Commentary

It’s been three and a half years from the start of the inflationary menace to the current plight of the dollar relative to its purchasing power.

And please, as you read this, keep in mind that when we speak of the value of the dollar, there are two ways this is measured. The first is its value against the goods and services it can buy. The second is its value against the other currencies it can buy. These are too often conflated.

It is massively important to take this into account because otherwise the headline news can be extremely confusing. When reporters go on about the strong dollar, they are referring to its value against other currencies. This does not matter to you at all unless you are engaged in day trading on currency markets (in which case you are probably insane or it is part of your job) or if you are travelling internationally. In the United States, there is only one currency in practical broad use and that is the U.S. dollar.

Therefore what really matters is the purchasing power of the dollar in terms of the goods and services that you buy in this country right now. Higher prices means less buying power or a decline in the value of the dollar. There are many factors that can cause the ratio of dollars to goods/services to fluctuate. But a long-term and overall decline in purchasing power—as measured by an index of many different prices—is these days called inflation.

I say “these days” because it was not always so. If you go back to the old definition, it plainly meant an increase in the number of currency units above that which was justified by offsetting increases in production. The Federal Reserve bulletin of 1919 says this clearly: “Inflation is the process of making addition to currencies not based on a commensurate increase in the production of goods.”

If you jump back a century earlier, the proviso was not even part of the definition. It only meant an increase in the supply of currency units. But today, we use the word inflation to mean not that but rather the effects of monetary expansion. In other words, the new definition replaces the cause with the effect. The change benefits the Fed because it takes them off the hook.

A much clearer relationship between cause and effect is evident once you compare the vast increase in the supply of money with its effect on prices. The Fed went into overdrive starting March 11, 2020. Thirty nine months later, we can see the main consequence. The dollar has lost 16 percent of its value from January 2020. That’s a form of taxation. And the pillaging far outweighs the temporary benefit of stimulus payments.

You might have thought you were getting a great gift when the government started dropping thousands of dollars into your bank account. It was a head fake for the ages, a clear example of the government’s using clever tricks to get your support for its own plot against your well-being.

 

There is a great absurdity in denying the relationship between money quantity and its value. Each additional unit that comes into being that is not matched by productivity increases waters down the value of the buying power of that currency. It’s no different from making coffee. If you keep pouring water through the same grounds, you get less coffee flavor and more thin hot water coming out on the other end.Another example might be the bottle of ketchup. The more you add water to it—increasing the quantity of the stuff that comes out—the less flavor you will get as a result. This is not controversial and yet it is routinely denied by Fed spokespeople daily. They will find every reason for price inflation you can imagine while minimizing their own role in controlling the money supply, even though that is their only real power.

The inflation of the last three years qualifies as one of the worst and most dramatic in U.S. history. So far it hasn’t been as bad as 1975–1981 but it is getting there. The dollar in those days (from 1975 to 1981) lost fully 45 cents in value. That is truly devastating beyond what we can imagine today. And yet the inflation of 2021–2023 does set a 40-year record. And it was completely unnecessary too. It achieved nothing good for anyone.

We keep hearing that inflation is cooling but each monthly report keeps delivering bad news. The latest figures put annualized inflation at 4 percent which is twice the Fed’s target. Plus all the declines in the rate of increase are due to changes in the energy sector. Once you exclude food and energy from the index—and we do this because they are the most volatile—the year-over-year increase is still running at 5.3 percent. This would be considered intolerable in the 1990s where today people have been acculturated to see it as normal.

As for producer prices, the latest reports show a larger-than-expected decline. The CPI will likely follow this trend. But rather than merely reflecting a taming of inflation, this is likely caused by a dramatic fall in the money supply and the onset of recession. What amazing mismanagement!

 

It’s a common thing for prisoners to adapt to their new conditions whatever they are. The institution itself becomes a place of contentment and the inmates find themselves grateful for the smallest increases in food or outdoor time. That is what has happened to us.It was always going to be true following lockdowns. Those days were the worst of the worst. Then our governments were in a position to start dolling out favors. You can gather with others in a mask. You can travel if you get the shot. You can have your freedoms back, however truncated they are, provided you comply with the following dictates.

This is the path to despotism. Inflation is part of that, a sure sign that government is overweening and using sneaky methods of finance to set itself against the interests of the public.

No question that lockdowns triggered impoverishment. We have lost so much in personal income once adjusted for inflation.

 

In addition to this old-fashioned method of destroying our currency value, we have another problem with which to contend. The Biden administration and the whole of the Deep State are wedded to the idea of a new monetary reform. The central bank digital currency (CBDC) will enable maximum population control, allowing the elites to determine what you consume and where you travel. A financial crisis would be the perfect pretext.This could likely come in the next 5 years unless there are concerted efforts to stop it. The population of the United States is today relatively less motivated and determined than it has been in a long time, owing to the rope-a-dope of lockdowns and other mandates. We are being socialized to be grateful for whatever freedom and rights they let us have.

We have a narrow window today that allows some freedom of speech. That too could be taken away in the coming year unless something changes. Now is the time to speak out. Now is the time to resist.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.