Krugman says no inflation worries

Inflation? Pssshh. Ain't no inflation coming. So says economist Paul Krugman, writing as columnist at the New York Times in this article. Really? Yeah, all this nonsense about inflation is totally overblown. As Krugman says:

First things first. It’s important to realize that there’s no hint of inflationary pressures in the economy right now. Consumer prices are lower now than they were a year ago, and wage increases have stalled in the face of high unemployment. Deflation, not inflation, is the clear and present danger.

Well, sort of. But from the news I'm reading lately, prices are indeed moving up--some at record paces. Consider the price of crude oil, which is experiencing the largest one-month gain in the last ten years (you may have noticed when filling up last). Metals are also doing well, taking a look at industrial metals such as copper and even silver. In fact, if a person bought silver just a few months ago, they'd see an increase in dollar value of ~30%! Not bad--and certainly better than Wall Street of late.

Oh, but that's the value of things relative to the dollar. That means relative to things of intrinsic value (such as oil or copper), the dollar is falling--a sign of inflation. But Krugman just said "there’s no hint of inflationary pressures in the economy right now". Hmmm. That's odd--I wonder why an established, influential economist like Paul Krugman would say something like that in light of the evidence I just cited. Maybe he's simply overlooked some trivial details concerning the economy? Probably happens all the time. After all, economists like Paul Krugman didn't seem to notice any signs of danger with the economy just a couple of years ago, either, did they? Of course, it's easy to have perfect vision of things past.

Notice how Paul Krugman is strongly stating that there's no need to worry about inflation--everything's under control and looking quite rosy considering the circumstances. Why would he do that? Going out on a bit of a limb, isn't he? Couldn't this have some serious consequences to his credibility as an economist if he's wrong? (Didn't something like this recently happen to Jim Cramer?) I wonder if he's got a safety net of some sort--perhaps someone willing to pay for some good news from such an influential economist--maybe someone who can pluck some policy strings somewhere?

Look, I'm just in industrial designer, and certainly no economist. But some of these signs--at least in the short term--are quite telling. These are things I'd expect a real economist to at least notice, and perhaps even write about. After all, we use economists to gain a preview of the future--and often base our decisions on such prognostications.

If inflation is of no real concern in the near future, you'd do just as well to hang on to your dollars. But if inflation does become a real issue, you can do something about that by getting rid of your faith-based Federal Reserve Notes in exchange for something of true, intrinsic value--and in doing so, you remove opportunity for wealth extraction at the hands of those who control the value of the dollar (and your work).

In times of inflation, the last person you'd want to be is a Baby Boomer at or near retirement with a cash nest-egg in the market or in the bank. Your dreams of the golden years will dissolve as quickly as the numbers of dollars to buy gold rockets upward--and the true value of your golden egg declines.

So to all of you who could actually do something now to maintain the value of the career you just worked--nah, don't worry about inflation. Consider it a healthy donation to your country at the expense of your dreams.

Federal Reserve oversight--or not

This is stunning. Since September of last year, the Federal Reserve ought to have lots of explaining to do. We're talking about trillions of dollars, unaccounted for. Fortunately, we have officials responsible for overseeing the Federal Reserve to make sure nothing gets out of hand.

Or do we? In this video, we see Representative Alan Grayson (finally, someone!) asking some direct questions about what's happening at the Federal Reserve. (You may know the Federal Reserve as the bank that prints the money, so you don't have to. It's called inflation, and I believe we're about to be hit with a tidal wave of decreasing value of every Federal Reserve Note held by anyone in the world.)

So--what's happening at the Federal Reserve? Apparently the Inspector General for the Federal Reserve doesn't know either. Nice. As Rep. Grayson mentioned, the sums in question amount to ~$30,000 for every person in this country. It seems the Fed "printed" these vast sums of money, handed them out to anonymous recipients, and has no real accounting for where this money went or who received it. It also seems the Inspector General has no idea either.

If we at least had an elected post available at this state-mandated currency factory, that would help. Perhaps we may have a slim shot at some occasional accountability. Or maybe if we at least had some other, viable form of legal tender, that would allow all who see fit to simply abandon use of the Federal Reserve Note for something that has hopes of maintaining its value. Unfortunately, we have no such things. Making purchases with gold or silver or bottle caps or Cabbage Patch Dolls is seen as use of a competing private currency, and is simply not allowed. Why not? What's the big deal?

The big deal is the government's refusal to maintain total control over the value of every citizen's work. To avoid being hemmed in by pesky budgets--spending within its means (through tax collection)--our lawmakers have discovered the allure of debt. Don't have enough in the budget for that pork? Who cares? We'll charge it! That's right--our lawmakers can spend infinite amounts of money to get what they want now and YOU'LL pay for it! How? The Federal Reserve will create new money (out of nothing, backed by nothing) to pay the debts incurred by the spenders in Washington. But wait, doesn't that cost somebody somewhere? Yes it does.

There is a finite amount of Federal Reserve Notes in circulation throughout the world (though some days it may not seem like it), representing a finite value. Suppose I hold $1,000,000 of those notes. I have a fraction of that total value. When the Federal Reserve cranks up their printing presses (they need not literally print the notes anymore), they do not create more value as represented by those finite Federal Reserve Notes in the world. In fact, they create more dollars, but the value remains the same. What does this mean? It means the $1,000,000 I hold now have less value than they did before the printing surge.

We can see this with a simple lemonade stand. Suppose I sell some great fresh-squeezed lemonade on the corner. I have a giant pitcher of perfectly-flavored lemonade, and it's selling great. But I've run out of lemons and sugar. Oops. I don't want to shut down my stand, and I've got some worthless water, so I decide to add water to my depleted pitcher of lemonade. Mmmm. I continue to sell lemonade, adding water when necessary. After a while, I notice my customers don't have any more nice compliments. In fact, many demand their money back, since this lemonade resembles dirty water more than lemonade.

Which would you prefer--the first or the last glass of that lemonade? The first obviously contains the best value. This is exactly what the Federal Reserve is doing to the value of the dollar. They add more and more "water" to the fixed value of the pitcher of lemonade, diluting the worth of each glass (eventually) to zero. And that's what we can expect to happen to our dollar at this current rate.

But there's not much use in complaining. You don't vote for king. And you don't vote for any of the posts held at the Federal Reserve.

Hey, it's only your livelihood.