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Guest Post: The Source of High Inflation: Government Spending

Tyler Durden's picture


Submitted by Charles Hugh-Smith of OfTwoMinds blog,

If we look at what's skyrocketed in price (healthcare, college tuition), we find they are government funded and supported. This is not a coincidence.

Inflation is generally viewed as a monetary phenomenon (print money excessively and you get inflation), but let's use a very simple definition: any loss of purchasing power. If your income buys fewer goods and services, for whatever mix of reasons (geopolitical, weather, monetary, fiscal, etc.), that's inflation "on the ground."

Consider this breakdown of the components that together make up the standard measure of inflation, the Consumer Price Index (CPI): (courtesy of What are the obvious major sources of inflation? Energy, medical costs and college tuition.


Here's an eye-opening look at medical costs and college tuition, also courtesy of


What differentiates medical and college costs from everything else? The Federal government's direct role in these markets. The Central State directly spends over $1 trillion a year on Medicare and Medicaid, and controls private spending with rules and regulations.

As for college costs: could their incredible expansion have anything to do with the Central State backing $1 trillion in student loans?

The Federal government controls much of the economy, directly or indirectly. It influences agriculture prices with price supports and regulatory controls, it influences the cost of housing with gargantuan subsidies (FHA and VA loans) and has basically taken over the entire mortgage market in its effort to re-inflate the housing bubble.

But it is striking that the highest inflation is occurring in precisely those sectors dominated by government spending: medical and college costs.

I was alerted to this correlation by correspondent David P., who wrote:

Inflation is centered in particular markets - not finance, housing or small business, but wherever the government spends money: Schools, food, energy, medical care.

This is of a piece with the previous post on the Federal Reserve's policy of supporting Federal spending by monetizing Treasury debt Why QE May Not Boost Stocks After All (September 26, 2012). In other words, the Fed doesn't necessarily create inflation across the entire economy (Why QE Won't Create Inflation Quite as Expected) by printing money; it creates inflation in government-funded sectors by monetizing Treasury bonds that enable massive Federal spending.

Government spending is by definition unhindered by market forces; having a monopoly on coercion, taxation and selling Treasury bonds to the Federal Reserve means you get to spend money without worrying about price or other market functions.

Government spending that funnels huge sums of money into cartels--for example, the sickcare and higher-education cartels--directly supports monopolistic pricing, which then drives costs higher regardless of the money supply expanding or contracting. This is the basic function of the Statist monopoly capital partnership that dominates our neofeudal economy.

Where the Fed has succeeded is in raising expectations of inflation that then drive speculative bets on higher prices. Part of the "don't fight the Fed" belief system is if the Fed wants inflation, it will get it. And if that's the case, then why not buy oil/gold/silver now before prices shoot higher?

The price of oil in the U.S. is influenced by many factors--geopolitical, currency, technology, policy, etc. Nonetheless, the rough correlation between base money supply and the price of oil in dollars is noteworthy:


It's also worth recalling that the Federal government itself is a major consumer of oil, as the Pentagon alone consumes as much oil as a small industrialized nation.

Government spending and intervention fuel inflation, and the Federal Reserve enables that spending and inflation by monetizing Federal deficits. Raising expectations of inflation has powered oil higher on speculative buying, but it's difficult to generate economy-wide inflation when wages are declining (courtesy of


Eventually, declining wages lead to demand destruction, as households consume fewer goods and services. But inflation that is being driven by government spending will not decrease, as the demand is being supported by a borrow-and-spend Central State supported by a monetize-Federal-debt-til-Doomsday Federal Reserve.


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Sun, 09/30/2012 - 16:25 | 2843423 Buckaroo Banzai
Buckaroo Banzai's picture

Don't worry...Obamacare/Romneycare is gonna fix EVERYTHING!

Sun, 09/30/2012 - 16:46 | 2843462 NewThor
NewThor's picture

Inflation = anytime they add "money" to the system. 


Sun, 09/30/2012 - 18:42 | 2843634 Richard Chesler
Richard Chesler's picture

Free ObamaPhone with every vote.

Come get yours!


Sun, 09/30/2012 - 21:40 | 2843907 Pinto Currency
Pinto Currency's picture


Read about the changes to the measurement of consumer goods price inflation:


This Charles Hugh Smith article is confused as it is using distorted CPI calculations and drawing conclusions from that.

Inflation is the debasement of currency by the central banks.  Consumer goods price inflation follows central bank monetary inflation or debasement.

Sun, 09/30/2012 - 19:43 | 2843726 Bastiat
Bastiat's picture

Monetary inflation when you increase money supply.  Price inflation is a function of money supply and velocity.

Sun, 09/30/2012 - 17:09 | 2843466 kaiserhoff
kaiserhoff's picture

Lame Stream Media doesn't care, but the Chicago teachers (sic)  /thugs got a 17% increase over 4 years.

Thank Gawd the state is bankrupt.  Otherwise Raum would have given them 117%.

Austerity, DlM style.

Sun, 09/30/2012 - 17:15 | 2843500 NewThor
NewThor's picture

The ghost of Goebbels cares, bro.

Teachers are thugs? LOL 

Sun, 09/30/2012 - 17:31 | 2843514 kaiserhoff
kaiserhoff's picture

Not all teachers.   Just the semi-literate union pigs milking the schools as an endless patronage system.

I grew up in Illinois, NOT CHICAGA, but my hometown now has half the students it had when I went there, and a massive bureaucracy.  The Junior High I went to, covering a city block, is now full of paper pushers.  Back in the day, school district administration was in a two room annex next to the high school.  This shit has to end.

Sun, 09/30/2012 - 17:48 | 2843538 kaiserhoff
kaiserhoff's picture

Some of you missed this..., and me without my elephant gun...   My bad.

Sun, 09/30/2012 - 17:53 | 2843547 greyghost
greyghost's picture

whew...and i thought it was me causing inflation when i choose target's brand over walmart's brand!!!! am glad i am off the hook

Sun, 09/30/2012 - 18:01 | 2843560 Whiner
Whiner's picture

Gawd! They don't want to be measured by improved student test score cuz their student be too dumb too learn! Like, dats what happened to me! I am deprived, not depraved. Gimmie mo money.

Sun, 09/30/2012 - 18:23 | 2843597 knukles
knukles's picture

Schooling is utilized by the Establishment to brainwash/condition/propagandize it's subjects.
The olde days true education, currently r4eferred to as a classic education, designed to develop character through the immersion of philosophy, arts, literature, science and mathematics in the form of "reading" is existent virtually nowhere, anymore.
I had enjoyed some 4 years of such as an American ex-pat in London way back in the dark ages.
T'was a different world geared to critical broad thinking wherein detailed facts and data were to be referenced in books, libraries.  Not meant to be quoted verbatim.
It was an environment where one could not master a subject through wrote memory... and therein it's demise. 
All were no equal.
And therein all were not properly brainwashed.
It was therefore inappropriate for a NWO, wherein thought is not permitted

Sun, 09/30/2012 - 19:35 | 2843713 Poor Grogman
Poor Grogman's picture


"All were no equal.
And therein all were not properly brainwashed.
It was therefore inappropriate for a NWO, wherein thought is not permitted"

heres one original...

Sun, 09/30/2012 - 20:01 | 2843754 A Nanny Moose
A Nanny Moose's picture

Teachers....when you do something wrong, they make you do it over.

That little curly haired girl on the right looked is she was about to be eaten.

Mon, 10/01/2012 - 08:44 | 2844476 neidermeyer
neidermeyer's picture

+1 for the Dangerfield quote.

Sun, 09/30/2012 - 18:01 | 2843562 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Not to worry, education won't be necessary in the forthcoming neofeudal society, at least for the majority of the proles.

Sun, 09/30/2012 - 19:27 | 2843700 pods
pods's picture

Smart enough to run the machines, dumb enough to accept the conditions.

(paraphrasing Carlin, RIP)

Mon, 10/01/2012 - 00:32 | 2844165 Anusocracy
Anusocracy's picture

A Morlock-Eloi hybrid.

Sun, 09/30/2012 - 18:12 | 2843580 Slightly Insane
Slightly Insane's picture

Lack of competition in education (in the public sector), Federal Government involvement (you know what they're good at), and the unions control the agenda .... and I agree ... the model is failed, broke, and that animal just won't die.  These politicians all say the same bullcrap, and what they deliver is the exact opposite.  The marxist agenda is failing in a big way.  This game is over!

Sun, 09/30/2012 - 19:08 | 2843676 jal
jal's picture


"What differentiates medical and college costs from everything else? 


The Federal government's direct role in these markets. 


The Central State directly spends over $1 trillion a year on Medicare and Medicaid, and controls private spending with rules and regulations.


As for college costs: could their incredible expansion have anything to do with the Central State backing $1 trillion in student loans?"


My comment:


Let's look deeper into the accusations.


The federal gov. is involved because private enterprise has control of where the gov. money should be spent so that private enterprise can profit the most.


Sun, 09/30/2012 - 20:43 | 2843819 dougngen
dougngen's picture

How does your ridiculos statment constitue "looking deeper"? Maybe you should turn off MSNBC and look at how government intervention has distorted every market it ever took over. Just ask Barney Frank how "houses for everyone" worked out?

"The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to "meet the credit needs" of "low-income, minority, and distressed neighborhoods." Lenders responded by loosening their underwriting standards and making increasingly shoddy loans. The two government-chartered mortgage finance firms, Fannie Mae and Freddie Mac, encouraged this "subprime" lending by authorizing ever more "flexible" criteria by which high-risk borrowers could be qualified for home loans"

Sun, 09/30/2012 - 23:49 | 2844119 spdrdr
spdrdr's picture

Nice link, dougngen.

Methinks that there will simply not be enough rope or power poles.

Sun, 09/30/2012 - 21:05 | 2843854 All Risk No Reward
All Risk No Reward's picture

Not just any private control, but the private Money Power control.

“This Act establishes the most gigantic trust on earth.…When the President signs this Act, the invisible government by the Money Power, proven to exist by the Money Trust Investigation, will be legalized.…The money power overawes the legislative and executive forces of the Nation and of the States. I have seen these forces exerted during the different stages of this bill.…” (Congressman Charles A. Lindbergh, referring to the act which established the Federal Reserve. Congressional Record, Vol. 51, p. 1446. December 22, 1913.)

Who is this Money Power?  They control the Federal Reserve system (Bernanke is a misdirection puppet, people, just like Greenspan) and the mega banks (and basically every megas corporation and government institution) by way of using the assets they strip from society to fund their control over these institutions.

Debt Money Tyranny is their Trojan Horse

Sun, 09/30/2012 - 16:37 | 2843448 Yen Cross
Yen Cross's picture

 Yet, all the "Tea Leaf", reading Central Bankers are obliged to redirect huge flows of "Fiat", to the [ SPAWN / OFFSPRING], of the 2008 crash!

  Some how the Japanese believe all those multi -tiered ,[ golf "driving ranges"], will outstrip[revenue from], parking garages with toll booths!

 Here's the Sunday calendar.

Time Cur. Imp. Event Actual Forecast Previous   Sunday, September 30 All Day   Holiday China - Mid-Autumn Fastival 16:30  AUD   AIG Manufacturing Index     45.3     16:50  JPY   Tankan Non-Manufacturers Index   6 8     16:50  JPY   Tankan Large Manufacturers Index   -3 -1     17:00  KRW   South Korean HSBC Manufacturing PMI     47.50     17:00  KRW   South Korean Trade Balance   2.72B 2.00B     17:30  AUD   MI Inflation Gauge (MoM)     0.6%     18:00  CNY   Chinese Manufacturing PMI   49.80 49.20     20:00  IDR   Indonesian Inflation (YoY)   4.60% 4.58%     21:00  IDR   Indonesian Trade Balance   -0.08B -0.18B     22:00  INR   HSBC Markit Manufacturing PMI   52.50 52.80     23:30  INR   Indian Trade Balance     -15.5B     Legend:
Sun, 09/30/2012 - 17:18 | 2843451 Richard Chesler
Richard Chesler's picture

The name is Ponzi...Uncle Sam Ponzi.


Sun, 09/30/2012 - 17:25 | 2843510 NewThor
NewThor's picture




Central Banks loaning out money to banks and hedge funds at 0% so they can then loan that money back to governments at 2% to 23% is a Ponzi?


How have Treasury Bills been doing the the last year or so?

Sun, 09/30/2012 - 18:54 | 2843651 monogratis
monogratis's picture

No, it's a racket built on a ponzi.

Sun, 09/30/2012 - 16:39 | 2843452 Death and Gravity
Death and Gravity's picture

Of course it is. Central banking EXISTS to feed the beast - to feed funds into an institution that would never be able to procure it itself by honest means.

Mon, 10/01/2012 - 08:04 | 2844416 Disenchanted
Disenchanted's picture




On central banksters('FED') and QE3:


"If the American people ever allow private banks to control the issue of their money,
first by inflation and then by deflation, the banks and corporations that will
grow up around them (around the banks), will deprive the people of their property
until their children will wake up homeless on the continent their fathers conquered."


Above quote attributed to Thomas Jefferson(in 1802 in a letter to then Secretary of the Treasury, Albert Gallatin)

Below an excerpt from(my emphasis):

The Fed’s US Land-Grab Hidden Within Purchase of Mortgage-Backed Securities


The latest scheme of the banking cartels has been introduced as QE3, which is nothing more than a massive land-grab in the domestic US by the technocrats under the guise of purchasing the mortgage-backed securities through the Federal Reserve to alleviate the pressure the banks are feeling from the bait-and-switch they caused.


Essentially, as the Fed buys the mortgage-backed securities, the central bankers now own all those properties which were bundled and securitized. The experts are still coming to terms with how many homes, small business, small farms and other lands were mixed-up into this Ponzi scheme. The actual total numbers of victimized Americans are continuing to rise and are currently unknown. However, it is clear that as this monster grows, it will be the Federal Reserve at the helm, making sure that more Americans are displaced and foreclosed on.


It is not the value they are after. Bernanke sets the tone for that with interest rates. It is the physical property that interests the central bankers. And this is a massive land-grab – the likes of which has never been attempted in the US and are likely to be a major contributor to our downfall as a sovereign nation. Through the mortgage-backed securities, the central bankers will literally own most of the domestic US.


Sun, 09/30/2012 - 16:47 | 2843465 Jason T
Jason T's picture

Socialism: Gov't allocates capital (your capital on your behalf)

Capitalism: You allocate capital ..


So since 1 in 7 Amerians are getting an average of $134 a month in food stamps for example, that means the other 6 out of 7 are each "donating for a good cause" $22 a month to that 1 in 7.

Got a family of 4?  $88 a month is your gun to the head benefit you help provide.  

Sun, 09/30/2012 - 17:20 | 2843507 NewThor
NewThor's picture

Post 2008 Bailout to infinity Capitalism = Rob everyone blind and get the "little people" to blame the $200 trillion dollar hole on 'foodstamp' people.

Hey. You like math. So if the deficit is $1.6 trillion, then are YOU really paying for those food stamps, or is the printing press doing all the heavy lifting?

Sidenote: How much have Iraq and Afghanistan cost us? What prizes and rewards did we win from that adventure? What's the score on the battle for the hearts and minds of the invadees?

Sun, 09/30/2012 - 21:14 | 2843862's picture


Hey. You like math. So if the deficit is $1.6 trillion, then are YOU really paying for those food stamps, or is the printing press doing all the heavy lifting?


An increase in money supply is a tax called inflation. But the lifting is actually not bad because package size is decreasing while prices are increasing. That's a great consolation to the little guy.

Sun, 09/30/2012 - 21:20 | 2843868 shuckster
shuckster's picture

No, dumbass, the minorities aka blacks are a BIG part of the problem. Along with the Jew banks! that's the point. everytime one of those monkies goes to Walmart with a snap card loaded with YOUR tax dollars, they are eating YOUR food. They are coming into your house, taking the potato salad and eating it at their house! And the Jew bankers are doing the same. Get it through your head. The Jews run/ have always run the financial industry. GOLDMAN SACHS? Um lemme guess, is that German, or Dutch perhaps? No IT'S FUCKING JEWISH, obviousy. Do you know anyone on SNAP cards? "Oh I know this one white family that collects welfare". Well duh, white people pay for welfare, so they should be able to collect it every once in a while. THEY FUND the PROGRAM. It's their money to take. Black people do not pay taxes, they collect them via handouts for their votes from Jewish backed politicians. And how do the politicians avoid the bad press from taking money from Sheldon Adelson (Romney) and George Soros (Obama)? Because Rupert Murdoch (Fox) owns the media that feeds you your information. THESE MEN ARE ALL JEWISH, obviously! Are Jews bad? I don't know. Are black people bad? Don't ask me, I don't know any of them personally. But I do know that every time I see a rotten, corrupt institution, there always seems to be a bunch of Jews in close promixity. "Correlation doesn't equal causation though!!" Fine, it doesn't. But why risk it

Nothing will change until we look at the very obvious writing on the WALL

Sun, 09/30/2012 - 23:46 | 2844113 Pie rre
Pie rre's picture

Nicley said!!

Sun, 09/30/2012 - 16:50 | 2843470 Don Levit
Don Levit's picture

Insurance coverage also arbitrarily inflates prices, particularly at claims of $25,000 and below.

What we need to do is to give people first dollar coverage, but provide discounts for voluntarily not making claims.

In my plan design, with a separate, primary policy, one can build $25,000 in paid-up coverage over 36 months.

This reduces premiums by 60%, simply by voluntarily choosing another way to pay claims below $25,000 other than through insurance.

Don Levit

Sun, 09/30/2012 - 17:21 | 2843495 kaiserhoff
kaiserhoff's picture

Good start and something I've advocated for years.  First dollar health insurance is 14 kinds of stupid, and an endless subsidy to corporate drug pushers.  Ethical Drugs - what a load of horse shit.

How about thinking outside the box?

Greatly reduced premiums for those who stay in shape, and are willing to try herbal/nutritional remedies first.

Reduced benefits to those who are morbidly obese, nicotine addicts, wino-Americans, etc.

For those addicted to meth, PCP, crack, bath salts... - we should offer assisted suicide, not that they need it.


Sun, 09/30/2012 - 17:23 | 2843509 NewThor
NewThor's picture

So does Marijuana qualify as Herbal Remedy or the Assisted Suicide category?

Sun, 09/30/2012 - 17:37 | 2843520 kaiserhoff
kaiserhoff's picture

The stuff makes me sleepy and gives me a headache.  Your results may vary, but unless you have glaucoma, or are undergoing chemotherapy, I don't think the taxpayers should support your buzz.  Thanks for playing.

Sun, 09/30/2012 - 17:41 | 2843532 NewThor
NewThor's picture


Seriously, you do realize that if Marijuana was legal, I'd have the best garden in the USA? Ain't no taxpayers ever gotta get involved. Ever.

Results do vary.

I've mastered all 7 of the arts. 

So break your people lumping brush in half, dude.

Sun, 09/30/2012 - 17:57 | 2843549 kaiserhoff
kaiserhoff's picture

Let a thousand flowers bloom.  I don't care how wasted you get.  I'm a libertarian.  Paranoia and the munchies,,, sheesh.

Just grow your own and don't mix it.  People should eat veggies, not become them.

Sun, 09/30/2012 - 18:21 | 2843596 NewThor
NewThor's picture

About 10 days ago, I was sitting at a bar.

An extremely nice guy who was in from out of town and who smelled like the Obama administration sat down next to me and asked me why I thought Ben Bernanke was the anti-christ.

I found this rather odd, but we continued to have an excellent conversation for about 3 hours about economics and physics. 

I'd never met anyone who defended the Federal Reserve with such vigor. He also had two plain clothes military G-men near him watching my every move and listening to every word. 

About 3 days later, I go to a bar again.

15 minutes later. He shows up again.

We have another excellent conversation.

The one thing he told me that sticks in my mind....

"The dollar is backed by the most powerful military in the world."


Sometimes it pays to be paranoid.


I am an Alpha Omega male.

vegetable? lol

Sun, 09/30/2012 - 19:00 | 2843660 monogratis
monogratis's picture

LoL.  Yeah, but what happens to the most powerful military in the world when the people who pay them go broke?

Sun, 09/30/2012 - 20:59 | 2843846 NewThor
NewThor's picture

An era of forgiveness.

That's what I'm talking about.

Everybody on the planet stands down and comes to the table.

No more war. 


Sun, 09/30/2012 - 20:10 | 2843772 kaiserhoff
kaiserhoff's picture

Great story.  My FBI file is bigger than yours.., or maybe not;)


Smelled like the Obama administration... gotta love it.  Can you give us a hint?

I'm thinking stale French Whorehouse?   or maybe eau de Bahny Fwank?

Sun, 09/30/2012 - 21:05 | 2843853 NewThor
NewThor's picture

Deep space Nebraska navy?

A star Jumper. 

School of Ra.

I'm just a poet.

With a vivid imagination.

At the end of the day,

It's all a communication breakdown.

There is a way, me you, Ben Bernanke

and the rest of the world

can figure out a way

to build something

that can last,

grow and prosper.

Step into the 2000's,

ladies and gentlemen,

We can all be saved.

Obstruction era,



Sun, 09/30/2012 - 17:38 | 2843526 hidingfromhelis
hidingfromhelis's picture

Who pays the pharma-lobbyists and owns the congress creatures?  Wait, was your question rhetorical?

Sun, 09/30/2012 - 17:37 | 2843525 Don Levit
Don Levit's picture

Thanks for your reply.

It really is simple math.

Coverage continues to build every month, like a supersized HSA.

Those who make claims, have lower paid-up coverage.  Those who do not make claims have higher paid-up coverage.


It's like withdrawing from a 401(k), or leaving the balance intact.

It is a voluntary decision one makes to tap benefits.

Yes, his back may be against the wall, and he may have few other options, but it is still a voluntary decision with natural, mathematical consequences.

Don Levit

Sun, 09/30/2012 - 16:54 | 2843476 verum quod lies
verum quod lies's picture

Read “This Time is Different”. The general causal sequence seems to be: (1st phase) bad fiscal policy – i.e., deficit spending, (2nd phase) bad monetary policy – e.g., the “monetization” of bad fiscal policy, and then rinse and repeat until finally (3rd phase(s)) crisis (1st banking and/or shallow economic caused typically by declining real estate prices then currency and/or deep and severe economic). Essentially, it’s not just inflation that is caused by government intervention and spending, but it drives the monetary response which in turn drives the final crisis and/or collapse. This time is not different, and neither is the inflation seen in the healthcare and education industries in the US.


Sun, 09/30/2012 - 16:57 | 2843483 10mm
10mm's picture

Inflation will EAT the purchaing power of the EBT.That's how EBT will go down,among the general population.Geez.

Sun, 09/30/2012 - 16:59 | 2843487 Yen Cross
Yen Cross's picture

 Hey folks, insurance companies are a pain in the ass!  Insurance Cos. are the " antithesis" of " pari passu"!


Sun, 09/30/2012 - 17:33 | 2843518 Aleedsfella
Aleedsfella's picture

To be governed is to be watched over, inspected, spied on, directed, legislated at, regulated, docketed, indoctrinated, preached at, controlled, assessed, weighed, censored, ordered about, by men who have neither the right, nor the knowledge, nor the virtue. ... To be governed is to be at every operation, at every transaction, noted, registered, enrolled, taxed, stamped, measured, numbered, assessed, licensed, authorized, admonished, forbidden, reformed, corrected, punished. It is, under the pretext of public utility, and in the name of the general interest, to be placed under contribution, trained, ransomed, exploited, monopolized, extorted, squeezed, mystified, robbed; then, at the slightest resistance, the first word of complaint, to be repressed, fined, despised, harassed, tracked, abused, clubbed, disarmed, choked, imprisoned, judged, condemned, shot, deported, sacrificed, sold, betrayed; and, to crown all, mocked, ridiculed, outraged, dishonoured. That is government; that is its justice; that is its morality.
Idée Générale de la Révolution au XIXe Siècle [The General Idea of the Revolution] (1851); quoted in The Anarchists (1964) by James Joll, Ch. 3, p. 78

Sun, 09/30/2012 - 17:37 | 2843524 Pumpkin
Pumpkin's picture

The Federal Reserve is where inflation comes from.  If they couldn't print money at will, and gold and silver coin were what we used for money (as the states are REQUIRED TO DO in Article 1 Section 10), the government couldn't cause inflation if it wanted to. It is as simple as that.  Without the Federal rezerve, we wouldn't have a $16 trillion deficit.  Or wars of agression.  Or bought and paid for government.  Or zombie banks.  Or dependant voters.  The list is endless.

Sun, 09/30/2012 - 18:07 | 2843572 Urban Redneck
Urban Redneck's picture

Everyone would wind up trading their yellow gold for black gold to put in their cars, within a year all the yellow stuff would have exited the country.

Sun, 09/30/2012 - 21:26 | 2843880's picture

The petrodollar system creates fiat which was designed to flow overseas. A sound currency tends to reinforce domestic industry.


"But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can, both to employ his capital in the support of domestic industry, and so to direct that industry that its produce maybe of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it." -- Smith's Wealth of Nations

Mon, 10/01/2012 - 02:51 | 2844243 Urban Redneck
Urban Redneck's picture

The original Saudi Aramco concession was priced in gold, not fiat.

"By preferring the support of domestic to that of foreign industry, he intends only his own security" 

The muppets are even dumber now than they were back then, take away their iCrap and they are likely to overthrow any new monetary system-

Sun, 09/30/2012 - 17:40 | 2843530 Mr. Regression
Mr. Regression's picture

Looking at those graph's, on average I think people are getting a deal.  Tution where I worked my way through college in the late 70's is 10X higher today.  They got a nice pool though and I hear the food is better. 

Sun, 09/30/2012 - 17:49 | 2843540 KickIce
KickIce's picture

The government is the economy.

Sun, 09/30/2012 - 18:06 | 2843568 q99x2
q99x2's picture

The current takeover of democratic and socialist societies around the world by corporate interests whether through the writing of unconstitutional laws, war, political bribery or financial terrorism, will without doubt end in total destruction. Carl Jung mentions the process in his book "Civilization in Transition."


From the Jungian Center for Spiritual Sciences

           Jung felt crowds let loose “the dynamisms of the collective man... beasts or demons that lie dormant in every person until he is part of a mob.”[25] Large groups blot out individual morality[26] and cause individuals’ consciousness to sink to a lower level.[27] Crowds stir up fears,[28] which can lead to a whole population having “...a feeling of catastrophe in the air.”[29] Crowds and groups induce “infantile behavior” in people who would otherwise behave in mature and responsible ways.[30] Crowds cause “even the best man to lose his value and meaning,”[31] and lead individuals to become “stultified”[32] and their personalities to “degenerate.”[33] Lacking any self-reflection,[34] large groups of people make individuals “psychically abnormal.”[35] Moved by impersonal, overwhelming forces,[36] mobs produce “herd psychology”[37] and the “mass man.”[38]

            Jung repeatedly decried the rise of “mass man.” Such a person is infantile in his behavior,[39]“unreasonable, irresponsible, emotional, erratic and unreliable.”[40] In the mass, the individual looses his value[41] and becomes the victims of “-isms.”[42] Claiming no sense of responsibility for his actions,[43] mass man finds it easy to commit appalling crimes without thinking,[44] and grows increasingly dependent on the state.[45]

            Jung felt that the larger the size of the group, the greater the dangers, because the lower the overall level of consciousness.[46] The individual thrust into a large crowd would be hard put indeed to resist the pull into unconsciousness and would soon manifest “psychic abnormality.”[47] Jung saw all this play out in the atrocities of World Wars I and II. He would not be surprised by similar events in the Iran-Iraq war, the U.S. invasion of Iraq in 2003, and in the current “war” on terrorism.[48]


It is not the people the NoWorldOrder have to fear, as the fuel to fund operations declines, but those within their own ranks--other corporate interests.


Sun, 09/30/2012 - 18:42 | 2843631 Don Levit
Don Levit's picture

I am a big fan of Jung.

I was not aware of his thinking on group v. individual psychology.

I think his thinking corresponds with Nietzsche, who said something to the effect that individual man is okay, but once he joins a group, watch out.

Of course, he said it much more eloquently than I.

This is the scary situation I believe we are faced with in this country.

And, it doesn't take too many powerful people in one group to cause massive damage.

Just look at the Federal Reserve and Ben Bernanke, in particular.

And, of course, our Congress and President make this combination exteremely powerful.  The idea of being able to simply print money out of thin air is a power so immense, with so many positive and negative consequences, that it is an option which cannot be managed by man, and certainly not by a group of men.

It frankly is a power to create something out of nothing, which heretofore, I thought only God was capable of pulling off.

Now, He has a competitor.

Many people think I am kind of loony for belieing in God.

If I told them I believed currently in 2 Gods I may not have much of an audience for my ideas.

Don Levit

Sun, 09/30/2012 - 23:58 | 2844124 Pie rre
Pie rre's picture

Beautiful but could he of been paranoid?

Sun, 09/30/2012 - 18:14 | 2843582 dumpster
dumpster's picture

this writer has the chicken befor the  egg .. government spending is the outcome of money printing .. inflation is an increase in the fiat supply..

these gyyyts  are like little blow hards  not wanting to cut the umbilical cord to the brain fart ..

so inflation they think will go down if government would jusrt stop spending .

so much purple bubble  territory that these writers float off into ..

consumer  spending up on gas price increase .. so the spending by government and  the folks is so good for the economy...



Sun, 09/30/2012 - 18:48 | 2843639 monogratis
monogratis's picture

You just have to understand that the Fed isn't printing money per se.  The Fed is not increasing M1 money supply.  Instead, what they do, is blow up their balance sheets and sustain the DEBT markets which are over-leveraged.  They are just trying to keep the CREDIT market from collapsing again, as it did in 2008, when it became obvious that the system was a Ponzi.

But... once you've seen the emperor without his clothes on, then the show is over.... Investors are now trading short-term only knowing that they have to keep their investments as liquid as possible... thus there is no job creation because job creation requires long-term investing and forwarding looking business models..

Sun, 09/30/2012 - 18:43 | 2843635 monogratis
monogratis's picture

So... Food stamps are actually causing food price inflation?  Student loans are causing tuition inflation?  QE3 is causing stock price inflation?  Who'd a thought it?



Sun, 09/30/2012 - 19:38 | 2843716 honestann
honestann's picture

Most of us here.

Sun, 09/30/2012 - 18:43 | 2843636 orangegeek
orangegeek's picture

Government spending/over spending creates inflation - it is one component, but it is no guarantee.


Watch deflation kick into high gear in spite of QE-X kicks in.


No amount of government spending will get this economy going.  Governments don't create jobs.  They create burdens for the taxpayer.



Sun, 09/30/2012 - 18:50 | 2843642 monogratis
monogratis's picture

I agree with you.

What will happen is exactly what happened the last 3 years...  Stores will have to massively discount product in the Winter season and squeeze margins (deflationary effect).  This will further destroy jobs and will basically put small businesses through the ringer.


People will save money when they should be spending it, and spend money when they should be saving it.  That's the result of screwing around with interest rates.

Sun, 09/30/2012 - 19:37 | 2843714 honestann
honestann's picture

The premise is correct.  This is just one of endless numbers of ways to misdirect.  You take whatever evil scam you wish to pull, break up the implementation into 2 or more elements, then each element can point to the other elements and say "it ain't our fault, it's them".  Then humans, being dumber than rocks, become confused and disabled.  Seems to work every time for anything large scale.

The solution?  Terminate both/all elements.  Duh.

Sun, 09/30/2012 - 21:48 | 2843921 shuckster
shuckster's picture

Look at all these people, arguing with each other: What does it accomplish? Nothing until you look at the real issue. I don't know what to say. I really don't. All I know is that something has to change, and soon. 

All the talk about Fed policy and qantitative this and qualitative that, it's all bullshit. I'm not talking about a police state. I don't give a shit about a police state. I hope we get a king, I hope we get a cruel fucking one. Because anything is better than this bullshit. Look around you. Who is living fat right now? Fat fucking dike teachers? Yeah. Fat fucking black ladies? Yeah. Fat fucking hook nosed rats like Alan Greenspan. I swear to god if i see the fat kike Netanyahoo on TV telling me what America needs to do one more time, I am going to club the shit out of a baby panda. What the fuck is wrong with this picture. Since when did a fat fucking Jew in a little tiny country on the other side of the planet tell us what do to? And since when did some boot lipped monkey from Kenya determine what was best for our kids to eat at school? "There's too many racists out there!" they say. No, there aren't enough. Our country has become a fucking joke. We've become a fucking joke. "Can't we all just get along". No you dumb fucking nigggger we cannot. I don't like the way you smell, I don't like the way you talk. I don't like fucking rainbows. I don't like gay people. And I don't like fucking Henry Kissinger talking with his lisp and his stupid fucking glasses. People need to wake the fuck up. And I don't mean by listening to that idiot Alex Jones or voting Ron Paul. What a fucking retarded idea. The problem is all the fucking Jews and fucking ILLEGAL law breaking mexicans and blacks who don't work. If you aren't willing to accept this or are too much of a chicken shit to say it out loud, I cannot help you. But at this point, it's too obvious to deny

Mon, 10/01/2012 - 03:05 | 2844239 James
James's picture

So, all the things you've identified as the problem frustrates you so much that a Panda gets the beatdown.

Maybe it's just me but myself I would rather spend the day w/the Panda and a couple of the people you mentioned got the beatdown.

Some say the book "The Elders of Zion" that fell from a guy riding a horse and was found by others is'nt true.

If so,it sure the hell rhymes w/EVERYTHING happening today.

This is all by design.

And it will take Men and Women of great courage and selflessness to straighten this out. For some of those that is their destiny in this world.

NONE of them currently work in D.C.,the Banks, or the Fed Reserve.

The fire that will consume them is currently smoldering.

I sense high winds in the days ahead re-ignighting that fire.

It will ultimately suck to be them.

Mon, 10/01/2012 - 11:18 | 2845132 shuckster
shuckster's picture

Of course they say "Elders of Zion" isn't true. Frankly, I don't give a shit if its true or not. I'll read what I like, thank you. Secondly, Jews deny everything you say about them. And when you catch them in a lie, they just deny it more. The Holocaust was a fucking myth. Hitler was half Jewish, and most Jews know this, yet they choose to ignore that fact somehow. I've met plenty of Jews and they're all the same. Cool and laid back, until you bring up the fact that they're Jewish or voice any complaint about the way Jewish people act in public. Then they clam up and get all defensive. Well sorry, if your going to live in someone else's country, on someone else's hospitality, you are going to have abide by THEIR rules from time to time. If you cannot abide by basics rules like "don't fuck people over" and "don't lie about important shit" and "don't steal the silverware" then don't get this stupid fucking look on your face when you get kicked out of the fucking house!

Mon, 10/01/2012 - 00:04 | 2844134 Pie rre
Pie rre's picture

Oh my!

Mon, 10/01/2012 - 08:28 | 2844443 yrbmegr
yrbmegr's picture

The government also spends boatloads on defense?

Mon, 10/01/2012 - 11:24 | 2845087 shuckster
shuckster's picture

That's because we are a warrior country. This country was built on war, it survives by war. That's how we operate. We are descended from Romans, descended from ancient Greece - therefore, we are a warrior society, built by warriors, paid for by the spoils of war and protected by warriors. A warrior society CANNOT cut down on war spending because the moment it does, it's gets invaded by some economy it pillaged a hundred years ago. We cannot not cut defense spending because we don't want to, we can't cut it because we have no choice. The moment we let our guard down, someone is either going to invade our country or draw us into a war in theirs. It's not about ethics, it's about survival

So if you don't feel like a warrior, you need to look at your history and see your grandpas and great grandpas and great great grandpas and see them shaking their heads at us in shame. Because for the last hundred years this country has sat on its ass and gotten fat and lazy. We haven't kept in good shape, we've forgotten how to fight. Well I have news, if we can't fight, we will die and if we die that will suck. Big time. I do not know much but I know that if the day ever comes, that I will not enjoy it, getting killed by someone from some far away country. The world is on the brink of WW3 and there are a lot of countries that want to see us all dead. Fuck them. I don't give a shit why they hate us, they can suck a dick. China. Fucking chinks can suck my dick. I definitely don't give a shit about Israel. I definitely don't give a shit about that fucking monkey Obama. He's a faggot. He's also black and his fucking dad is a fucking monkey just like him. 

Mon, 10/01/2012 - 20:42 | 2846985 WhiteNight123129
WhiteNight123129's picture

The commodity which best tracks the monetary base is processee tobacco. The phenomenon of prices rising is better way to look at things. And the Ricardo/Friedman idiocy of currency school and quantity of money is useless crap. It is true over the long term only.



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