Food and Energy Inflation is Not Transitory By National Inflation
Association| Thursday, Apr. 28, 2011
Federal Reserve Chairman Ben Bernanke on
Wednesday held his first press conference in history. The
press conference took place shortly after the Fed announced
its decision to leave the Fed Funds Rate at a record low
of 0% to 0.25%, where it has been for an unprecedented 28
months. The U.S. economy is flooded with U.S. dollars and
is close to overdosing on excess liquidity. The fact that
our financial markets are not falling on the possibility
of the Fed not unleashing QE3 immediately at the end of
QE2, shows that we could be on the verge of hyperinflation
with or without QE3.
The Federal Reserve currently has a mandate
of both maintaining price stability and facilitating job
creation. However, central banks don't have the ability
to create real employment. If any jobs happen to be created
as a result of a central bank's policies, they are only
temporary jobs created due to the errors and distortions
of phony asset bubbles. All phony asset bubbles that are
fueled by monetary inflation eventually burst, sending unemployment
through the roof.
Almost every major central bank besides
the Federal Reserve, understands the truth about job creation,
and has a mandate that focuses solely on keeping price inflation
low. The Bank of Japan, Swiss National Bank, Bank of Canada,
and Bank of New Zealand, all have mandates that are entirely
about low inflation and don't even mention the creation
of jobs or the rate of employment. Bernanke said on Wednesday
that, "while it is very, very important for us to try
to help the economy create jobs and to support the recovery,
I think every central banker understands that keeping inflation
low and stable is absolutely essential to a successful economy."
Bernanke has decided to go down a route
that no central banker has ever gone before. Bernanke has
literally invented countless ways to create inflation that
nobody else has ever thought of. If keeping inflation low
was ever Bernanke's slightest concern, the Fed Funds Rate
would currently be north of 5% and the U.S. economy would
be in a steep recession. Bernanke has never once thought
about keeping inflation low. He has literally implemented
every measure he could possibly think of to create as much
inflation as possible, while outright lying to the American
public and saying that he isn't printing money and that
inflation is under control.
Bernanke would like the public to believe
that his policies of expanding the money supply through
cheap and easy money will cause the U.S. economy to recover
and unemployment to decline back to pre-crisis levels, and
that right before price inflation spirals out of control,
he can raise interest rates and prevent massive price inflation
without disrupting the recovery. Unfortunately, this is
impossible because the recovery isn't real and massive price
inflation is already here. Bernanke's policies may have
created 1 million artificial jobs since December of 2009,
after 8.75 million jobs were lost in the previous two years,
but he did this at the expense of 310 million Americans
already seeing double-digit percentage increases in food
and energy prices.
Since after the Real Estate bubble burst
in late-2008, the primary economic concern of Americans
has been finding a stable job in order to make mortgage
payments and put food on the table. Under the pressure of
Congress, the Fed printed enough money to prevent a much
needed recession that would be healthy for the long-term
U.S. economy. In its attempt to reinflate the Real Estate
bubble, the Fed has been destroying the free market and
creating new economic distortions, which caused an artificial
bounce in the rate of employment. Unfortunately, when you
add together the money the Fed has either printed or committed
for bailouts and stimulus programs, over $4 million has
been spent for each job created. The Fed would have been
better off just crediting the bank accounts of unemployed
Americans with the average U.S. income.
When asked about rising gas prices, NIA
is very happy that Chairman Bernanke acknowledged that gas
prices "have risen quite significantly" and are
"creating a great deal of financial hardship for a
lot of people". Bernanke admitted that gas is a "necessity"
as "people need to drive to work" for the artificial
jobs Bernanke created at a cost of $4 million per job. However,
Bernanke seemed to be confused when he said "higher
gas prices add to inflation". The truth is, Bernanke's
zero percent interest rates and quantitative easing are
the inflation, and inflation leads to higher gas prices.
Bernanke is directly responsible for gas
prices rising back to $3.87 per gallon, yet refuses to admit
it. Bernanke placed the blame on the growing global and
emerging market economies, and their strong demand for oil.
He said that America's demand for oil is going down, which
NIA believes is actually due to the U.S. dollar losing its
purchasing power and Americans seeing their standard of
living decline. Bernanke said there is nothing that he can
do about rising oil and gas prices "without derailing
growth entirely". The truth is, Bernanke already derailed
growth entirely when he derailed the free market. It is
impossible to see real economic growth when a government
and central bank is interfering in every aspect of the economy
and impeding the free market in every possible way. All
nominal GDP growth in the U.S., along with growth in retail
sales, is solely due to inflation. Even when the government
adjusts GDP and retail sales growth to the rate of inflation,
it is based off of the consumer price index, which NIA believes
is currently understating price inflation by approximately
4%.
Although Bernanke denies he has the ability
to reduce gas prices, he claims he can prevent "gas
prices from passing into other prices and wages throughout
the economy and creating a broader inflation which will
be much more difficult to extinguish." Bernanke obviously
doesn't want Americans to see higher wages because he believes
it could lead to broader inflation, but NIA believes rising
wages would be a good thing. Inflation hurts Americans most
when the rate of inflation is far outpacing wage increases.
The fact is, the U.S. is already experiencing broad inflation
even without wage increases.
Bernanke's brand new favorite word as of
late seems to be "transitory", which he used about
a dozen times during his press conference. Despite what
Bernanke says, NIA strongly believes that rising food and
gas prices are not transitory. Bernanke likes the word "transitory"
because he can use it to try and pretend that rising food
and gas prices are only just a temporary phenomenon and
that their current high levels aren't here to stay. Many
Americans can remember the day 40 years ago when a can of
Coca-Cola cost a dime and a Hershey chocolate bar cost a
nickel, with a gallon of gas back then costing only thirty-five
cents. Have rising food and gas prices over the past four
decades been transitory?
NIA first predicted two years ago in its
documentary 'Hyperinflation Nation', that rising food and
gas prices would soon become the primary concern of all
American citizens as a result of the Fed's dangerous and
destructive monetary policies. Bernanke back then claimed
that inflation would not be a problem and said that the
U.S. risked deflation. If Bernanke has been so wrong about
the inflation that Americans are faced with today, NIA doesn't
see how anybody can possibly believe that Bernanke will
be right and that current high food and gas prices aren't
here to stay. In our opinion, the food and gas price inflation
that Americans have experienced over the past 40 years,
is likely to occur all over again during the next 4 years.
NIA believes that 4 years from now, Americans will look
back at the good old days of having cheap $4 a gallon gas.
The last thing the U.S. government wants
is for the American public to realize that Bernanke is responsible
for rising food and gas prices. If the public demanded to
end the Federal Reserve, the government will no longer be
able to spend recklessly knowing that the Fed will be there
to monetize their deficit spending. In an attempt to make
up excuses for rising gas prices and deflect attention away
from the Fed, Congress has been pressuring the U.S. Attorney
General to investigate the matter. Attorney General Eric
Holder just announced the formation of the Oil & Gas
Price Fraud Working Group. The stated purpose of this working
group is to monitor the oil and gas markets for potential
violations of criminal or civil laws to safeguard against
unlawful consumer harm.
NIA considers this to be complete insanity.
Any government interference in the oil markets will only
drive oil prices up even higher. Oil prices are rising solely
do to supply and demand. Demand is going through the roof
because the Federal Reserve is creating a lot of inflation,
and inflation always gravitates to the goods that Americans
need the most to live and survive. Oil supplies are falling
because President Obama has ordered U.S. troops to occupy
Libya. In the past we at least made up excuses to invade
countries like Iraq over oil by claiming they had weapons
of mass destruction. Today, the U.S. government doesn't
even bother. Obama campaigned as an anti-war President,
saying he would bring our troops home from the middle-east.
Instead, he has increased our middle-east troop levels,
and the sheep who voted for him are showing absolutely no
signs of outrage.