Hedonic Hedonism 1/2

By: John Mackenzie | Tue, Mar 15, 2005
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The Inflation Rate from January 1970 to January 2005: 404.50%

Rates of Inflation 1970 - 2004

1970: 5.29%
1971: 3.27%
1972: 3.41%
1973: 8.45%
1974: 11.37%
1975: 6.53%
1976: 4.68%
1977: 6.15%
1978: 8.32%
1979: 12.30%
1980: 10.93%
1981: 8.05%
1982: 3.50%
1983: 3.58%
1984: 3.34%
1985: 3.60%
1986: 0.82%
1987: 3.78%
1988: 4.15%
1989: 4.13%
1990: 5.02%
1991: 2.45%
1992: 2.75%
1993: 2.24%
1994: 2.39%
1995: 2.13%
1996: 2.72%
1997: 1.38%
1998: 1.42%
1999: 2.43%
2000: 3.08%
2001: 0.91%
2002: 2.15%
2003: 1.43%
2004: 2.75%

* in·fla·tion: ()

1. The act of inflating or the state of being inflated.

2. A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.

Admittedly, the Inflation / deflation discussion appears to have worn a little thin, but it remains an important, if not the central issue Americans face today.

Monetary Inflation in excess of real transactions is theft, pure and simple.

Monetary inflation is an increase in the money supply that is higher than the increase in total real transactions for goods and services (GDP), or the real amount of output measured by some fixed standard.

Monetary inflation sends mixed signals to the Productive Economy as specific price levels are affected unevenly. Certain goods, in particular scarce resources our Nation imports will rise in price more than others.

Asset Price Inflation is yet another form of Inflation. Components of our Nations Capital Stock have been inflated one by one. First general Equities, then Bonds and finally, the largest component, Real Estate; these Asset Classes were intentionally inflated in order to produce a "Wealth Effect." Interest rates were moved to an artificially low and negative rate of return in order to create the "Speculative" nudge to get the Wealth effect rolling.

Price inflation is a continuous increase in the Price Level; rates of Inflation require a Basis or base of reference for the math to compute.

The basis can be a fixed basket of goods and services (CPI) to measure purchasing power, or resultant price Inflation, resulting in a specific rate of inflation, in this case, Price inflation. Inflation is measured by a "price index" metric.

Price inflation is a continuous increase in the price level, a singular price increase in the price level is merely a component that may or may not be used depending on the intentional bias found to be prevalent in Government Statistics, ie.: Ex-Energy, Ex-Food and Ex-anything bad.

Observe the Price of Crude Oil over the past 48 months, the Price has nearly doubled. The rise in the Price Level of Crude Oil is essentially removed from the Consumer Price index. It will not manifest itself until the Intermediate users in the Supply Chain begin to experience rising prices of Intermediate Goods.

By example, Food: although we became a next importer of our Nation's Food Supply in June of 2004, costs for final, non-durable foodstuffs increased dramatically.

I doubt the members of the Federal Reserve do their own shopping, but numbers do not lie wheeling around in a shopping cart, although those people massaging our Nations statistics sure do.

Deflation, it is claimed, is the opposite of inflation. Monetary deflation occurs when there is a decrease in the money supply relative to goods and services.

Price deflation is a decrease in the price level.

Adjectives are very important when discussing inflation or deflation.

Central banks direct control the supply of money through their policies. They profit from inflation as the real value of their "Money" decreases. Interest charged for issuing "Money" is charged in the form of United States Treasury Bills, Notes and Bonds.

Governments profit from inflation handsomely as well. As the real value of its Debt decreases, it is able to repay its obligations with the deflated value of money.

While the Federal Reserve and Government enjoys the first abuser privilege. Also referred to as of "Seignorage;" the Net Result as this "Money from Nothing" trickles down is effectively a tax on the Production Economy at Large.

Or as William A.M. Buckler of The Privateer succinctly puts it: Government is an "ECONOMIC COST."

Now I am certainly not advocating an End to Government, but I do hold these words to be as self evident as any, the best form of government, governs least. Admittedly, there are "Public Goods" that should be aggregated ensure Economies of Scale and effective use of our tax Dollars. Defense comes to mind, as do several other important functions, such as overseeing the United States Constitution is adhered too. Defense is where the majority of graft occurs, so far better mechanisms for oversight are required.

Education, Social Security and Monopolies over rates of Exchange are NOT something Government should have a hand in on any level. A Free, Market Economy will suffice. It always has and there in no point in which the current Central Planners can point to in history's pages where success has occurred in rigging daily life.

Inflation has reduced the value of our Nations Savings for the benefit or larger and more intrusive Government. It remains the most insidious form of taxation upon our savings. Consumption beyond the Production of Good and Services requires Savings to fill the void.

This simple concept has been lost among our Representatives, Elected Officials, self appointed Oligarchs and the majority of Americans.

For a "considerable period" Government has been able to repay this Nation's Bills, Notes and Bonds with ever cheaper money. Savings have been imported in order to close the Consumptive gap between receipts and expenditures.

The moral hazards created continue to compound and dreadfully so. Our Central Bank's monopoly on the creation of money must end.

There must be a form of convertibility in order to prevent the abject theft of our savings and the generations who will follow. Gold and Silver were used for millennia to accomplish this simple task. This is not complex, nor difficult, contrary to the general propensity to suggest it would be difficult to implement.

A thin strip of malleable Gold Leaf could adorn every Note issued for circulation. Silver could readily act as coinage again in small percentages, but coined none the less. There certainly exist enough of both metals to ask the citizens to turn over their precious metals for coinage, repaying holders back in official Notes at an even basis.

This would, of course, require several important and historic changes, changes that will raise immense obfuscation and resistance. Within such a Constitutional Monetary System there would be very little or perhaps even no monetary inflation. Price Inflation would merely fluctuate.

While Savings and Capital Investments allowed production to become more efficient; real, increased productivity would manifest itself in higher wage rates and rents.

Peak Oil will be upon us in our lifetimes, likely quite soon. We need to begin preparing alternatives for every problem we are staring down. If we believe in one another and our right to Life, Liberty and the Pursuit of Property, let's begin again before it is too late.

404.50% is far too great a theft to allow to continue.


Author: John Mackenzie

John Mackenzie

John Mackenzie manages private capital.

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