It’s not higher value – it’s dollar devaluation


I’ve written many times before about inflation.  It’s a growing problem, and it’s getting worse more rapidly than ever.  I’ve been watching our local prices for a long time, and I’d say they’ve increased faster over the past three months than I’ve ever seen happen before.

The reason, in this case, is fairly obvious.  It’s not that products and services are worth more, and therefore getting more expensive – it’s that the currency we use to buy them is worth less, because it’s becoming depreciated.  It’s a simple equation.  If you have 100 dollars in circulation, and an egg costs a dollar, that’s what you pay.  If you suddenly double the number of dollars in circulation, those extra dollars are chasing the same number of items for sale – so prices will rise, to accommodate the new “value” (or, rather, lowered value) of the currency.  An egg will now cost $2.  In a microcosm, that’s what causes most inflation.  Oh, sure, scarcities will also drive up prices, but that’s a localized and temporary thing.  We’re talking about sustained increases across the board, everywhere.

This isn’t an accident.  It’s actually deliberate Federal Reserve policy.  As Wolf Richter points out:

The “Purchasing Power of the Consumer Dollar” – part of the Bureau of Labor Statistics’ Consumer Price Index data released today – is the politically incorrect mirror image of inflation in consumer prices, as measured by the Consumer Price Index (CPI). By wanting to increase consumer price inflation, the Fed in effect wants to decrease the purchasing power of the consumer dollar, to where consumers have to pay more for the same thing. Thereby it wants to decrease the purchasing power of labor paid in those dollars.

And that purchasing power of the dollar in January dropped by 1.5% year-over-year to another record low.

There’s more at the link.

The US government, over the past year, printed or electronically created over 40% of all the dollars that have ever existed.  Click the image below (provided by the Federal Reserve Bank of St. Louis) to be taken to a larger version at the Fed’s Web site (which will update on a regular basis).

That’s an enormous growth in the US money supply, and not one cent of it has been backed by economic growth or hard assets.  It’s all been conjured up out of thin air.

The only reason inflation hasn’t jumped even further is that much of those funds haven’t been widely circulated.  They’ve been funneled to banks and institutions that have used them to shore up their own bottom line, and to taxpayers who’ve used them to substitute for the wages and salaries they would have earned but for the COVID-19-induced economic shutdown.  However, more and more of those funds are now circulating.

That’s not all.  Senator Elizabeth Warren has introduced a bill to partially forgive study loans (at an estimated cost to the taxpayer of $650 billion).  The Biden administration is talking about ongoing subsidies for poor families and children (estimated to cost well into the trillions every year, according to some estimates), and increased social and entitlement programs.  Where will the money come from to pay for all these things?  Why, from the same source as the 40% increase in money supply over the past year.  The Fed will simply generate the money out of thin air.

Our political leaders are economic illiterates.  They have no idea of the likely consequences of their policies.  The cause of inflation is well known.  It’s been known for generations.  We have the example of Weimar Germany, Zimbabwe and many other nations to show us what happens when you print money without restriction.  I fear greatly that it’s coming our way as well.

Over the next few weeks I’ll publish more articles about our likely inflation prospects.  I hope they’ll help all of us to take stock of our current situation and prepare as best we can.  It’s probably going to be a very, very hard ride.



  1. During the Carter years I went from a solid middle class income and lifestyly to near poverty, with my nominal income unchanged.
    I collected a set of Weimar currency from a dealer in New Orleans, of the highest denomination in each month from June 1919 to May 1923.
    The bills went from a well-printed 100 Mark note to a 20 trillion Mark note that looked like it had been printed with a potato on cheap wrapping paper.
    Both of these lessons I have taken to heart.
    I see the same kind of a mess coming at us now, along with a witches brew of other Progressive inflictions, and the obvious consequences of that level of idiocy.
    Prepare as you can, and remember and teach all that which is great about America and Americans.

  2. Peter a well written article HOWEVER "Our political leaders are economic illiterates. They have no idea of the likely consequences of their policies." MIGHT be only Half Correct.

    They want MOAR Power, as Obama's man Rahm said "Never let a crisis go to waste and if needed CREATE that Crisis" the more malevolent of them are seeking to create a economic crisis.

    Dependency is a control tool, fear is also one. 1984's 5 minutes of HATE was also one that miss-directed the unresolved anger of the "Peoples" to a safe target of Emmanuel Goldstein.

    I wonder if Trump's 2nd Impeachment "Trial" is to CREATE an "Emmanuel Goldstein" FOR THE PARTY's use.

    Bad times coming, got seeds, stored food and TRUSTED Friends?

  3. The single biggest way to destroy the dollar is probably the $15/hr minimum wage. There's a vast number of people making between the current min. wage and $15. They'll all be compressed to $15 or very close to it. The lesson there is 'why bother to try to better your situation in life when the government will just destroy it?'

    Combine that with everyone getting college paid for by the magical government money and it's a raging brush fire through the economy. To paraphrase someone else, the Starbuck Barista with a huge student loan in Aggrieved Minority Studies will now have xer loan paid off by the guy who went to trade school to avoid student debt. Can't you just sense the unity that will generate?

    So just lie back, do nothing and let somebody else pay for your life. As long as you reliably vote them into power, they'll try to keep the wheels from falling off the bus.

  4. economic literacy involves the collection of reliable data related to the current trends[CPI statistics do not qualify here, but have been used to increase my meager retirement income by 13 and 1/3 percent in eight years][cost of living adjustments, or COLA]; in New Zealand[according to a retiree living in a personal care facility down under], the price[value] of a Chinese prostitute has fallen by 1/2; if you figure out what the DOW industrial average is, you will begin to see the game being played with the economic indicators being used to keep the wheels on the bus

  5. "Our political leaders are economic illiterates. They have no idea of the likely consequences of their policies. The cause of inflation is well known. It's been known for generations."

    They know exactly what their policies will cause; however, they know equally that they won't share in the resulting misery. They're insulated, and if all else fails, they'll just fuck off to someplace else, hard assets in tow, just like always happens.

    The poor lickspittles beneath them, however…they're the blind ones. They think they'll get to get out, too.

  6. My son liked the idea of $15 minimum wage since he makes $15 an hour now. I explained that didn't mean he get a raise to $22 an hour. The noobs would get the same pay now as him.

  7. I want to know exactly how student loan forgiveness will cost taxpayers that much.

    Do people think that the Federal Government, which issues all student loans, is going to send its imaginary money to the loan servicing companies to pay off balances, which payments then go to… the Federal Government?

    It's a stupid accounting trick, so they very well might, but isn't it more likely that they would just say to the loan servicing companies "Reduce everyone's outstanding balance by $50,000. Apply it to the accumulated interest first"?

    Is it because the forgiven amounts will be considered taxable income, on which taxes (which might be up to 30% of the loan value) will have to be paid in a much tighter time-frame than the payments on the loans themselves?

    How is that not a win for everyone except the federal government (which loses the source of revenue that student loan payments are)?

    I owe the feds 70% less than what I did, and because it's been made a tax debt instead of a student loan debt, it's bankruptable? Sign me up!

  8. @John in Indy:

    My late father had a paper money collection; I sold it but kept the Weimar DM (IIRC 50 million) and had it framed. Now I also have a Zimbabwe 100 trillion dollar bill framed, and several other examples of hyperinflated money awaiting framing. I suspect that, assuming I live through the coming spicy time, that I will be adding American currency to the list.

    @Michael and @Jimmy the Saint:

    They know what they do. Cloward-Piven.

    @The Lab Manager:

    Not just economic illiteracy.

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