay McLean and Joe Nocera. The Tacoma public library has a few copies to loan.

    But don’t tell Tree_Guy.

  9. Every major recession can be directly tracked to the Federal Reserve artificially lowering interest rates from what the market actually should be. However, the current administration’s response to print endless dollars mimics Argentina and that was and is an economic disaster. We are now headed that direction.

  10. “Every major recession can be directly tracked to the Federal Reserve artificially lowering interest rates from what the market actually should be.”

    Well what about all the recessions and depressions that happened before 1913?

    http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

    At any rate, recessions are not caused by artificially lowering interest rates.

  11. theogsters says:

    Mr. Jordan’s simplistic conclusion — blame everything on government — ignores the law of supply and demand. When shortages, or preception of shortages, appear on the horizon, investors/speculators bid up the price. And. today, when our finite supply of (many) commodities struggles to satisfy the demands of our infinite ability to overpopulate, expect the price of commodities to continue their rise.

  12. the3rdpigshouse says:

    The dollar has been marginalized by the printing of billions of $’s in our managed currency system by the federal reserve which is being driven by a marxist/socialist in the White House named “OH-Bummer” and his socialist cohorts running the fed!

    The only overpopulation occurring in the U.S. is the influx of millions of illegal immigrants that the same government refuses to stop!!

  13. “The only overpopulation occurring in the U.S. is the influx of millions of illegal immigrants that the same government refuses to stop!”

    As always, 3ph spews garbage.

    Mexican net migration into the U.S. was 570k per year in 2001, 625k in 2004, 547k in 2007, 374k in 2008. It was 203k in 2009, and 175k in 2010. Notice any decline under the “marxist/socialist OH-Bummer”?

    http://pewhispanic.org/files/reports/112.pdf

  14. Cirrus- so was that Legal…or ILLegal migration and how does one accurately differentiate them categorically?
    By going off of the gold standard, and then off of the silver standard, we have allowed the acceleration of fiat currency thanks to the past directors of the nonfederal nonreserve which were unconstitutionally empowered by a congress that chose to ignore its constitutional mandate:
    to fix the value of domestic specie to a commodity (gold) that would not be quickly vulnerable to arbitrary capriciousness.
    Mr. Paulson, Mr. Geitner, and Mr. Bernanke….
    Please pass the toilet paper currency. ( Hey, China, can ya spare a dime ?)…

  15. “By going off of the gold standard, and then off of the silver standard, we have allowed the acceleration of fiat currency thanks to the past directors of the nonfederal nonreserve which were unconstitutionally empowered by a congress that chose to ignore its constitutional mandate:”

    But going off the gold standard increased economic growth and our standard of living. I see that as a good thing.

  16. bobcat1a says:

    Piggy, more illegals deported in each of the last two years than in any year under Bush. 195,000 convicted criminals deported last year, 81,000 more than Bush’s last year. Facts sure are inconvenient, aren’t they? Get in the way of propaganda.

  17. Sure, and the giant corporations take every opportunity to mess over
    the American citizens.

  18. “But going off the gold standard increased economic growth and our standard of living. I see that as a good thing”

    Since we left the gold standard in 1971, our standard of living has increased because we’ve put an excess of paper money into the system, as opposed to increasing our growth because of any intrinsic value in our country such as manufacturing or natural resources. The excess money in the system eventually causes the currency to be devalued and a devalued currency automatically results in rising prices.

    “Paper money eventually returns to its intrinsic value—zero”— Voltaire-1729.

  19. ItalianSpring says:

    I blame Obomba and will as long as he is president. Every time I think of him I see His happy smiling face, the US flag hanging upside down behind him with a sign affixed to it that says “For Lease”, just like the available business space for lease I see everywhere I go during Obomba’s “jobless recovery”.

  20. IS – jobless recovery is part and parcel of our capitalism without manufacturing

    Most US economic recoveries in the period 1945–1990 led to employment increases relatively rapidly. However, in the early 1990s recession, early 2000s recession, and late-2000s recession the employment recoveries have lagged increases in GDP.

  21. “Since we left the gold standard in 1971, our standard of living has increased because we’ve put an excess of paper money into the system, as opposed to increasing our growth because of any intrinsic value in our country such as manufacturing or natural resources.”

    But how are you going to fund wars with IOU’s if we go back to a gold standard?

    I don’t see us are going back to a gold standard anytime soon.

    The S&P bond rating agency has just fired a warning shot across the bow the USS Uncle Sam. I guess we will see if that spurs the Republicans and Democrats to form an agreement.

  22. ::::;holds up shiny object:::::::

    Remember….the oil companies do not price fix. Now repeat after me….

  23. “IS – jobless recovery is part and parcel of our capitalism without manufacturing”

    It’s not just Obama, it’s a Republicans and Democrats that have not demanded equal trade agreements.

    America should have listened to Ross, but they choose not to.

  24. letsworkitout says:

    Our economy runs based on what we spend, period.

    Gold standard? Impossible to go back to without completely destroying the economy.

  25. “Our economy runs based on what we spend, period.”

    If that were true, letsworkitout, we should be in great shape. But we’re not.

    I tend to agree with those who grieve the loss of our manufacturing base.

  26. Our economy runs based on what WE THE PEOPLE spend, period

  27. I_S,
    The GOP version of Old Glory carries the legend ‘AMERICA FOR SALE’.

  28. Our economy runs based on what WE THE PEOPLE spend, period

    But xring…..without good paying jobs (read: Manufacturing), WE THE PEOPLE can’t spend much and therefore WE THE PEOPLE lose crappy paying jobs selling things made in China in big box stores.

  29. Resident01 says:

    Here’s a question. At todays prices, how much gold would it take to equal the current money supply.
    Anbody know?

  30. Lets sez – ” Our economy runs based on what we spend, period.”

    No.

    Our economy runs on what we 1) produce and 2) earn.

    Your version apparently depends on what we …borrow.

    Simply printing more paper reduces the net worth of each piece of paper.

    Ask anyone on a fixed income.

    Try this: fill a glass 10% up with red liquid food coloring, now fill the remaining 90% with clear water. The result will no longer be red.
    Principle sufficiently illustrated…

  31. larsman – there is what should be and what actually is.

    To say that the American economy depends upon what we…..borrow……….is fairly accurate. Not a good thing, just an accurate generalization.

    America is a post-industrial society. Since the 80s, the get-rich-quick-in-the-Market schemes of Michael Milken and Silverardo Savings & Loan have only been expanded and “improved” upon. Labor (and unions) were always a pain to deal with – what with paying them and providing benefits – so the jobs were offshored. The “new and improved” economy was to be found in the Service sector. Manufacturing was off-shored – the Bush Administration assured us that this was a good thing – and putting a Quarter-pounder with Cheese was redefined as manufacturing.

    Research and Development in America is focused almost solely upon devising an even more arcane financial derivative “product” that repackages debt – that is where the “real” money is! So, yes, letsworkitout’s “version” of our economy is based upon credit and, unfortunately, it is a fairly accurate assessment which is why we are in such dire straits that the Fed paper-currency mill can’t manage to put together another Bubble.

  32. Bb- agree…
    However it might be short sighted to “blame” this or that “party” or president since off-shoring likely began with the appointment of Deming to facilitate the Marshall Plan post WWII.
    The classic “Mouse That Roared” on reality steroids…

  33. Financial “derivatives” (mystery poison) that can be backed first by Fannie/Freddie and then later by Tarp/Stimulus and then further obfuscated by artificially (QE2) adjusted interest rates continue to add water to the red food coloring example….but it is STILL the un-empowered citizen-taxpayer that is responsible for the consequences of devalued paper.
    Question: what is the current ratio of private sector employment compared to public sector employment relative to the past, say, four or five decades?
    Got a graph?

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