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Inflation: “Too Much 'Friggin' Money Chasing Too 'Few' Goods!”

Updated on December 24, 2011

Inflation: “Too Much Dang Money Chasing Too Few Goods!”

A thorough but didactic understanding of inflation is very important in today’s kamikaze economy; any significant increase in the overall price level of an economy will, indeed, lead to an increase in the cost of living. Most economists are aware that a given quantity of currency is able to command fewer quantities of goods and services as overall prices rise. However, it’s not uncommon to hear most economist define inflation as “too much money chasing too few goods.” This definition—simplistic as it may seem—serves its purpose—whereby, too many dollars circulating around will not only lower the purchasing power of a currency but; indeed, cause prices to climb.

The Government And Its Tampering With The Money Supply

It’s now general consensus that there’s never been a period in the U.S. economic engine’s history in which a significant change in the price level hasn’t brought about a corresponding change in the supply of money. Nevertheless, it can only be speculated that the true cause of inflation is always and everywhere a monetary phenomenon. Because inflation is first and foremost a monetary phenomenon, an economic engine can’t “get it” without government tampering with the money supply. It’s like a husband trying to distance himself from his wife to bear his own kids. Just like you can’t get a child without the help of a woman, you can’t get inflation without the help of the U.S. Federal Reserve. Theoretically, in true market economic doctrine, inflation could be considered imminently inevitable. In theory, in anytime you have a fiat based economy—other than a command economy— prices represent floating devices within a sea of erratic swings. In fact, it’s completely normal for prices to move both up and down over a long period of time. In addition, according to world renown economist A.W. Phillips, creator of the world famous Phillips Curve, there exist a tradeoff between unemployment and inflation. It has been this same tradeoff that monetary policy was centered around.

Run Take Cover Americans, Boogey Man Inflation Is Coming..

Nonetheless, why is it that government’s always preaching the same inflationary rhetoric? It’s safe to say “big gov” use inflation to scare the American public into believing we should avoid it like the plague. The fact of the matter is the government use inflation almost like a sidekick to do its dirty work— governments and inflation has always had a natural affinity for one another. If the U.S. government’s so scared of inflation, then why won’t it “do the right thing” and back our money with some kind of commodity and stop playing with it so much.

In addition, inflation, if used correctly, can be used to lend the impression of a burgeoning economy. If you look at the two bubbles we had in the last ten years: Do you really think that those two events naturally occurred out of thin air? And other than periods of stagflation when an economy experiences both “inflation and rising unemployment,” high inflation is a sign that that labor market is damn near full. How the heck is this bad? But as the board or governors all gather together in these secret financial enclaves—these Federal Reserve governors would have you believe that they’re left with no other choice but to create these “illogical monetary policies” in the hopes of ameliorating an unstable economic environment—yeah right! “The American people ain’t fools no more.”

In all honesty, “big gov’s” objective to foster a safe and more flexible banking system (through supervisory and regulatory functions) has fallen short of its objective ever since it’s inception. It’s time the American people take a step “outside of themselves” and objectively observe what’s really happening. What you’ll find is distortion, after distortion of our money supply at the behest of about a dozen extremely powerful individuals—aka, clandestine financial cabal. If you think that all this is an exaggeration, than ask any financial expert on Wall Street what happened to the M3 figures. M3, what’s that? The different types of money are typically classified as "M’s.” The "M’s” usually range from M0 (narrowest) to M3 (broadest) but which "M’s” are actually used depends on the country's central bank.

To give you a general idea, below is a list of the “M’s” and their principal components:

· M0: The total of all physical currency, plus accounts at the central bank that can be exchanged for physical currency.

· M1: The total of all physical currency part of bank reserves + the amount in demand accounts ("checking" or "current" accounts).

· M2: M1 + most savings accounts, money market accounts, retail money market mutual funds,and small denomination time deposits (certificates of deposit of under $100,000).

· M3: M2 + all other CDs (large time deposits, institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements.

As you can see from the list, M3—being a sum total of the first two “M” gives an extremely accurate depiction of the our supply of money, but because the Fed don’t really want the American public to know the level of egregious mishandling of our supply of money, they ceased publishing M3 statistics in March 2006. The reason for the cessation as they explained was that, M3 did not convey any additional information about economic activity compared to M2,” and thus, "has not played a role in the monetary policy process for many years." This is simply not true, M3 is a combination of all three “M”s. How could it not “play a role?” It’s like someone working three jobs and using an old resume. Why wouldn’t you want to use a more up to date accurate curriculum vitae? Outspoken Libertarian congressman Ron Paul (R-TX), a staunch critic of the Federal Reserve said it best, when he proclaimed the following:

M3 is the best description of how quickly the Fed is creating new money and credit. Common sense tells us that a government central bank creating new money out of thin air depreciates the value of each dollar in circulation.

It’s time the American people wake up and realize the potential perils that awaits our economic engine if we don’t do away with these disastrous monetary policies. It’s now 2011, we’re only 3 years removed from 2008 when our economic engine came to a grinding halt. “Big gov” have been playing around with the lifeblood of our engine for way to long now, the frivolous nature for which they have carried out these policies has caused serious disdain within the realms of free market capitalism. Much to the dismay of our recent economic breakdown, what would remedy our situation doesn’t seem to be within reach: the government relinquishing its killer “choke hold” on our monetary system isn’t going to happen in our lifetime; therefore, hoping that they do and realizing the reality of it really happening are two totally this things.

At this juncture the best we could pray for in our economic society is that they don’t screw things up any worse than they already have. Almost like going out on a date with an attractive female, the hard part is already over with: the female has agreed to go out with you. It’s up to the guy not to screw things up—that is, of course, if he wants to move on to the next step. In others words, we can’t afford the luxury of government exacerbating an already dire economic environment thus making matters worse, down the line, for our children and our children’s children.


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