lindajoy wrote:
Yet there is no inflation, right??
I won’t draw on the food prices because of weather ...true to some degree when weather kills crops and companies increase prices but those increases one year may not be the same the next.... ~~~
Did you know there are two 'kinds' of inflation? One is a symptom of the other. As you rightly point out, there are a lot of factors that can cause prices to rise, weather and simple financial greed most certainly play their parts in the 'grand scheme of things'; those are temporary maladies easily 'fixed' in a free market. Weather 'changes' (climate 'change', anyone?) and greedy business owners are soon 'priced out' of the market by more competitive businesses.
Consider this; lets say there's a terrible drought one year and the corn crop is decimated. Because there is less corn on the market, the price is driven up (simple supply and demand, right?). Next year there is a bumper crop. Because there is an excess of corn on the market, the price falls until all the corn is cleared through the market. Just another day in the 'free market', right? But what if the price does not fall back to the previous level; what if it stays slightly higher, even though there is clearly a glut of corn on the market? Is this a sign of some other cause? Now we come to that other kind of inflation, currency inflation. The higher price (price inflation) is an effect of the central bank creating more money and releasing it onto the market, a deliberate devaluation known as currency inflation. When money is devalued, prices rise to reflect the new value. Cause = currency inflation. Effect = price inflation.
When you look at a graph of the price of literally anything over the last eighty years or so, it inevitably has risen, slowly but substantially. Take the average cost of 1lb of hamburger meat. In 1930, it was 12₵, in 2013, it was $4.68. The price of 1lb of hamburger meat went up by a whopping $4.56 in 83 years, a rate of increase of 3900%. Because it was slow and gradual, it is hardly noticed; just like the
boiling frog analogy.
Why does the central bank devalue our currency? Because government says so, and they write the laws that perpetuate the central bank monopoly. Why does government say so? Because there is no way to finance the leviathan through honest taxation. If the government sent each taxpayer a bill for his/her share of the actual expenses of government in the previous year, there would be revolution tomorrow. Instead they 'boil the frog'. Each year, the Federal government issues the Federal Reserve a series of financial bonds that the central bank uses to create money from out of thin air. It then credits the federal government with this amount and government is financed for another year. Once this money is spent into the economy, prices rise to compensate for the excess currency in circulation.
More money, higher prices. Less money, lower prices. Guess which way it's gone since 1930...