This post has been inflation adjusted: actually 1.7 posts

My Grinnellian friends Ms. Sherwood and Mr. Gitter have been writings some posts about inflation.  As a journalist and an economist, respectively, they have made some good points.  As an internet crazy, I have made some mediocre comments.  But, as it happens, I do have some thoughts on the recent rise in prices we’ve been experiencing in the United States.

The first thing I would like to say is that I don’t support the money monopoly that we have in this country.  The fiat dollar is legally mandated and any other remotely competitive currency is shut down if it even has a chance of taking root.  The real solution to an inflation problem is a free market in money.  If you can decide to store your funds in another private currency, inflation in the dollar would not be a problem.

But this is just one of many ways that our government aggravates painful inflation and prevents the kind of relief that would be available in the free market.

  1. Corn ethanol subsidies create a false market for corn as energy, raising the prices of a) most of our food, b) energy, and c) our taxes.
  2. Sugar subsidies and tariffs also raise the price of food substantially.  Basically the whole farm subsidy system means we pay a whole lot more for food than we should.  See also: milk.
  3. The Federal Reserve has pursued a policy of constant inflation for almost its entire history; in a normal market there are periods of inflation and deflation, but since the money supply is controlled by the Fed, we no longer have these natural periods of deflation. Instead, we have periods of low inflation (the 90’s) and periods of high inflation (now).
  4. My whole theory on 401(k)s and IRAs, which I explain (poorly) on my blog.  It’s actually the most viewed post on here, though.
  5. Running deficits all these years is what has caused the dollar to weaken, meaning higher costs for imports, and we import almost everything these days.

These are just a few of the myriad of ways that the government helps cause inflation.  That’s my take on the issue.

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4 Responses

  1. I find your libertarian ideas disturbing, but I agree with you on nos. 1, 2, and 5.

  2. After 1 and 2, you have to mention the large amounts of $$$ the Fed pays farmers not to farm.

    http://www.washingtonpost.com/wp-dyn/content/article/2006/07/01/AR2006070100962.html <- $1.3 billion going to farmers to not farm certain crops.

    “Most of the money goes to real farmers who grow crops on their land, but they are under no obligation to grow the crop being subsidized. They can switch to a different crop or raise cattle or even grow a stand of timber — and still get the government payments.”

    In SE Kansas I know several farmers who were getting paid not to farm corn, so instead they switched to cattle or hay.

    Sadly, I don’t see an end to this. Democrats are not willing to part with the subsidies in danger of losing what little gain they have recently received in the Midwest. Republicans on the other hand, might. But they won’t until they have a lead like what they had in 2002.

  3. Thanks for the link glad you enjoyed the discussion.

    I have heard questions of the US currency before, but is the alternative we want colonial US where each state has their own currency? If you don’t like the US currency you can put your money in Pounds, Euro, or Yen. There is a great benefit to using one currency, I know what money is suppose to look like, it is hard to counterfit.

    I would be curious to hear why and how the US should have competition with the $.

  4. all my friends love thomas jenning!

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