Wednesday, December 26, 2007

What Is Inflation?

What Is Inflation?

“The most common cause of inflation is too much money chasing too few goods. If everybody had 5 times as much money but the amount of goods and services produced remained the same, prices would naturally rise by a factor of 5. So the answer to avoiding inflation is simply to avoid printing too much money. Easier said than done.
Government leaders like to spend a lot of money on military equipment, roads, subsidies, building projects, etc., because this keeps them popular with their constituents. But getting money to pay for these things is often difficult. Raising taxes is as unpopular as government spending is popular. One alternative is to borrow the money, but sooner or later you have to pay it back. Probably the easiest way to pay for those popular government spending programs is to ‘print’ some more money.” The Study of Economics
Principles, Concepts & Applications

If you are like most AmeriKKKans you are noticing a sharp decrease in the purchasing power of your money, it is getting increasingly more difficult to make ends meet. You see the prices of most products like gasoline, food and consumer products steadily rising. Some erroneously call the rise in the cost of living, inflation. This is not so. The rise in prices or the cost of living is merely the result of actions taken by an elite cabal of private bankers that control the money supply, set interest rates, determine credit and monetary policies. Many people mistakenly believe the US government is the entity that prints paper bills. The US Treasury does print the money but it does so at the behest of the Federal Reserve Bank a privately owned entity composed of privately owned banks. “Federal reserve System. The central bank for the United States banking system and the institution that holds the primary responsibility for the making and execution of American monetary policies. Its bank notes circulate today as the United States' everyday paper currency. (Metal coins, however, are issued by the United States Treasury Department, not by the Federal Reserve.) The Federal Reserve System represents an almost unique hybrid or blending of elements of governmental power with elements of private ownership and control. Because the authors of the 1913 legislation that set up the Federal Reserve System felt that it was vital to insulate monetary policy from ‘undue’ pressure and influence by partisan politicians obsessed with their own short-range re-election prospects, the Federal Reserve was set up along the lines of an independent regulatory commission -- not as just one more agency of the Executive Branch that would be under the direction of the President and supervised closely by Congress. The private banking community was also given a major role in the running of the Federal Reserve System that continues to give banking interests privileged access to the process by which the US government's monetary policy is made.
The Federal Reserve System's highest decision-making body is its Board of Governors, which consists of seven members. Members of the Fed's Board of Governors are nominated for their positions by the President of the United States and then must be confirmed by a majority vote of the Senate before taking office. The members of the Federal Reserve's Board of Governors serve very long terms (fourteen years), and, once appointed and confirmed, they may not be removed from office by either President or Congress (except through a cumbersome process of impeachment by Congress for serious violations of the criminal law). People selected for appointment to the Board of Governors have nearly always been professional bankers, executives of Wall Street brokerage houses, or, occasionally, professional economists. They tend to share many of the relatively conservative political and economic views of the business and professional groups from which they are drawn. Because the President can not fire them from their positions before their fourteen-year terms expire, members of the Board of Governors normally feel relatively free to ignore or oppose the President's preferences when they make U.S. monetary policies. Moreover, even though some members of the Board of Governors perhaps feel an ideological kinship or sense of political loyalty that might predispose them to support the policy views of the President who appointed them, the terms of the Governors are staggered, so that only one Governor's term expires every two years, making it unlikely that any President would be able to dominate the Board with a majority of his own appointees until near the end of his own second four- year term in office.” A Glossary of Political Economy Terms
This is Orwellian doublespeak and obfuscation for an economic system set up by the Congressional flunkies of the private bankers back in 1913 to make sure they gained control over the money supply and economic policies of the United States. The Federal Reserve System is an independent entity that does not have to answer to the President or Congress and they do pretty much as they (and their fellow private bankers) please. Keep in mind the Federal Reserve System, not Congress and not the people, is the sole determiner of AmeriKKKa’s monetary policy. They determine how much money is in circulation at any given time. They set interest and credit rates, they are the ones who routinely bail out commercial banks when their reserves get low. They do this so there will not be any 1929 type runs on banks. “The primary reason why the banking industry generally supported the creation of the Federal Reserve System and continues to support it today despite the inconveniences imposed by the Fed's regulations, is the valuable privilege that membership brings to the bankers to count on the Fed for large emergency loans of cash if they someday need it to survive a ‘run’ on their bank. In a bank ‘run,’ large numbers of depositors frightened by rumors that their bank is about to fail suddenly begin crowding into the bank, demanding to withdraw all their deposits in cash. This exhausts the very limited cash reserves normally kept on hand in the bank's own vaults within a few hours. Since the large majority of the depositors' dollars on deposit are always out on loan to the bank's credit customers, and since it takes days or weeks to call in any sizable fraction of the loans outstanding, the bank would have to ‘go bankrupt’ and be liquidated by the courts unless it can raise enough cash somewhere on short notice to pay off the panicky depositors demanding their money. This is where the Fed steps in as rescuing angel with armored cars full of cash pulling up to the beleaguered bank within a few hours.
Bank runs are much more rare nowadays than they used to be, mainly because most depositors today feel much less reason to panic when they believe that they can get their money ‘for sure’ -- either by virtue of the Fed's stepping in with loans in the case of a short-term ‘liquidity crunch’ if the bank in question is relatively sound or (with more delay) by virtue of the insurance provided by the Federal Deposit Insurance Corporation if the bank really does turn out to be irretrievably in the red financially. And because runs are now both less likely to happen and less dangerous to the bank even if they do, bankers can earn higher profits by maintaining lower reserves than would otherwise be necessary and thus being able to lend out a higher percentage of their deposits at interest.” ibid
This is what we are experiencing now during the subprime mortgage/credit/monetary crunch! The Fed is pumping mad money to shore up the “liquidity” of banks that are taking major hits on the escalating mortgage and loan defaults and the exotic ways these loans were bundled with other bonds and investment packages then passed of to unsuspecting investors (like your pension fund or 401K). Western central banks, The Bank of England, the European Union Bank, the US Fed it their Canadian counterparts are pumping billions into their respective banks frantically hoping to forestall a major global meltdown. Once we understand the role of the Federal Reserve System what they do and how they do it, you will see it was Fed’s policies that brought on the current crisis in the first place, working in collusion with Wall Street, commercial banks, brokerage firms, insurance companies their employees and the Shadow Banking System (Hedge Funds, Derivatives etc). But I digress.
Inflation occurs every time the Federal reserve System pumps additional money into circulation. This increase in money subsequently lessens the value of the money already in circulation and subsequently drives up the cost of living for all of us. In addition to the subprime mortgage/credit/monetary crisis the Fed created, the Fed is exacerbating the situation by lowering interest rates while simultaneously ramping up the printing presses flooding the economy with their Federal Reserve Notes. This increase in the Federal Reserve Notes “money supply” in addition to the deliberate Fed policy to devalue their notes, the US dollar, is making the dollar worth even less both at home and overseas. The dollar is being devalued big time and the resulting inflation will cause the cost of everything to go up!
“Price inflation makes us lose value on the money we detain. It can fluctuate a lot over time. Many economic theories offer explanations about the causes. However, these theories rather explain increasing and lowering prices among products and services. They do not explain why inflation is permanent. The permanent inflation has a different cause. We’ll take a quick tour through different types of inflation. But, to start with, we will eliminate the confusion between the Consumer Price Index and price inflation... The monetary inflation is the cause of the permanent overall price increases we notice in the long run. It is the only inflation that counts over years and decades. Inflation, in the first place, refers to inflating the money stock. This leads to the increase of average prices. Today we also use the word ‘inflation’ for the increase of prices. Keep in mind, when the money stock grows and, simultaneously, productivity grows, it may happen, that the average prices don't increase or increase less quickly. The available money is spread out among a greater number of products and services and this helps keep prices down.” Secrets of Money Interest and Inflation by Rudo de Ruijter, Independent researcher, Court September 2007
When the media talking heads speak of inflation they are deliberately attempting to confuse you to make you think the consequences of Fed policy are the cause and keep the real culprits (the Fed and the bankers) hidden. It’s not just the media talking heads, it’s the educational system both secondary as well as college who tell people inflation is rising prices rather than increased money stock (supply). They are dummying us down by lying and obfuscating the truth. So now you know inflation is an increase in the money stock (supply) and is the direct result of the Federal Reserve System pumping more and more money into circulation. The only thing that will alter this reality is to abolish the Federal Reserve System which is a privately owned entity. Unfortunately the last US president who tried to circumvent the money changers was John F Kennedy and that was one of the reasons why they killed him.



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