More Inflation Fears

http://paul.house.gov/index.php?option=com_content&view=article&id=1786:more-
inflation-fears&catid=31:texas-straight-talk

More Inflation Fears
        
Inflation fears are heating up this week as Fed Chairman Ben Bernanke gave a 
speech in Boston on Friday, causing further frantic flight into gold by those 
fearful of the coming “quantitative easing” the Fed is set to deliver in 
November. Others who view gold as a short term investment engaged in 
immediate profit-taking after Bernanke's speech.

Gold is more correctly viewed as insurance against bad monetary policy 
decisions that erode the value of savings.  Those bad decisions keep coming 
at an ever faster clip these days and we hear more and more talk of currency 
wars especially between the dollar, the Chinese yuan, the Japanese yen, the 
Australian dollar, and the Euro.  As the economies of the world continue to 
stagnate or contract, monetary policy decisions become more relevant to 
people who once thought this topic arcane.  We have several examples this 
week of major fumbles on the part of the US Central Bank:

·       The Federal Reserve continues to insist that inflation is too low, 
even while the monetary base remains at record levels, and food and gas 
prices continue to climb.

·       As the Fed continues to drive down the value of the dollar, the 
government accuses China of deliberately devaluing its currency, and the 
House has passed legislation aimed at punishing China for this alleged 
devaluation.

·       Low returns on US bonds are driving investors into higher-performing 
foreign bonds.  Some of these countries are responding by reinstituting 
capital controls to guard against hot money and the carry trade.

·       The spat with China and reemergence of capital controls have led some 
to fear that we are in the first stages of an all-out currency war.

·       The instability in the international monetary system, the decreasing 
value of the dollar, and the large amounts of new US debt could lead the IMF 
and countries such as China, Japan, Russia, India, and Brazil to abandon the 
dollar and adopt a new multinational currency.

While the big players in these currency games sort everything out, the people 
hurt the most are the savers, the workers, and those on fixed incomes as 
their money buys less and less.  Make no mistake – the Fed and the Treasury 
Department are playing games with our money, especially in how they report 
statistics like unemployment and inflation.  These games erode our standard 
of living and hide just how much damage their inflationary policies are 
doing.  

Official core inflation for the US is only 1.14%, but that excludes such 
crucial day-to-day goods such as food and energy.  Real inflation certainly 
is higher, maybe much higher. John Williams of Shadow Government Statistics 
calculates true inflation at a whopping 8.48%!  But manipulated inflation 
statistics give the government cover when they again deny seniors a cost of 
living increase in their social security checks.  They also serve to convince 
the public that further expansion of the money supply will boost the economy 
without causing any real pain, which has essentially been the core argument 
of Greenspan-Bernanke fed policy for the last 20 years.

Of course, the United States is not alone in its disastrous monetary policy 
decisions.  These pressures are inherent in any fiat monetary system where 
money is created at will, for the benefit of the special interests.  As all 
these currencies race to the bottom of the inflationary barrel, the only 
security to be had will be in honest money like gold as the system falls 
apart.  My hope is that we can return to the wisdom of the Constitution and 
get back to sound, commodity-backed money before our dollar suffers a 
wholesale collapse.

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