In the News
Feb 14, 2008
Remember a few years ago when the price of oil began to rise in a serious way? Fed Chairman Greenspan declared it to be "inflationary" and began to raise interest rates to combat it. I guess it takes a genius to figure out that if the cost of business goes up, then the Fed should make their loans cost more, too!
That's a solution?
When overhead costs go up, due to the rise in the price of oil, then of necessity prices must rise. Otherwise the business can't make it and goes belly up. But the rise in prices is not attributable to "inflation" unless you define inflation narrowly in terms of a simple rise in prices, regardless of the reason.
There's a wheat shortage happening right now, too, because so many farmers are switching to corn in order to sell corn to the new ethanol plants springing up. A Minnesota farmer friend tells me that wheat prices are up to about three times what they used to be. Is that a sign of inflation? Not really. It's a sign of a wheat shortage, compared to the demand for wheat on the world markets. Should the Fed raise interest rates to counter the wheat shortage? That's ridiculous. But it is the same with oil.
Not being an economist, I am greatly disadvantaged, because I am not educated enough to see how a rise in interest rates would actually lower the inflation rate. Unless, of course, such a policy would simply drive more companies out of business, and there would then be less demand for heating oil. Is that the rationale?
When I saw Greenspan implement this policy some time ago, I knew then that we were heading for a self-induced recession. I even begged the Lord to let me sell my house, knowing that housing prices would soon plummet. But the Father in His wisdom would not let me sell the house, so that I would participate in the housing crisis along with everyone else. So as ex-President Clinton would say, "I feel your pain."
I was, however, able to get refinanced with a fixed mortgage at a good rate, so perhaps I don't feel ALL of your aches and pains.
The great political solution to the current recession is to tell the Fed to create more money out of nothing, lend it to the government at interest, so that they can send it to every taxpayer in the country, hoping they will use it to buy more stuff that people would not otherwise purchase. Excuse me, but one of the big reasons for "inflation" is the drop in the value of the dollar. Every drop in its value makes the cost of imports higher, because they have to be paid for with foreign currencies that have higher and higher values compared to the lowering dollar.
The drop in the value of the dollar is primarily due to the fact that we are creating too many dollars to pay for wars, social projects, and other things. Every dollar that is created is borrowed into circulation. It does not represent wealth. It represents debt. That is why they are called "notes." This is an economic term that means "debt note." Take another look at the top side of your currency. It reads "Federal Reserve Note." These notes used to read that they were redeemable in lawful money until they decided to remove that statement. After all, lawful money is defined in the Constitution in terms of silver. A dollar is one ounce of silver. But it now takes over 17 Fed dollars to buy a real dollar.
That is the underlying cause of "inflation." It is not a rise in prices. It is a drop in the value of the dollar. It takes more Fed dollars to buy goods and services than it used to. The only thing that potentially might prop up the value of the Fed dollar is if there is an increased demand for it world wide. In other words, if China, Japan, or others buy more and more US bonds (i.e., more of our debt).
That, however, began to change last September. When bonds come due these days, those countries are more reluctant to roll them over into more bonds. They are purchasing less of them today, but we are still creating more of them to sell. Hence, we have a glut, an overstock of dollar-debts to sell, and with the subprime mortgage meltdown, other countries are skittish about buying more of our debts.
So the political solution pushed by our president is to create more dollars to send to the taxpayers in America. Is that really the solution? Well, no one wants to turn down free money. It's good for the individual, at least in the short term. But long term, it only adds to the original problem that is not being addressed. Nor can it be addressed in an election year.
If I may show my ignorance of economics, let me propose a theory for the experts to ponder. It has occurred to me that perhaps these financial wizards at the Fed and the Treasury Department really do know what they are doing. Perhaps they are deliberately destroying the dollar, while crying the blues in public. Why would this be? Perhaps they are looking for an excuse to get rid of the dollar in favor of the AMERO, the new North American Union dollar that is being developed for Mexico, Canada, and the USA
This new currency is comparable to the euro that is replacing the national currencies of the European nations. The North American Union is the natural outgrowth of NAFTA, the free trade agreement.
For further information, see the CNN news comment on the Amero that was mentioned on Nov. 27, 2006:
Or read an article at:
"[Robert] Pastor’s 2001 book “Toward a North American Community” called for the creation of a North American Union that would perfect the defects Pastor believes limit the progress of the European Union. Much of Pastor’s thinking appears aimed at limiting the power and sovereignty of the United States as we enter this new super-regional entity. Pastor has also called for the creation of a new currency which he has coined the “Amero,” a currency that is proposed to replace the U.S. dollar, the Canadian dollar, and the Mexican peso.
"If President Bush had run openly in 2004 on the proposition that a prime objective of his second term was to form the North American Union and to supplant the dollar with the “Amero,” we doubt very much that President Bush would have carried Ohio, let alone half of the Red State majority he needed to win re-election. Pursuing any plan that would legalize the conservatively estimated 12 million illegal aliens now in the United States could well spell election disaster for the Republican Party in 2006, especially for the House of Representative where every seat is up for grabs."
COMMENT: It has long been understood that if government officials can cause a problem secretly, they can convince the unsuspecting public to demand the "solution" presented to them by the very people who caused the problem. I wonder if perhaps this present recession and currency collapse is not actually something that was deliberately engineered.
It would certainly explain how economic experts could fail to see how raising interest rates is NOT a proper way to fight "inflation" caused by a rise in oil prices. I saw this recession coming two years ago. Surely the experts knew it would come as well. They either knew ahead of time, or they were pretty stupid.