So you think gas prices are high; food prices are too high; farmers are ripping you off; oil companies are ripping you off, and CEO’s are paid too much? Folks, it is really not about any of that; we’re not even gonna go there today. Our Dollar is rapidly losing it’s value = losing it’s purchasing power.
Between the Federal Reserve manipulating our dollar, and the politicians spending dollars we don’t have, your national debt has mushroomed to 9 Trillion, 392 Billion Dollars. That’s up from when it was ‘only’ 6 Trillion Dollars in March of 2002. Today each person in the USA owes about $30,700, so a family of four owes $122,800. Hey, we all get overloaded with numbers. This is only to help you see that the debt is far beyond our ability to pay it. Our USA is bankrupt, and will soon have to admit that.
Using the government’s calculator for CPI (consumer price index, flawed, but..) tells us that what we could buy for $1,000 in 2003 now costs us $1,194 in 2008. I said flawed… you can’t help but know $194 doesn’t come close to paying the increases in keeping your gas tank and pantry filled. If yours are filled, you’re probably ahead of the average Joe! You can play with these numbers yourself at bls.gov.
Okay, so we stumble along like this for 5 years with (admitted) inflation of about 5% per annum. Are your investments (if you even have any!) in banks and stocks, paying you 5%? And uh oh! Government TAXES your investment profits – so you need 7-10% return to actually have 5% spendable. So you take your spendable to the store of the gas station, and guess what? Prices are up WAY more than that 5% you’ve been told, so your spendable buys less. You’re paddling the boat like crazy just to keep even! How is this making your life better?
We buy lots of stuff from China; it’s cheaper and helps make our survival easier. It feels good somehow to help all those Chinese peasants have more than just one measly bowl of rice per day. Many today can own an automobile. The car needs gas, and there are more cars everywhere, which increases the demand for gas, right? China is holding lots of our inflating dollars, which it gets rid of by buying OIL (=gas)! Rational, right? More demand, inelastic supply, so we are paying more for gas. Or haven’t you noticed?
So China passes our dollar to somewhere in the middle east to pay for a few boatloads of oil. Ya know what? OPEC members have noticed that this dollar keeps getting worth less and less. So what happens? Dollar Down, Oil Up! OPEC meets again in September, which follows dead-serious talk at their last meeting about dumping the dollar for some other currency. Why? Lack of confidence in the dollar — it’s no longer stable! You might be wise to consider your personal circumstances if/when that happens. Can we control it? NO!
So our dollar, fiat money which is only an IOU (a promise to pay redeemable with ditto fiat dollars) is becoming worthless (worth less, okay?) That is called inflation. As inflation increases more quickly, we call that hyperinflation. When we have hyperinflation, sorry, “that’s all, folks”.