If the U.S. economy "grows" by 4 percent in 2011, but by the end of the year we are paying $3.00 for a loaf of bread, $4.00 for a gallon of milk and $5.00 for a gallon of gasoline are the American people going to be better off economically or worse off? The answer is obvious, but most "experts" in the mainstream media continue to insist that as long as U.S. GDP is increasing and as long as the stock market is going up that our economy is improving. But that is just not the case. If the amount of money in circulation was relatively constant, those measurements would be helpful, but unfortunately the U.S. government and the Federal Reserve are dramatically pumping up the money supply right now. Just because larger amounts of paper money are changing hands does not mean that the economy is getting stronger. Of course GDP is going to rise when there is much more money in the system. But economic growth that is fueled by inflation is just an illusion and it is not an indicator of economic health at all.
A very basic example shows this very easily. Imagine if suddenly everyone in the United States had the amount of money they owned instantly doubled. Would the U.S. economy be twice as healthy? Of course not. Very quickly prices would rise to meet the new level of money.
Well, in the United States today our "authorities" are pumping massive amounts of new dollars into the system. That is one reason why so many people are so upset about the Federal Reserve's "quantitative easing 2" program. The Federal Reserve is creating money out of thin air and pumping it into the financial system. The first people that get their hands on this new money are Wall Street banks and major financial institutions. The idea is that eventually all of this new money will "trickle down" and will help average Americans, but that just does not seem to be happening.
In addition, when the U.S. government goes into more debt, this also creates more money. The U.S. government has accumulated far more new debt during the last two years than it ever has in any other two year period. When the U.S. government spends all of this money that it borrows it introduces a massive amount of new money into the system.
There are many ways to measure the money supply, and one of the most basic (M1) is displayed below. As you can see, thanks to the actions of the Federal Reserve and the U.S. government, the money supply is rising at an almost exponential rate at this point. The money supply has grown rapidly at various points in the past, but what we are witnessing now is really unprecedented.....
Read more:
http://theeconomiccollapseblog.com/archives/paper-money-madness-inflation-fueled-economic-growth-does-not-indicate-that-an-economy-is-getting-stronger
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