By Greg Hunter’s USAWatchdog.com
If you believe government inflation rate numbers, inflation is 1.2%, according to the Consumer Price Index (CPI.) That’s how much prices rose last year. Last week, Fed Chairman Ben Bernanke testified in front of the Republican controlled House of Representatives and inflation was a hot topic. Even though the government says inflation is low, some lawmakers are not buying it.
The new leaders of key financial committees are not fans of the Federal Reserve or its money printing policies called quantitative easing (QE.) The Fed continues to do this to suppress interest rates, bail out banks and fund the government. CNNMoney.com reports, “Paul Ryan, a Republican from Wisconsin who heads the committee, has been a vocal opponent of the Fed’s recent stimulus policy, which pumps $600 billion into the economy through purchases of long-term Treasuries. He said he fears the policy, known as quantitative easing, will cause inflation to accelerate rapidly, forming asset bubbles and crushing the dollar. “There is nothing more insidious that a country can do to its citizens than debase its currency,” Ryan said. . . . But Bernanke countered that quantitative easing would not permanently increase the money supply, since the Fed plans to reverse the policy once the economy recovers.”
Economist Paul Krugman came to Mr. Bernanke’s defense on Friday’s Op-Ed piece in the New York Times. He said, “Start with that bit about debasing our currency. Where did that come from? The dollar’s value in terms of other major currencies is about the same now as it was three years ago. And as Mr. Bernanke pointed out, consumer prices rose only 1.2 percent in 2010, an inflation rate that, for the record, is well below the rate under the sainted Ronald Reagan.” (Click here for Mr. Krugman’s complete Op-Ed piece.) Yes, Mr. Krugman is correct. The dollar is about where it was three years ago, but using this reference point distorts reality. The U.S. dollar has lost more than 30% of its buying power if you look back to the early 2000’s. Then, gasoline was around $1.60 a gallon. Now, the average price is more than $3.00 a gallon. I can’t believe I have to point out the obvious inflation to a Nobel Prize winner in economics.
Another obvious indication of inflation is this chart from the Commodity Research Bureau (CRB). Since October 2010, shortly before the start of the latest round of money printing (QE2), commodity prices are up around 20%. This index tracks things like corn, wheat, soybeans, cattle, oil, gold and silver, to name a few.
The idea the Fed can print money out of thin air and there not be an inflationary downside is preposterous. We will have inflation, but looks like it will be reported as growth. I wrote about this last month in a post called “Inflation is Here.” Back then I said, “If not accounted for properly, inflation can appear to be growth when, in fact, it is nothing more than price increases. For example, the latest spending numbers from the Christmas holiday season were reported as a record $462 billion. A recent AP story said, “Just because Americans spent more this holiday season doesn’t mean they bought more. A button-down shirt you bought your father in 2010 probably cost more than it would have three years ago. The government figures on which the National Retail Federation based its holiday total do not take into account rising prices.”
Read more:
http://usawatchdog.com/the-low-inflation-rate-lie/
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