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Guest Post: The Government Inflation Scam
Submitted by Jacob Hornberger via Laissez-Faire blog,
What is happening in Argentina provides a valuable lesson in why governments in every country on earth control the education of the nation’s children.
Argentina is suffering the ravages of government debasement of the currency — i.e., inflation, the process by which government pays for its ever-increasing debts and bills by simply printing more paper currency. The expanded money supply results in a lower value of everyone’s money, which is reflected in the rising prices of the things that money buys.
According to the New York Times, last year prices in Argentina rose nearly 30%. This year, they’re expected to increase by 45%.
Not surprisingly, the government’s inflation of the money supply is causing economic chaos within Argentine society. From butchers who are now posting price increases on scraps of paper, to women filing for increases in alimony payments, to café owners who are selling less, to wholesalers who are having trouble pricing imported goods, the government’s monetary debauchery spares virtually no one.
So, what does all this have to do with government schools?
Well, ask yourself: Why do governments finance their expenditures with inflation rather than simply by raising taxes?
The answer is a simple one: With taxes, everyone knows that the government’s the culprit because people can see that it’s a government agency that is collecting the taxes. With inflation, government can blame what is happening on the private sector, where prices are rising in response to the government’s continued debasement of the currency.
And that’s precisely what they teach children in public (i.e., government) schools. They teach them that it is greedy, rapacious people in the private sector, not the government, who are to blame for the rising prices brought on by inflation. They teach them that it is the job of the government to protect people from the greed and rapaciousness of the private sector by doing such things as imposing price controls on businessmen, sellers, and producers.
Inflation is one of the greatest government scams in history. The government inflates the money supply to pay for ever-increasing debts and expenditures. Prices of most everything naturally begin to rise in response to the debased value of the money. The government blames the rising prices on the private sector. Public-school graduates are taught to support the government and castigate the private sector.
Through it all, government officials know exactly what they are doing. They know that it’s their central bank that is producing the problem by expanding the money supply. But they also know that most of the citizens are graduates of public schools, which teach that inflation is caused by private-sector people who are greedily raising their prices. The officials know that all they have to do is focus the blame on the private sector and the citizenry will immediately fall into line and see the government as their savior rather than the entity that is actually the cause of the problem.
By imposing price controls on the private sector, the government makes it a criminal or civil offense to raise prices. Then, officials encourage citizens to become snitches, exhorting them to report unlawful price increases to the authorities.
The price controls inevitably mean shortages. That’s because producers can’t make a profit if they are forced to sell at a price below their costs. The citizenry then get angry over the shortages and condemn the greedy, rapacious businessmen for being “hoarders.” Of course, government officials love to see the process working.
You’ll recall that this was what happened in the United States during the 1970s, when price controls were imposed on gasoline. The result? Shortages and long lines at the gasoline stations, which public school graduates, not surprisingly, blamed on the oil companies and gas station owners.
Through it all, the U.S. government played the innocent. It even had a Whip Inflation Now campaign, acting as if inflation was caused by someone other than the government. The citizenry loved the WIN campaign and participated in it enthusiastically.
It’s no different in Argentina. As part of its campaign to blame inflation on the private sector, the government has imposed a wide range of price controls, leading to shortages and even more economic chaos. Government billboards exhort people to snitch on businesses that are unlawfully raising their prices.
Playing her important role in the scam, Argentine President Christina Kirchner tells the citizens, “We have to monitor prices. Don’t let them rob you.”
Not suspecting that government is the cause of the chaos, the citizenry love the price controls and their new-found role as snitches for the government. According to the Times, two engineering students even devised an app that enables shoppers to see whether grocery stores are complying.
However, there are some Argentinians who see through the scam, just as libertarians saw through the Whip Inflation Now scam here in the United States here in the 1970s. A retired 77-year-old accountant named Jose, who declined to give his last name, no doubt out of fear of government retaliation, showed that he had somehow broken through the government’s indoctrination: “The campaign is useless. It’s a rule that’s older than the world. If you print money, there’s inflation.”
How is it that Jose sees the truth behind the government’s inflation scam while others continue to fall for it? Who knows? Why is it that American libertarians see through the inflation scam here at home while so many others continue to fall for it? Public schooling works well but it’s not foolproof.
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No 'panic buying' yet in USSA, but peeples do have to eat at some point.
Yes, I do wonder if food getting more expensive could be the black swan that lands first. PEDV killing pigs, cattle herds at levels not seen since the '50s, the drought in California. If this all converges at once, you could see people "stocking up" because they're scared that food prices will go even higher, which would in turn drive prices even higher, causing a nasty feedback loop and eventually loosing all of that QE money.
Whether or not food prices is what causes this, it's probably going to happen. The bright side is, if you've got your basic necessities covered, you'll be able to pay off your debts by asking for some spare change. If you don't have your necessities covered, plan on going into more debt. Which probably won't matter.
BTW, I've got all of my NM chile planted, onions, carrots, brassicas, turnips, raddishes and a couple other things. Today I also planted beets and various beans, both dry and green. In a week, I'll check the 10 day forecast. If it looks good, corn is getting started, to then be planted at 1-2 week intervals in blocks. Pole beans will be planted among the corn, then come late May, squash will be planted in there too. When the cool weather stuff is done, more dry beans will go in. Then there'll be cool weather stuff going in Aug-Sept.
I plan on not getting hit by high food prices.
The bright side is, if you've got your basic necessities covered, you'll be able to pay off your debts by asking for some spare change.
Nope. You think the government will let its favored bankers suffer the same penalty of inflation that the common people endure? Expect a law that indexes loans to inflation.
"The citizenry loved the WIN campaign and participated in it enthusiastically."
Bull. Shit. Both the WIN campaign and President Ford were objects of ridicule in the '70s that I lived through.
Yep that's kind of the way I remember it too. But the idiots keep pulling this shit. There must be enough fools to keep the hope alive in the minds of the anointed.
When my daughter was in grade 2, I explained it all to her. She didn't say anything right away, but about a week later at breakfast, right out of the blue, she said, "Daddy, I hate the government." I asked her why, and she recast the whole story about government's role in causing inflation. I said, "that's very nice, dear, but perhaps it would be best if you didn't say that at school."
Do not forget the WIN button. I was in college and just shook my head at the craziness of it. Couldn't even get a part-time job washing dishes because of the grown-ups willing to do any type of work. Seems like there was even a Rockefeller as Vice-president.
The government won't have a choice. It depends on the dollar almost as much as the bankers do. Which is why in the end, debt won't matter, because most of it is never going paid back.
I'm all out of ammo. Paging Dennis Gartman, long gun ($/¥) extraordinaire/
Tell Me lies
The sheeple want a king. The sheeple want to trust their king. The sheeple prefer the lie, rather than confront their stupid delusion of trust in a king.
I was a teenager then but remember the cartoon of Gerald Ford wearing a W.I.N. button upside down: "N.I.M." ~ "No Immediate Miracles!" was the caption.
Weren't (aren't?) people naive?
Americans are suckers for a catchy slogan or scam.
Russians, not so much.
http://www.politico.com/news/stories/0309/19719.html
Umm Workers of the World Unite?
inflation, we are told by economists, is an increase in the money supply, inflation, we are told by the media, is increasing prices. inflation, we are told by the Fed, is about 2% - not the 8% we see. inflation, we are told by social security administrators, is non-existent.
'But inflation can't happen if wages are flat to declining', is the usual response.
That's the more important lie for the US and other developed nations, in my opinion. Inflation is already happening (underreported for numerous reasons, none of which help you and me). What happens then? Exactly what most people see around them- a declining standard of living.
What's OUR government's propoganda campaign against that? "Income inequality".
Don't think it's just happening in faraway lands where they speak different languages. It's happening right here, right now. It's just got a different twist to it.
taxes dont allow you to knock a decimal off the deficit in 10 years like hyperinflation
only ONE decimal??????
It's EASY tp pay off a national debt measured in TRILLIONS when a loaf of bread costs a couple hundred billion. And unlike Zimbabwe who couldn't pay for more paper to print more money, here in the US most money is created with with computer keystrokes
I thought that inflation was caused by the dollar being controlled by evil international speculators...you mean Nixon wasn't telling us the truth?
http://www.youtube.com/watch?v=rcnhF09QN78
Between climate change and equal pay for equal work, there's no shortage of bulls*&t reasons these jokesters will find to blame rising prices on.
Please, a modicum of self control if you will while the .gov operatives are off work and out cruising the parks for illicit homosexual encounters, and specifically mind the approved narrative for peckersniff bloggers.
Keep your agenda to the following obsequious blather:
- DemoRepublicrat fatuous feuding
- Dictatorship of the proletariat [as mandated by the bourgeois papal authorities of the church of the ubiquitous state]
- State approved sacraments such as shameless promotion of social media surveillance or circuses for imbeciles
- Stochastic and complex systems for the state to feign management such as economies, hyper mega global overfit climate difference change, anthropological of course, what else could cause it?
- Love the troops. Always love the troops. Advancing the fronts of course but loving the troops especially. Bless this cess.
...the more you know.
The FED has been inflating for a century now. Borrow, repay with devalued currency. Helluva playbook.
It's never meant to be repaid. The reality is they need to inflate just to be able to service the debt.
Inflation is the ultimate theft. They do it in our faces while telling us it is for our own good. I would rather be robbed at gun point...its more honest.
Yes, at least the pain is over immediatey, instead of drawn out over years of substandard living.
The riots in Egypt started when government took off price controls....for bread.
Causation?
Societies addicted to delusion react with violence to the sudden intrusion of reality. As reality is ultimately unavoidable and every government in the world is sustaining its power and domination through public delusionment, it will all end up in the sreets. It may well end up being the worst of all the fictional "end of world" dramas played out in theaters. We live in interesting times.
Quote of the week...perhaps even the month, on ZH. Well done.
So when EBT cards are not "refilled" (or when $200 buys 3 twinkies) there will be hell to pay?
Chicago Head, Charles Evans thinks inflation should be higher. This guy like, New York Fed head, William Dudley and Janet Yellen are print maniacs. The government lies about inflation to justify more printing and these print-a-holics are more than happy to oblige.
Raising rates more aggressively, whether to head off the risk of financial instability or unacceptably high inflation, could dangerously depress already low inflation and derail a recovery that is finally gaining steam, Evans said.
http://www.reuters.com/article/2014/03/28/us-usa-fed-evans-idUSBREA2R04Q...
Its the only tool they have that simultaneously enriches themselves and their friends while having an economist supported theoretical agenda for cover. Anything else would be just plain stealing. They are doing god's work, saving us from ourselves and all.
"..Well, ask yourself: Why do governments finance their expenditures with inflation rather than simply by raising taxes?"
the given answer was partially correct. the rest of it is that the debt generates interest for banksters who worship the ground debt is created upon.
because of the petrodollar the US is able to export its inflation and import cheap energy. by exporting inflation i mean this - we buy oil for dollars. all of the oil producing countries (Middle east, russia, etc) are all selling oil for dollars. they end up with a bunch of dollars. they must convert these dollars into their local currency.
they then must sell their currency cheaper (ruble, dinar, etc) in order to keep up with flood of dollars coming in UNLESS they are pegged to the USD. then they just pass that inflation on to the market in the form of higher rent, food prices, etc.
so until the USD is no longer the bona fide medium of exchange for oil, the show will go on and on and on and on and on.
When the conterfiting results in no job or wage growth they then push to raise the minimum wage to help speed thing along.
Incompetent government fucking us morning noon and night.
It's neo Fascism, and it is indeed competent.
Our facist/corporate/goverment bailout happy state policies offer appeasing table scraps to the poor, survival to the elderly poor, huge increases in power and wealth to the aready powerful and wealthy, and does all this on the backs of the workers between the 20% and the 99%. One of these tools is inflation.
All these troubles because the whores in washington are happy to be sold to the highest bidder. Not an ounce of statesmanship, courage, or leadership in the bunch of them. We need to get out of the socialist control everything mode and give capitalism a chance. It won't be perfect, it will be a difficult change, but the results will be more predictable and less damaging than todays corporatist/facist system.
Following from http://www.economist.com/blogs/buttonwood/2011/06/escaping-debt-crisis
On the 1% ". . . .the effect of higher inflation on the savings of the richest. But this is quite a complex area. The richest only spend around half their income, so consumer inflation only affects that portion; they have more of their savings in equities and property, asset classes that are better protected against inflation, than on the cash deposits which middle-income savers might depend on for the bulk of their interest income."
On the poor and middle class, "The US inflation numbers out today illustrate the theme. The headline rate is 3.6%, well above the 10-year bond yield, indicating that real rates remain negative across the spectrum. Now the Fed may focus on the core rate (at 1.5%); that number excludes food and energy, but the poor spend more proportionately on food and energy."
On QE "Of course, governments could side-step the markets and get their central banks to buy all the debt; a sort of QE on steroids. The risk of this outright monetisation is a very high inflation rate indeed"
On controlling inflation "The idea that inflation can be raised by a controlled amount for a fixed period then easily brought back down again is naive. When inflation has been used to reduce debt in the past, it has usually happened because a government has resorted to this out of desperation and weakness, rather than because it has judged that it is in the best interest of the economy in the long-term.
"So Capital ranked the G7 countries on these factors to see which would be best placed to inflate away the debt. Germany is best placed (it has a small deficit, very little inflation-linked debt and an average maturity of six years); Italy is second, Canada third, France fourth, Japan fifth while the US and UK bring up the rear, not least because they have big deficits to finance."
In other news, mere peas have been prosecuted for grand theft finance. Government racketeering (Fascism) is the enabler and protector of Fraud Inc. while thwarting the rule of law with the rule of lawless.
Well, no. Inflation is not an accident, and it's not really all that bad either. Inflation is a feature, not a bug in the system. Inflation punishes hoarders of wealth and encourages money to maintain some velocity rather than simply sit there. Deflation encourages hoarding as why spend today what will buy more tomorrow? The problem is not inflation in and of itself, the problem is high inflation. High REAL inflation that is, the problem you see in the US is that CPI figures are linked to a whole shitload of budget items, therefore, it is in the interest of many to cook the books and use creative accounting methods so as to obfuscate the reported figures.
http://www.safehaven.com/article/33279/gold-and-silver-they-are-money
Living in America, prior to the 1930s, if you went into a bank with a US Treasury Note of any denomination, you could exchange it for gold or silver, for all currency was specie-backed, even the Federal Reserve issue, which circulated side-by-side with US Treasury Notes, [those issued by the US government and not the private corporation known as the Federal Reserve].
After the elites forced the US into bankruptcy in 1933, when FDR declared a bank holiday and shut the system down for several days, when the banks reopened, it was the foreign-owned Federal Reserve that was in charge of the entire banking system, finally. [We add "finally," because that was the objective of the Rothschilds for over 50 years even before 1933, actually longer, but it gets too complicated to explain.]
A man goes into a bank, prior to 1933, and hands over a $100 US Treasury Note, or even a Federal Reserve Note, which also was specie-backed, at the time, and asks for $50 in gold and $50 in silver. No problem.
Sometime after 1933, a man goes into a bank with a $100 Federal Reserve Note and asks for $50 in gold and $50 in silver.
Banker: "Sorry, sir. There is no gold or silver backing for your $100. Would you like two $50 Federal Reserve Notes, instead?"
What happened?
When the Federal Reserve Act was passed, two days before Christmas in 1913, when most politicians were home on holiday, the Act was passed with no opposition by the remaining chosen politicians who stayed on, and were well paid to do so by the Rothschild-backed bankers. And so the most treasonous act against the Constitution was passed.
Here is how the rest of the plan was carried out: The Federal Reserve issued its own currency, also specie-backed, to circulate along with the US specie-backed Treasury Notes. This went on for a few decades, which is a short period of time for the Rothschilds. What happened was, people saw the new Federal Reserve Notes, along with Treasury Notes, but it made no difference because both were equally backed by, and could be exchanged for gold and silver on demand, at any bank.
After 1933, when the Federal Reserve took over control of the money supply, it began to slowly withdraw all US specie-backed Treasury Notes and had them destroyed! Nobody paid attention to the disappearance of the US Treasury Notes because Federal Reserve Notes were the same thing, in their minds, and in reality. This was all planned, decades in advance. It was a part of the Rothschild formula for well over a hundred years even before that.
Something else happened very gradually, over time, and almost immediately after 1933. All Federal Reserve Notes that were specie-backed were also withdrawn from circulation. All of the US Treasury currency issued by the United States government had already been removed and destroyed. All that was left were Federal Reserve Notes, backed by the full faith and credit of the United States. Fiat. Again, people had come to accept Federal Reserve Notes in circulation at the same as Treasury Notes, so when all that was left were the Federal Reserve Notes, it did not matter because people could still buy and sell whatever they wanted and did as in times prior to the financial bait-and-switch.
All the gold and silver owned by the United States government was stolen, taken by the elite-owned Federal Reserve central bank. The central bank controlled the government and the media. The public was fed the kind of news that never let on to what happened during those decades, and the public has since been dumbed down even further in all the other decades to date.
Time to end DC destruction of America
http://usnvrepcan.blogspot.com/
Mr. Hornberger chides the citizens of Argentina who fall for the government propaganda that businesses are responsible for inflation because they raise the price of goods and services.
Perhaps Mr. Hornberger should review the chaos of the United States and Europe and question whether it is the government or financial institutes that cause---and profit from---inflation.
The methodology by which the Federal Reserve Board of Governors conceals $4 billion daily from the auction accounts of Treasury securities that are exclusively handled by the FRBNY---and have never been audited or reported to Congress---has been documented. Ref. FEDERAL RESERVE HEIST. The use of that money to fund the New World Order using the World Bank and International Monetary Fund has been presented. Ref. FUNDING THE NEW WORLD ORDER. The embezzlement of the Treasury auction funds by the FRBNY and FRBOG has been brought to the attention of the United States government, Ref. AMENDED COMPLAINT—WHISTLEBLOWER SUIT. All articles available at www.scribd.com/oldereb.
The “end goal” of the cabal has been stated in internal memos to be the collection of the $17 trillion National Debt of the United States.
And still Mr. Hornberger is unaware of the future tragedy and demise of the U.S.
And so much for the economic knowledge of U.S. citizens.