The View From 1776

The Fed Ignores Inflation at its Peril

Despite Chairman Bernanke’s optimism, inflation is not under control.

Posted by .(JavaScript must be enabled to view this email address) on 01/30 at 12:36 AM
  1. Inflation, by being under reported is a thief that robs all of us in many ways. Most companies give pay raises based on inflation to their workers. By under reporting it, we lose buying power every year even though wages go up.

    Sometimes inflation (compensated with pay raises) pushes us into higher tax brackets. We pay more taxes even though our buying power and real wages are lower.

    Inflation determines the social security check increases (through wage change in society tied to inflation raises)and to have the same buying power now, a S.S. check would have to be 50% or more higher to have the same buying power it did 20 years ago.

    So, lowering rates and printing more money and then under reporting inflation, means we all lose buying power and the faster it rises the worse it gets.

    This affects imports the most, especially oil and food and goods from nations where the dollar is dropping in value. Take a look at the Chinese currency in this chart and look how fast they are dropping the dollar's value to their currency.
    http://finance.yahoo.com/currency/convert?from=USD&to=CNY&amt=1&t=2y

    If the government keeps promises and continues to keep rates low, borrow hundreds of billions to fund infrastructure building for stimulus plus send money to citizens, we will all see inflation rising faster than our wages.
    Posted by JanPBurr  on  01/30  at  11:05 AM
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