You Are Being Robbed

Author: Tommy Leung | 06.26.2008 | Category: Economics, Money, Politics

The talk of economics usually puts people to sleep. We feel the affects of high food and gas prices and we know it has something to do with inflation. What if I told you the reality is that you are being robbed? Inflation is the talk of the town these days. That is why prices are so high. Not the other way around. The prices are not causing inflation–popular thought is a misunderstanding of cause and effect. I’ve read headlines and articles that keep referring to inflation as an increase in prices. Simply put: it is wrong. The truth is, you are being robbed.

The concept of inflation is not hard to understand. It is not mystical and not a topic we the people can’t grasp. Trust me, you are smart enough. The Federal Reserve met today, the 26th of June, and decided that they were not going to change the interest rates. So, what the hell does that mean? It means that the Federal Reserve decided not to rob us. When interest rates are lowered, money is more freely available through loans. This increases the amount of money in circulation. The law of supply and demand tells us that if there is a greater supply of something, it will be worth less. That is the net effect of a lowering of the interest rate. The rate has been lowered several times in the last year.

So, how is this robbing us? If you had $10 and could buy 6 and a half gallons of gas at $1.50 a gallon 5 years ago, now your $10 will buy you less than half as much gas. The obvious change is the price of the gasoline. However, the price of gas increased because the value of the dollar decreased. The inflation brought about by Federal Reserve rate cuts and enormous government spending increased the supply of dollars in circulation and lowered the value of each dollar. There is some affect coming from the supply and demand of oil and from speculation but, this huge increase cannot be attributed to those things. The reality is that the $10 you had is now really worth less than $5. This is much more apparent when you compare the price of oil with gold–oil prices would be stable if we were buying in gold.

The outlook for our economy is grim. No one wants to hear that and as Americans, we are positive, forward thinking, and proactive. Regardless of how terrible the outlook may be, I’m sure we will come out of it fine in the end. The only question is: how far away is the end? That depends on a lot of factors but, I think the most important one is knowledge. It is a failure of those responsible for informing the masses that so many Americans are unaware of how our financial system works. We need to understand why our economy is tanking, why our dollar is sinking, why home foreclosures are rampant, etc. What we don’t need is to beg government to print more money in an effort to “fix” these problems. The government cannot fix this–it can only make it longer and worse.

The candidates of the two major parties have started to talk about inflation in terms of the increase in prices, of course. The chances are neither of these two men actually understand economics or, if they do, are giving in to public pressure. Obama supports both a windfall profits tax for oil companies and a crack down on speculators. McCain is also eyeing speculators as a scapegoat for the price of oil. Luckily, McCain isn’t for a windfall profits tax as the only outcome of that will be a decrease in the supply of oil which will increase its price further–if that ever passes, buy oil stocks as oil company profits will be higher than we’ve ever seen. This is just simple economics, if government wants more of something, they subsidize it. On the other hand, if they want less of something, they put a tax on it. Both are artificially toying with prices but one “lowers” the cost while the other increases it. Going after oil speculators is a huge waste of time and resources. Speculators didn’t and can’t cause these kinds of price increases. What these candidates need to do is investigate the Federal Reserve–incorporated in 1913.

The reason for our economic woes and the sad state of our United States dollar is entirely a fault of the Federal Reserve and big government. With the 4thof July around the corner, it is a good time to reflect upon the wisdom that our founding fathers left us with.

“I sincerely believe that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale”. – Thomas Jefferson

Our Constitution clearly gives Congress the authority to coin and regulate the value of money and that only gold and silver shall be legal tender–not paper. Our current system is exactly that which Jefferson described above. We are using banking institutions–Federal Reserve–to loan the United States money to spend on services for Americans today assuming that future Americans will take care of the debt. It is swindling those who are not yet born. This applies to the funding of undeclared wars, foreign bases, welfare programs, government employment, and universal health care. Politicians say they have a plan to pay for these services but, history would disagree. Our national debt is approaching $10 trillion and this does not include the obligations of social security and medicare which both are holding IOU’sfrom the federal government. If you were $1 million in debt and said that you were going to pay for a new HDTV by driving less, you are still $1 million in debt with interest accruing daily. The reality is that you are not going to drive less enough so the debt climbs. This is exactly what government does except they can print money; they can indirectly steal from us.

No matter how you want to slice this, the end result is that we are getting poorer. We are getting robbed! It is frustrating for me to read news articles that are clearly misleading readers about the reasons why we are in this predicament. The blame will be bounced around to every source imaginable besides the real culprit: big government and the Federal Reserve. It is my hope that I have enticed you to read this far and that I have managed to explain the concept of inflation. The greatest reason why I write about this topic is because I see America tumbling and I’ll be damned if I’m just going to watch it happen. We should all reread our Constitution, Declaration of Independence, and Bill of Rights this July 4th to remind us why we are Americans.

By Tommy Leung