Thursday, May 26, 2011

Inflation Coming

Bernake of the Fed tells us “the fight against deflation is succeeding”. But since when is deflation the problem? In 2008 the money supply was increased by 13%.  It takes about two years for the increase in money supply to be reflected in rising prices. And now the real inflation rate is about just that! 13%.

But the Feds are saying the “core inflation rate” is only 2 or 3%! And herein lies the fraud: the government gets to pick the items in the “core inflation rate”. They already say they are excluding food and fuel, (probably the most essential items)!  Who knows? Maybe this quarter it is the prices of grand pianos, anvils and Swiss coo coo clocks that’s being used as the “core inflation rate”!

In 2009, the money supply was increased an unprecedented 125%! It would follow that prices will go up this amount very soon! This means $8.00 per gallon gasoline, and $8.00 loaves of bread!

The usual response of government will be to scape goat someone else! During Stalin’s farm collectivization, which triggered massive food shortages, he scape goated “The Krulaks”, mythical wealthy greedy farmers in the Ukraine that were “hiding grain” to create the shortages. Stalin then sent legions of party activists to terrorize Ukrainian peasants by confiscating every scrap of food, livestock and grain supplies they could lay their hands on. As a result, 3.4 million Ukrainians were intentionally starved to death in 1933!

A scenario: as food prices soar, the President scape goats farmers and food distributors in the Midwest. He unleashes legions of “Obama self defense corps” volunteers to fan out and confiscate food in the Midwest, as Stalin’s henchmen did in 1933. Would the result be any different?  Yes: instead of 3.4 million people starving, the figure would be closer to 30 million! But who cares? Rural farmers vote Republican anyway.

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