USA: Pressure Cooker of Inflationary Food Prices
"The dollar index seems to be dropping towards that psychologically-important level of 80 as the dollar's buying power falls and falls because the Federal Reserve is creating so damned many of them. One day, soon enough, it will fall to the psychologically-important level of 70 and then the psychologically-important level of 60 on its way to that psychologically-important level of a big, fat zero, which has always been the fate of fiat currencies. This "psychologically-important" phrase keeps popping up because, surprisingly, the dollar index is also one-for-one with an index of the effectiveness of my medications in controlling my panic and outrage at the destruction of the dollar and the American economy. At a dollar index of 80, I am able to control 80% of my panic at the monetary and fiscal stupidities that are going to eat us alive. At a dollar index of 70, pills are but 70% effective. You can see where I am going with this. The bad news is that it gets really ugly and weird from there on down.
And helping that along, of course, is that the Federal Reserve is still constantly creating excess amounts of money and credit, and last week boosted Total Fed Credit (the fount of truly "money out of thin air" of story and song) by a whopping $9.7 billion. Admittedly, this only takes us to $857.3 billion TFC, which is actually lower than it was at the beginning of the year, but still within the dismal, long-standing up-trend since 1997.
All that creation of excess money and credit will show up as price inflation for two reasons. The first is that all imports (like oil) will cost more, thanks to the depreciated dollar, unless foreign exporters accept less buying power (but the same number of dollars) as payment for their exports, and the second is that price inflation always follows monetary inflation, and in rough degree to the degree of the accumulated excessive creation of money and credit. Always."
No comments:
Post a Comment