Oil and Cotton and Wheat, Oh My!
by Mark Luedtke
What do oil, cotton and wheat have in common? They’ve all nearly doubled in price in the last year. Worse, all commodities have dramatically increased in price recently. Gold and silver have skyrocketed. Stocks have dramatically increased in price. Groceries are more expensive, but that’s harder to see because manufacturers hide price increases by reducing the size of many products. We’re not just suffering from high gas prices. We’re suffering from rapid, general price inflation.
This is a direct result of monetary inflation by the Federal Reserve (the Fed). Not many people know what the Fed does. It’s the government’s most secret organization -more secret even than the CIA. It was created nearly a century ago as a tool for bankers and politicians to invisibly steal money from the people. It does this by counterfeiting money and giving it to the biggest banks and to the government. It invisibly transfers wealth from Main Street to Wall Street and Washington. It does its job so well that Congress has provided zero oversight since it was created.
Imagine if you could counterfeit a perfect hundred-dollar bill, impossible to detect. You could print up money and buy whatever you wanted. You could give money to your family and friends and make them rich, too. But, as you and your cronies spent your counterfeit money, there would be more dollars chasing the same amount of goods in the economy. The prices of goods and services would rise. You and your cronies would be richer, but everybody else would be poorer. Everybody would agree that you were stealing from the American people, but if you did it slowly enough, few would notice.
Now let’s imagine you put a Federal Reserve sign on the front of your counterfeiting operation. Your operation would still defraud the people. But, let’s further suppose you made a deal with Congress to buy government debt with your counterfeit money. That’s a politician’s dream. So, in return they would declare your operation legal and order all Americans to accept your counterfeit money as legal tender. It would be the perfect scam.
This isn’t a thought experiment. It’s a summary of the Fed’s creation. Ben Bernanke is the current Fed chief. He’s counterfeited an unprecedented amount of money (trillions of dollars) and that money is leaking into the economy and driving up prices. But Bernanke rejects terms like counterfeiting, inflating, debasing and defrauding. Instead, he invented the catchy term, “quantitative easing,” to fool people into thinking he’s doing something other than stealing from us.
The Fed has trapped us in an inflationary depression and the American people have yet to realize how much they’ve stolen from us. For example, economist Mark Brandly calculates that if the Fed had merely debased the dollar at the same rate the European Central Bank debased the euro over the last decade, gas prices would be $1.09 cheaper today. Economist Kevin Meaders fears current monetary inflation may push gas over $7, yet Bernanke wants to counterfeit more.
Whenever the Fed injects a bunch of “funny money” into the economy, commodity prices, including oil, rise. Presidents always blame speculators. Nixon and Bush did it. Obama is doing it. Like all big lies, this one relies on a grain of truth. Investors understand that because the Fed is printing funny money, prices will be higher in the future. They buy commodities – basic products people will always need – to protect their wealth from being stolen. That drives up commodity prices and makes those investors convenient scapegoats for the demagogues who are really stealing our wealth.
The structure of the oil market makes it a prime safe haven for protecting wealth from inflation. The growth in world demand for oil is outstripping the growth in supply. U.S. policy exacerbates this problem because government unconstitutionally forbids Americans from extracting much of the fossil fuels in the country. Obstructionists claim we can’t drill our way out of this problem because it takes time to drill. That’s a straw man argument. If the U.S. government freed Americans to drill anywhere today, investors would sell off oil because of expectations the price would fall in the future. As a result, the price of oil and gas would fall overnight. OPEC nations would increase output for the same reason, driving the price down further. As U.S. production ramped up, the price would fall even further.
To my friends on the left who think government should steal more money from us to invest in alternative energy, I’d remind them the last thing politicians and bureaucrats want is to actually develop alternative energy and lose all the money they get by pretending to support it. The best thing we can do to develop more efficient, cleaner energy is get the government out of our energy sector and out of our entire economy. The American people can invest their own money in the energy projects that will produce profits in the future far more effectively than the corrupt central planners in Washington.
But first and foremost, we should end the Fed before its counterfeiting scam produces hyper-inflation.
Mark Luedtke is an electrical engineer with a degree from the University of Cincinnati and currently works for a Dayton attorney. He can be reached at MarkLuedtke@daytoncitypaper.com