Topic: Economics
Inflation Some information on one of the tools of the State.by Edward Townes
(libertarian)
Sunday, December 30, 2007
The first point is that undoubtedly most of you don't know what inflation is. One of the primary characteristics of tyranny is the redefinition of words, and inflation is an excellent example. Inflation does not mean an increase in the general price level of goods and services within a country. What inflation actually means is an inflation of the money supply, ie an increase in the total number of dollars in circulation. An increase in the price level is a normal consequence of inflation because it depreciates the currency, lowering each dollar's purchasing power. But it is important to realise that inflation refers to the creation of new dollars, and in our current system that is literally out of thin air and rampant.
So the question is, why does redefining inflation to mean price level increases complement tyrannical goals? Well, in this case it is because by concentrating on the ends it is possible to hide from the American people just how much of their money is being stolen by the Federal Reserve. That is the real reason. By focusing on the price level the government can perform a variety of tricks which mislead us and draw people's attention away from the abuse and theft of the Fed. One of the tricks is the CPI -consumer price index. This instrument is extremely manipulative and vastly under-states the true price level increases of the country for three main reasons:
1) The CPI does not include mortgage costs. This is bizarre because for the average person, their home and its cost is by far their largest asset and commitment. Mortgages are very much a part of the vast majority of people's budgets. This is pretty sneaky because house prices are one of the few really good indicators of monetary inflation, and the trade off is usually with rental properties, which are included in the CPI, who's price generally falls as mortgage costs rise.
2) The CPI uses "hedonics". This is seriously manipulative. What this means is that the CPI tries to incorporate increases in productivity into the price. The first point is that this is heavily subjective with miles and miles of room for pursuing agendas. The second point is that is has no place. Let me explain what it does; If I buy a computer in the year 2000, it cost me $1000 and has 1GHz clock speed. I then buy another computer in the year 2004, it cost me $1000 and has a clock speed of 2GHz. Using "hedonics" the CPI will say that the price of computers has fallen by 50% over 4 years. This wouldn't be a problem if it wasn't arbitrary and then used to justify inflation. Because the real cost of computing power dropped, the Fed can inflate the money supply until all our increases in productivity are effectively meaningless. This is what they've done.
3) The CPI uses an "Expenditure/Chain-Weighted Index". What this is, is starting with an acceptable premise: goods that are not regularly purchased should carry less 'weight' in the CPI index. So bread has a high weight, but wasabi peas do not. This would be fine, but they take this further to the point of fraud. They then added "chain-weighting", and this means that over time the weighting will change to continue to represent only the most commonly bought goods. This is evil because by the definition of markets, a good that gets more expensive will be bought less and something cheaper will take its place. Therefore, using this system they can effectively hide a huge amount of price level increases. It should be obvious that this is seriously criminal.
So the trick being pulled here is as follows; The Fed directs our attention to price levels rather than inflation, it then manipulates the instruments that measure price levels to hide exactly how much inflation is going on. In fact, the real measures of inflation, the MZM, M2, M3, etc, which look at the increases in the money supply are sidelined, to the point where the Fed actually doesn't bother publishing the M3 anymore because it is so high (>20% in recent years).
There is an amazing consequence to this - Americans have gotten poorer since 1990. Yes, they have indeed. Take the US's GDP now and then (I know, GDP is another manipulative measure), adjust it for the increase in population, adjust it with the M2 or M3 monetary inflation, and you will find that the average American has genuinely gotten poorer. This is the consequence of central banking and fiat money. Thomas Jefferson was not kidding around when he said:
"The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered."
This day is approaching much faster than most people realise, and I can say with full confidence that if we stay on track, it will definitely happen in our lifetimes. Every empire in the history of mankind was finally undone with the destruction of its currency.
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The views expressed in this
article are those of Edward Townes only and do not represent
the views of Nolan Chart, LLC or its affiliates. Edward Townes is
solely responsible for the contents of this article and is not an
employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.
Thanks for a great article! You've got my thumbs up!
As a fellow columnist, may I offer a couple of small observations? In your second paragraph, I think you probably meant "complement" rather than "compliment?" And, near the end I wonder if you might have wanted to find a classier term to describe Gross Domestic Product? :) I enjoy using http://thesaurus.com for this kind of thing. :)
Glad to see another writer on "Economics" here on the Chart! :) Welcome!
PS I found your article to be both interesting and instructive! :)
Yes great article and I agree about them faking the numbers a lot.
According to some figures that I have read, that if they were now using the same procedure as they did in about 1980, that the CPI would be well in excess of 10% per annum today.
Hi Edward,
What a Great Article! The "shell game" played with CPI (and most reporting standards) is critically important for Americans to comprehend. Hopefully, informative articles like this will eventually stimulate general interest, and eventual political action. I'm giving you a big thumbs up and referring others to your article!
Thanks
Ted Williams
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