The Inflationary Pillaging of America

A woman shops at a grocery store in Columbia, Md., on May 17, 2023. Madalina Vasiliu/The Epoch Times

Commentary

It has been 3 1/2 years from the start of the inflationary menace to the current plight of the dollar relative to its purchasing power.

And please, as you read this, keep in mind that when we speak of the value of the dollar, there are two ways that this is measured. The first is its value against the goods and services that it can buy. The second is its value against the other currencies that it can buy. These are too often conflated.

It’s massively important to take this into account because, otherwise, the headline news can be extremely confusing. When reporters go on about the strong dollar, they are referring to its value against other currencies. This does not matter to you at all unless you are engaged in day trading on currency markets (in which case you are probably insane, or it’s part of your job) or if you are traveling internationally. In the United States, there is only one currency in practical broad use, and that is the U.S. dollar.

Therefore, what really matters is the purchasing power of the dollar in terms of the goods and services that you buy in this country right now. Higher prices means less buying power, or a decline in the value of the dollar. There are many factors that can cause the ratio of dollars to goods and services to fluctuate. But a long-term and overall decline in purchasing power—as measured by an index of many different prices—is these days called inflation.

I say “these days” because it was not always so. If you go back to the old definition, it plainly meant an increase in the number of currency units above that which was justified by offsetting increases in production. The Federal Reserve bulletin of 1919 says this clearly: “Inflation is the process of making addition to currencies not based on a commensurate increase in the production of goods.”

If you jump back a century earlier, the proviso was not even part of the definition. It only meant an increase in the supply of currency units. Today, we use the word inflation to mean not that increase, but rather the effects of monetary expansion. In other words, the new definition replaces the cause with the effect. The change benefits the Fed because it takes them off the hook.

A much clearer relationship between cause and effect is evident once you compare the vast increase in the supply of money with its effect on prices. The Fed went into overdrive starting March 11, 2020. Thirty-nine months later, we can see the main consequence. The dollar has lost 16 percent of its value from January 2020. That’s a form of taxation. And the pillaging far outweighs the temporary benefit of stimulus payments.

You might have thought you were getting a great gift when the government started dropping thousands of dollars into your bank account. It was a head fake for the ages, a clear example of the government’s use of clever tricks to get your support for its own plot against your well-being.

Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker

There is a great absurdity in denying the relationship between the quantity of money and its value. Each additional unit that comes into being that is not matched by increases in productivity waters down the value of the buying power of that currency. It’s no different from making coffee. If you keep pouring water through the same grounds, you get less coffee flavor and more thin hot water coming out on the other end.

Another example might be the bottle of ketchup. The more you add water to it—increasing the quantity of the stuff that comes out—the less flavor you will get as a result. This is not controversial, and yet it’s routinely denied by Fed spokespeople. They will find every reason for price inflation that you can imagine, while minimizing their own role in controlling the money supply, even though that is their only real power.

The inflation of the past three years qualifies as one of the worst and most dramatic in U.S. history. So far, it hasn’t been as bad as 1975–1981, but it’s getting there. The dollar  lost a full 45 cents in value during that time period—truly devastating beyond what we can imagine today. And yet the inflation of 2021–2023 does set a 40-year record. And it was completely unnecessary, too. It achieved nothing good for anyone.

We keep hearing that inflation is cooling, but each monthly report keeps delivering bad news. The latest figures put annualized inflation at 4 percent, which is twice the Fed’s target. Plus all the declines in the rate of increase are due to changes in the energy sector. Once you exclude food and energy from the index—and we do this because they are the most volatile—the year-over-year increase is still running at 5.3 percent. This would be considered intolerable in the 1990s, whereas today people have been acculturated to see it as normal.

As for producer prices, the latest reports show a larger-than-expected decline. The Consumer Price Index will likely follow this trend. However, rather than merely reflecting a taming of inflation, this is likely caused by a dramatic fall in the money supply and the onset of recession. What amazing mismanagement!

Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker

It’s a common thing for prisoners to adapt to their new conditions, whatever they are. The institution itself becomes a place of contentment, and the inmates find themselves grateful for the smallest increases in food or outdoor time. That is what has happened to us.

It was always going to be true following lockdowns. Those days were the worst of the worst. Then our governments were in a position to start dolling out favors: You can gather with others if you all wear masks. You can travel if you get the shot. You can have some of your freedoms back, however truncated they are, provided you comply with the following dictates.

This is the path to despotism. Inflation is part of that, a sure sign that the government is overweening and using sneaky methods of finance to set itself against the interests of the public.

There’s no question that lockdowns triggered impoverishment. We have lost so much in personal income once adjusted for inflation.

Data: Federal Reserve Economic Data [FRED], St. Louis Fed; Chart: Jeffrey A. Tucker

In addition to this old-fashioned method of destroying our currency value, we have another problem with which to contend. The Biden administration and the whole of the Deep State are wedded to the idea of a new monetary reform. The central bank digital currency will enable maximum population control, allowing the elites to determine what you consume and where you travel. A financial crisis would be the perfect pretext.

This could likely come in the next five years unless there are concerted efforts to stop it. The population of the United States is today relatively less motivated and determined than it has been in a long time, owing to the rope-a-dope of lockdowns and other mandates. We are being socialized to be grateful for whatever freedom and rights they let us have.

We have a narrow window today that allows some freedom of speech. That, too, could be taken away in the coming year unless something changes. Now is the time to speak out. Now is the time to resist.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.