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|The Incredible Shrinking Dollar|
|Commentary/Politics - Guest Commentaries|
|Written by Bradley Harrington|
|Wednesday, 05 August 2009 05:40|
"We have it in our power to begin the world over again." - Thomas Paine, 1776
If you had a 60-foot telephone pole in front of the house where you were born in 1959, and you paid a visit to that house this year, and the telephone pole was now only 13.49 percent of its original height - 8.1 feet high - would you notice? And, if so, would you wonder what had happened? And if your parents drove a 1959 Cadillac, 18.75 feet long, and you saw that same car in their garage today at only 13.49 percent of its original length - 2.5 feet long - would you notice? And, if so, would you wonder what had happened?
While we're all pretty sure that we would notice such radical alterations in the height of a telephone pole or the length of a car, I wonder if we are as perceptive about such radical alterations in the value of our money. Yet, by the government's own calculator (http://data.bls.gov/cgi-bin/cpicalc.pl), a dollar bill in 1959 is now worth $7.41 in today's dollars; today's dollar is worth 13.49 percent of what it used to be worth in 1959. Do you notice, or wonder what has happened?
"Inflation," of course, is the obvious answer - but that leaves open the question: "What is inflation?" The BLS calculator, above, is based on the Consumer Price Index - which strongly implies that inflation is rising prices. This definition, today, is supported by many dictionaries; Wikipedia, for instance, defines inflation as "a rise in the general level of prices of goods and services in an economy over a period of time."
Yet such "definitions" could not be further from the truth. Historically, inflation has always been defined in terms of the amount of money in circulation in relation to the level of goods and services in the market, not in terms of price levels. Webster's New Collegiate Dictionary, for example, originally defined "inflation" as a "disproportionate and relatively sharp and sudden increase in the quantity of money or credit, or both, relative to goods available for purchase." Note that by this definition, rising prices are the consequence of inflation and not the cause.
Translation: Inflation, in essence, is too many dollars chasing too few goods, and is brought about by the only entities capable of manipulating our money supply: the Federal Reserve and the Treasury. Since our "dollars," which used to be gold, are now just inherently worthless pieces of paper, the federal government injects more money into the economy simply by printing more. Neat trick, that. When private citizens try it, they end up in jail for counterfeiting. When the feds do it, they call it a "public service."
Yet money, to be money, must function as both a standard of value and as a long-term store of value. Precious metals, such as silver and gold, fulfill these functions quite well; fiat-based, paper-money manipulation on the part of our federal government, however, fulfills neither and destroys both. What is the driving force behind such an incredibly stupid policy? Deficit spending.
When governments spend more than they make, they have three choices: (1) cut spending; (2) raise taxes; (3) print more rubber "money." Because choice (1) is detrimental to the accumulation of power, which all governments covet, and choice (2) is politically unpalatable, that leaves choice (3).
Lest you think this is all a joke, you might do well to consider the words of John Maynard Keynes, the very architect of America's policies on deficit spending: "By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." ("The Economic Consequences of the Peace," 1919.)
And there you have it, pure and simple. Now you know what has happened to your money, and why. Fiscal sanity would declare, at this point, that what is necessary for our economy to recover would be an end to deficit spending and a restoration of the gold-based dollar.
Instead, President Obama and Congress are hocking the wealth of ourselves and our children to the tune of trillions that we do not have.
Don't you think it's time we did something about it? Because it's either that - or collapse. Which do you prefer?
Bradley Harrington is a former United States Marine and a freelance writer who lives in Cheyenne, Wyoming.
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