The Destructive Power of Inflation

Posted On: Thursday - August 9th 2018 8:52PM MST
In Topics: 
  Global Financial Stupidity  Economics  Inflation

Shadowstats inflation estimate vs. Feral-Gov numbers:

I really want to knock this one and one more summary post on interest/inflation out, so I hope the reader will feel welcome just skipping this and waiting for the next in our usual articles on the more blatant forms of stupidity. However, this may not be so awful boring, and there's ice cream at the end. My memory for economic as well as political stuff seems to be very good when compared to others who seem to forgive and forget. Do I remember when inflation (of the money supply) and it's visible effect of constantly rising prices was not existent? Nah, I'm not 120 years old, which is about what age one would have to be now to have been 20 and aware before, the FED was created - that's that Creature from Jekyll Isle that you'll hear/read people like yours truly and Ron Paul talk/write about on occasion. One could also just be about 75 years old, and have been aware during the early 1960's that inflation wasn't much of a deal (before the removal of sound money).

For most of us, inflation seems like a natural evil that we can do nothing about, like, say mosquitos. Even when it was very high, in the late 1970's, people really believed that the "wage-price spiral" was just a matter of one-upmanship between employee-consumers and producer-employers, and would just plain stop, if one party could be made to stop the escalation. "The price goes up, so we need more pay, then they need to raise prices to pay us more, then we need more pay... " "All we gotta do is control the prices or wages for a while and the spiral will stop". It sounds reasonable, until you realize that inflation is simply the increase in the supply of money due to the government's extreme need to spend, spend, spend. If there's more money, but the same amount of wealth being created, stuff just plain gonna cost more - easy peasy.

See, it used to be that the Feral Government had to control the budget, due to the fact that anyone could turn in their fiat money, those pieces of green paper, for the appropriate amount in gold or silver. If that green paper was not keeping it's value, the gold/silver would all be taken back by Americans, and the paper would disappear from use, preventing the government from buying anything, what with having no more gold and all...

By diluting the value of the Dollar in this way, with it's effect of continuously rising prices, the US Government is stealing your savings (if any). What this really means (and thanks to some commenter on some site somewhere for making this point) is that the Feral Government is stealing years of your life away. What does that savings, in whatever form, represent? You've worked for that money, and unless you work as a male prostitute, it's usually not something you'd be gladly doing anyway. Those years of labor that represent the time to accumulate the amount that is being lost via dilution are simply being stolen, that's all there is to it. Who's gained those stolen years, BTW? That'd be whoever can make use of this new money being created to live a life of luxury and NOT have to labor at all. (Wait, am I sounding like a Communist, here?- no, not at all. Commies LUV Big-Gov; I hate it, along with the crony-capitalism/government-supported F.I.R.E. "industries".)

All that boring, but important, stuff being said, let's get more personal here. Got that Social Security Scam (see also Part 2) money coming? Sure, they've got it indexed to inflation, so you can't lose. Suuuure, yeah, that's the ticket. Do you believe your promised SS checks will buy in the future what the dollar amount will buy now? Sure, the government also has some land on this one island for cheap ... Bikini Atoll, it's called ... mmmm... bikinis.... It's not just SS, but Federal pensions, and other obligations, that amount to a coupla' hundred TRILLION $ that also vary according to the "official", government calculated inflation rate. That's why the Bureau of Labor Statistics, who come out with the numbers, seem to keep them much lower than a grocery shopper, insurance customer, car mechanic, or homebuilder may notice. Yeah, groceries, car insurance, batteries, lumber etc. are not going up 1-2% yearly. The Shadowstats site, linked-to above, whose graph appears at the top, has much more detailed information on real estimates of inflation, along with other economic numbers.

I'll have to write about hedonics another time, a trick used by the BLS folks to make the numbers look good to, you know, help, and all, but let me just get back to another example of Big-Biz tricks to hide their increases in prices. The old Peak Stupidity yogurt post, Inflation by Deflation described the devious way that Big-Biz downsizes packaging to hide price increases. If you are one who notices these things, you will be familiar with the name-brand (Breyers comes to mind) ice cream package shrinking that started in 2008, if I'm not mistaken.

The containers look the same from the top and are of the same height, but became slightly tapered, then significantly tapered, as the 1/2 Gallon (2 quarts) of ice cream became 1.75 quarts and then 1.5 quarts a few years later. They are pretty sure we were never gonna notice. BTW, I don't believe the company saves that much in cost by putting less ice cream in each container. They can manufacture it cheaply, and lots of the costs is in the shipping, packaging, and fixed costs of advertising, paying the corporate honchos who approved this sleight-of-hand, etc. Their reason to do this is to just increase the purchases of containers of ice cream, as obviously 3 pints takes only 3/4 as long to finish as 4 pints does. I've seen something around a $1 increase in the price of this type of ice cream in that same decade, from about $4.50 to $5.50, when it's not on sale. That is is a total increase in price of decent ice cream of 62% over the decade, over 5% yearly compounded.

OK, says the reader, all I've heard about is stuff from the dairy aisle of the grocery store - that's pretty damn anecdotal. Yes, I'd like to write a post giving quite a few more examples, and kind of giving my experience and remembrances of inflation over the years. Secondly, again, check shadowstats and see how much data they have and where they get it.

The summary on interest and inflation will discuss why both control of interest rates and the destructive power of inflation are good for government.

Friday - August 10th 2018 12:27PM MST
PS - Agreed, BernCar. The fed-government's basic methodology on that has been stupid for a few decades now. Once you are off the unemployment books due to timing-out (or if you never got on em, even though out-of-work), you are not counted as unemployed.
Friday - August 10th 2018 11:12AM MST
PS John Williams at is also a reliable source of unemployment data, which is another statistic where government likes to cook the books.
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