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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
Ron Paul
www.house.gov/paul
Visit Congressman
Ron Paul's Web Site
Congressman Ron Paul of Texas enjoys a national
reputation as the premier advocate for liberty in politics today. Dr. Paul is
the leading spokesman in Washington for limited constitutional government,
low taxes, free markets, and a return to sound monetary policies based on
commodity-backed currency. For more information click on the Project Freedom website.
Published with the authorization of Dr. Paul.
Copyright Dr. Ron Paul
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