Inflation is a dangerous threat facing our society, and it comes in many ways, not just from monetary policy. Many companies will be inflating their costs due to new federal safety regulations that will be enacted this year. This will be done by forcing companies to institute costly record-keeping procedures and tougher pollution regulations. These regulations will require companies to replace four-to-six-year-old trucks with units that will cost 10 percent to 15 percent more—a cost that will ultimately be passed onto the consumer.
Another reason inflation will soon come to America is due to employer health care costs. This will happen because Obamacare now requires employers to cover dependents until the age of 26 and eliminates lifetime caps on reimbursement. This will drive insurance premiums through the roof. Medical malpractice insurance costs for doctors will also escalate. This is yet another cost which will ultimately be passed on to the consumer. An excise tax on defibrillators and other medical devices will add 2 billion dollars per year on health care expenses.
Inflation will occur because overall regulatory costs in all businesses are starting to rise, due to increased federal regulations, as well as new regulations that come from the financial reform bill. This financial reform will give the Federal Reserve power to take over any bank they deem “too big to fail." Indeed, the same Federal Reserve that printed new money which devalued the savings of Americans so they can give that newly-printed money to foreign banks.
The biggest reason inflation will be coming to America, is that quantitative easing will continue. The Fed is continually buying U.S. Treasury debt by printing more money to finance trillion dollar deficits. They will continually be financed by the Federal Reserve’s printing press due to the lack of demand for these treasuries in the market place. Inflation is simply a hidden tax. Politicians, in fact, love inflation, because it allows them to overspend, run up large deficits and accumulate debt that will be repaid with devalued currency. Inflation penalizes the working poor and middle class the most, due to the fact that their incomes never rise as rapidly as the prices on consumer goods. At the same time, inflation pushes all of us into higher tax brackets, raises the tax revenue on gasoline, excise-taxed expenditures and allows local governments to collect more money on real-estate taxes.
The Consumer Price Index (CPI) is inaccurate. The first reason the CPI numbers are cooked, is due to the fact that most health care costs do not show up in the CPI index, because the CPI ignores employer health care expense. Next, the CPI does not include food and energy costs. The CPI also allows the substituting of cheaper low quality made products in place of regular products. The CPI index is computed in a manner to ensure that the Treasury Department will not have to pay out more money in TIPS (Treasury Inflation Protected Securities).
Another reason Inflation is inevitable is because of our national debt and interest rates. Low interest rates, as well as government policy, make loans more readily available for everyone to acquire. Due to this easy money, as well as this easy lending economic climate, people who would not normally take out loans due to the interest they would have to pay back, now start entering into the borrowing market, because of the lack of interest they will have to pay back. As a result, this creates poor investment loans, which always results in a bursting bubble. But this time, it can be the currency that bursts, and not technology stocks or houses. The national debt will explode because the style of accounting the federal government uses to showcase its balance sheet is fraudulent. Trillions of dollars in unfunded liabilities in Social Security and Medicare are not even on the balance sheet.
Currently, interest rates are at an all-time low; they are bound to go up. And when interest rates do rise, the amount of interest we will have to pay on the debt will skyrocket. We might not even be able to pay off the interest of our gross national debt, much less the principle amount.
Moreover, Fannie Mae and Freddie Mac have a combined 6 trillion dollars worth of debt. Their debt is backed by the U.S. government; if Fannie Mae and Freddie Mac default on their debt, our national debt can balloon overnight from over 13 trillion dollars to 19 trillion. The government only has two options: default on the debt that we owe to countries like China and Japan, making them angry, or inflate our way out of debt, making our debt easier and cheaper to finance from foreign government and banks.
In addition, China, Russia and other emerging markets are pushing to oust the dollar as the world's reserve currency. If this movement gains momentum, the stock piles of dollars being held overseas, as well as U.S. treasuries, will be dumped out of the foreign banks and government holdings and will be sent back to the United States. If, or when this happens, millions of dollars will then be put back into our monetary system and cause a massive expansion in our money supply.
Obama's policies have all but ensured that we will soon likely uncontrollable inflation. Therefore, buying some gold, silver or other precious metals, may be a good way for Americans to protect their savings from the Federal Reserve and Washington’s relentless assault on the nation's wealth and prosperity.
-John Manfreda is a writer living in Bethesda, Maryland.
