In his article Are Pessimistic Consumers’ Fears of High Inflation Exaggerated?, Daniel Gross writes:
...this alarmism over inflation on the part of consumers is nothing new, and it may not be warranted. We’ve given a lot of grief to professional forecasters, who never seem to know when a recession is about to begin or end. But when it comes to projecting inflation, the amateurs don’t do very well, either.
there are a host of individuals and companies who benefit from freaking people out about inflation — i.e. gold bugs, bond vigilantes, politicians who believe that the Fed, simply by printing more money, creates inflation.
Given that people seem to be incorporating higher inflation into their mindsets, perhaps policymakers should consider indulging them.
Last time we checked, inflation occurs when those responsible for issuing the currency, be it a Roman emperor who controlled the content of precious metals in coinage or a central bank that controls the money supply, is solely responsible for the resulting price inflation.
How else, save trillions of dollars in quantitative easing, can we explain the exorbitant price increases in commodities like food and gas over the last forty years? Yes, Mr. Gross, the Fed, simply by printing more money, does, in fact, create inflation. A third grader can understand this basic concept, that when you artificially create something, its value goes down.
The reason people “seem” to be incorporating higher inflation into their mindsets is because policymakers have already indulged them. Isn’t this exactly the current policy of the Fed?
Mr. Gross suggests that consumers are disconnected from reality because they are, on a personal level, expecting inflation of around 5.8% over the coming 12 months based on a recent survey. Clearly, Mr. Gross is himself disconnected from reality, because those consumers are already experiencing yearly price increases as of right now of over 11% – almost double what they are expecting for the coming year, and triple what the official CPI has reported.
The real data suggest everything the Federal Reserve is reporting, and mouthpieces like Mr. Gross are parroting, is nothing short of deceptive.
Well known economist and contrarian statistician John Williams, who incidentally is not an amateur, provides a concise explanation for how you’re losing purchasing power to inflation everyday.
Williams says, for example, that Social Security cost of living adjustments, if the government had utilized real data, should be double what they are today. Of course, that is simply not economically feasible for a government run retirement system that is a few years from collapsing using even manipulated data.
In an interview with Goldseek Radio, John Williams, proprietor of the popular alternative statistics web site Shadow Stats, provides those with the desire to understand the real numbers a concise explanation of how the government calculates their statistics, why the need for manipulation, and what the real data are actually saying:
You have to be careful when you are talking about inflation and deflation that you define what you’re talking about. When I talk about inflation I’m talking about the change in prices for goods and services consumed by the consumer. I’m not talking about asset inflation or deflation. When I’m arguing that we have higher consumer inflation, that’s again for goods and services. It’s not for assets and such. I can see a deflation in assets – I’d have no problem, conceptually, with a stock market crash. In fact, I think we’re probably seeing something akin to that now in slow motion over the last couple of weeks.
Our policymakers, utilizing all sorts of adjustments and machinations, are doing everything in their power to control the perceptions of the general population. If they were to come out and tell us the truth about what’s really happening to our currency you can fully expect panic buying of precious metals and hard assets would ensue. As we’ve pointed out many times before, the powers that be do not want anyone but themselves holding gold and silver assets, because then you are not beholden to their system of debt.
Make no mistake, the US Dollar is in serious trouble, but so long as people, those like the aforementioned Mr. Daniel Gross, have faith in what they’re being told by the Fed, the US government and the mainstream media, that the inflation rate is under control at 3%, there is still calm.
When the reality of what has happened becomes obvious, however, the people will go ballistic. And according to Mr. Williams, that time is coming sooner rather than later:
I’m not a day to day timer here, but I can tell you long-term that we have a catastrophe ahead for the US dollar. It will eventually become worthless in a hyperinflation, which I have written about it’s the time of thing that will break in the not to distant future. It could be another couple of years, but it’s coming. So, looking at the long haul you don’t want to be in the US dollar. Gold is a primary hedge against that, as is silver.
We’ve previously written of Mr. Williams warnings, and what we can expect in such a scenario in No Way of Avoiding Financial Armageddon:
The U.S. economic and systemic solvency crises of the last two years are just precursors to a Great Collapse: a hyperinflationary great depression. Such will reflect a complete collapse in the purchasing power of the U.S. dollar, a collapse in the normal stream of U.S. commercial and economic activity, a collapse in the U.S. financial system as we know it, and a likely realignment of the U.S. political environment. The current U.S. financial markets, financial system and economy remain highly unstable and vulnerable to unexpected shocks. The Federal Reserve is dedicated to preventing deflation, to debasing the U.S. dollar.
John Williams – December 2009
The evidence is absolutely clear. The catastrophe cannot be stopped. The implications are life changing.
Protect Yourself – Understand What’s Happening and What You Can Do: