Letter: Real versus reported inflation
I wrote to you not too long ago about the Obama Administration and the total ineptness and chicanery going on. I have another sore spot. That would be real inflation vs. reported inflation.
The government and the Federal Reserve and most economists think that 2 to 3 percent inflation is a good thing. I remember 12-15 percent inflation; so maybe 2 percent is good—relatively speaking.
However, with all due respect to the pro-inflation crowd, I can’t understand why core inflation numbers are reported without food and fuel included. Right! Who needs food and fuel?
And with all due respect to the economists, I maintain that there is only one real rule of economics. That would be the rule of supply and demand. There is no question that we are increasing the amount of U.S. dollars in the global economy at a staggering rate. Who, besides me, remembers buying a new car for $3,000 instead of $30,000? The U.S. dollar is the world’s reserve currency. Why debase it so?
In 1971, Nixon took us off of the gold standard, making our currency a fiat currency (backed only by good faith and promise by government). Since then, the purchasing power of the U.S. dollar has declined by 80 percent (according to CNBC reports)! Now, it really was not Nixon’s fault; he had no choice. France, among others, was redeeming dollars for gold at a rate that would take most or all of the U.S. gold held in reserve. Don’t get me wrong, I am not a “gold bug” it is difficult to hold, guard and it pays no interest, dividends or rent. Gold’s increase in value is directly related to the decrease in fiat currency’s valuation!
These chickens will, and are, coming home to roost! You see it every time you have to spend that currency. No wonder the middle class is shrinking and poverty is rising.
What is the average American to do? Become a currency trader? A precious metals hoarder? Governments, and not just ours, seem to think that increasing the currency float is a solution, not a problem.
I don’t think so.