Whip inflation!
Remember that old saying from the 1970s? If you don't, you might want to say it a few times just to get used to it. It turns out prices have gone up on just about everything from oil, to food, to clothes and more. Even hotel prices spiked. Inflation is rising, too. Read more about it in
an article from AP.org available over at SignOnSanDiego.com. It's a good article filled with all sorts of depressing facts. One thing it doesn't provide, however, is a reasonable explanation of inflation. You know what inflation is, right? It's so funny because everyone thinks they know what it is but they really don't.
Inflation is what happens when you add more of a thing to a supply of that thing thus driving down the value of each individual thing. All right, that's a little confusing. Let's take Star Wars figures, for instance. I was talking to my friend Mark recently about the new Star Wars movies and he told me how General Grievous is going to be the new badass of the Star Wars universe. He's got four lightsabers he stole from Jedi he has killed--like Mark said--the new badass. Mark goes on to tell me how Hasbro, the toy maker that produces Star Wars action figures, is limiting production of the General Grievous figures to just a few per case. This means the value of each Grievous figure (!!) will be high because of how rare each figure is.
Now, if they were to add to the production level and produce more Grievous figures, logically the value of each individual Grievous figure goes down. This is what happens to our money. Every time a bank loans money, it's actually creating a goodly chunk of that money from nothing since banks (I think) can loan out $10 for every $1 they take as a deposit. That makes the value of all other dollars go down. Ironically, they call this "inflation." I guess it's because the amount of total dollars out there is inflating, but really, there's no substance behind it, like inflating a balloon.
Isn't it funny how no one ever talks about it in such simple terms?
When interest rates go up, it is supposed to discourage people from taking out loans--AKA, less money will be created by the bank, thus slowing the devalueing (is that a word?) of the USD.
There are two things that make matters worse.
First, Bush 43 keeps borrowing more money from the Fed. I've blogged on it a bit in the past--if memory serves, Bush has upped his credit no fewer than 3 times since he moved into the White House (it might be more) which puts America's credit limit with the Fed at
$8 trillion. That's a lot of devaluing of the dollar going on.
Now to the second thing making matters worse. In theory, our wages should be rising in rough sync with inflation--at least, that's what is always supposed to happen so we don't end up a country of poor people. Guess what...
It hasn't been--in fact, our wages as a nation have actually gone down.
Now we can't blame all of this on Bush--some of it is the system's fault. I mean, every time a loan is given out the value of the USD goes down. That's just financial physics. Kinda makes you wonder why we go with this system at all, doesn't it?
Well, the people who like the system say it has been what has allowed us to have unlimited growth. If we based everything on metals, like we did before 1913, we'd have caps on our wealth. There is only so much gold and silver in the world and that would mean we could only be so rich. Creating money from nothing means that we can grow and grow and grow.
Which makes sense, I suppose.
However, I do worry that eventually, the USD will be worth so little, we'll be the poorest country on the planet. I mean, that's the direction financial physics of inflation is invariably going in. Loans will continue to be given out (including those to the guy in the White House) and the USD will continue to drop in value--
forever.
"What about all that gold in Ft. Knox?" says you?
If there's any gold left in Ft. Knox, it's owned by foreign investors.
Another thing that article I linked to at the top of this post fails to do is suggest how long these price/inflation hikes and wage drops will last. My guess is that it will last quite a while. Of course, I hope I'm wrong....From AP.org and SignOnSanDiego.com:
Prices are surging – and it's not just gasoline
By Martin Crutsinger
ASSOCIATED PRESS
2:40 p.m. April 20, 2005
WASHINGTON – Americans got hit with an economic double whammy last month. They had to pay more for gasoline, clothes, airline tickets and a lot of other products. And their wages did not keep up with inflation.
It was the second month in a row that wages, after adjusting for inflation, had fallen.
"Wages aren't keeping up with the higher prices for gasoline, health care and even clothing," said Sen. Jack Reed, D-R.I.
President Bush, pressing Congress to pass his long-stalled energy plan, said the measure would boost exploration for new domestic supplies. But he acknowledged it would not come in time to help motorists facing the prospect of gasoline staying above $2 per gallon during the summer driving season.
"I wish I could simply wave a magic wand and lower gas prices tomorrow," he told a Washington audience.
Politicians from both parties were scrambling to deal with the two new economic reports Wednesday that contained bad news for families.
The Labor Department reported that its closely watched Consumer Price Index showed prices rising by 0.6 percent in March, the biggest advance since last October, as the cost of gasoline and other energy products shot up.
And even more worrisome, prices outside of the volatile energy and food categories, rose by 0.4 percent, double what analysts had expected, and the highest increase for so-called core inflation in 2½ years.
While inflation was rising, the Labor Department said in a separate report that the average weekly earnings of nonsupervisory workers, after adjusting for inflation, fell by 0.3 in March after having dropped by the same amount in February. Real weekly earnings had risen by 0.2 percent in both January and December.
Underscoring that inflation pressures are mounting, the Federal Reserve said Wednesday in its latest survey of business conditions in the Fed's 12 regions that "price pressures have intensified in a number of districts and most report that high or rising energy prices are a concern across sectors."
The higher consumer prices and the Fed's report on rising inflation pressures led to another triple-digit loss on Wall Street. The Dow Jones industrial average fell 115.05 points to close at 10,012.36, the lowest close since October.
The Labor Department reported that gasoline prices climbed 7.9 percent last month, the biggest increase since an 8 percent surge in October.
Both times, the increases were driven by soaring global oil prices – a record $55 per barrel in October, a new high of $57 per barrel at the beginning of this month.
While crude oil prices have retreated recently, gasoline prices are expected to remain above $2 per gallon through the summer driving season.
So far this year, inflation at the consumer level is rising at an annual rate of 4.3 percent, compared with a 3.3 percent increase for all of 2004.
Excluding food and energy, core inflation is rising at an annual rate of 3.3 percent in the first three months of this year, significantly higher than the 2.5 percent increase in 2004.
The Fed gradually has raised interest rates over the past year as a hedge against inflation. Analysts said the central bank could find itself in the difficult position of choosing between fighting slower growth by cutting interest rates, or higher inflation, which would require rate increases.
The Fed's latest survey of regional conditions said that economic growth was continuing from late February through early April but that the growth ranged from "robust" to "moderate" to "uneven."
"The Fed is caught," said David Wyss, chief economist at Standard & Poor's in New York. "The Fed would like to keep interest rates low to keep the economy moving, but on the other hand they have to fight against inflation."
Wyss and other analysts said the Fed probably would continue to raise rates by one quarter of a percentage point at its upcoming meetings, though a one-half point jump could happen if energy-driven inflation worsened.
"Energy prices are the key wild card for the economy," said Mark Zandi, chief economist at Economy.com.
For March, energy costs shot up 4 percent, the biggest one-month gain since a similar rise in October. Prices for gasoline, home heating oil and natural gas all increased.
Food costs rose by 0.2 percent in March, following a gain of 0.1 percent in February. Prices for pork and fresh fruit fell.
Clothing costs, which had declined, jumped 0.8 percent in March, the biggest one-month gain in 12 months. Hotel room prices rose a record 3.9 percent.
Some analysts suggested that both increases were one-month aberrations that reflected the government's inability to adjust for the impact of an early Easter, which was in March this year.
Airline ticket prices rose by 2.7 percent, the largest increase in nearly four years, reflecting efforts to deal with surging fuel costs. Health care costs were up 0.5 percent in March after an increase of 0.6 percent in February.
On the Net:
Labor's Consumer Price Index: www.bls.gov/cpi
Federal Reserve's economic survey: www.federalreserve.gov
© Copyright 2005 Union-Tribune Publishing Co.
THE INKSTREME BALLPOINT
Positive Experience/Entertaining?? Yes--definitely! It may not make everyone laugh throughout the movie, but there's something in there somewhere that will do it for you.
Back in the late 1970s in Communist Czechoslovakia a magazine for teens called ABC came up with a great way to get cameras into the hands of kids--print them in the pages of their magazine. Check out that pic to the left, there, to see what a finished Dirkon looks like (roughly). Now check out 
Positive Experience/Entertaining?? Looks like more of the same "insisting" type of film making director Michael Bay likes to do. Like Armageddon was an important movie or something.
