Inflation is basically defined as the general rise in the level of prices of goods and services in an economy over a period of time. When prices rise, each unit of currency buys fewer goods and services. Then, the purchasing power of the currency drops and it takes more units of currency to buy the same amount of goods and services as it use to buy. If only our story ended with a warning of “Inflation Ahead”…but it doesn’t.
High rates of inflation are caused by the rapid increase in money supply (paper) and slowdown in the economy, which is usually caused by a decline in employment. Loss of jobs causes consumers to buy fewer goods. When the world currencies were backed by gold, the paper had value. Since 1944, when the US Federal Reserve notes stopped being backed by gold, the currency became less valuable. Hyperinflation is basically caused by an excessive growth of the money supply. The consensus view is that a long sustained period of inflation is caused by the money supply growing faster than the rate of economic growth. This is the state of the US economy today. Hyperinflation can be seen clearly today by the rising cost of food. Eric Harding, in his news story, US Food Inflation Spiraling Out of Control, reports the following: “The Bureau of Labor Statistics (BLS) released their Producer Price Index (PPI) report today, April 23, 2010, for March, 2010 and the latest numbers are shocking. Food prices for the month rose by 2.4%, its sixth consecutive monthly increase and the largest jump in over 26 years. NIA believes that a major breakout in food inflation could be imminent, similar to what is currently being experienced in India.” Harding attributes his report to the National Inflation Association. Here are some of the prices they reported for March, 2010, as increases on a year-over-year basis: fresh and dry vegetables are up 56%, fresh fruits and melons are up 28.8%, fresh use eggs are up 33.6%, beef and veal are up 10.7%, and dairy products are up 9.7%. Why are the prices of these items rising so quickly? They all involve manual labor to produce them. Labor costs are rising, and the value of currency is dropping. Basically, unemployment is very high, the US debt is at its all time high, and the only solution the government has is to print more paper or let the stock market crash and usher in the Greater Depression, which most economic realists believe will become the great equalizer. Those who have prepared will prosper. Those who have not prepared will suffer untold misery like the last depression. America is headed towards hyperinflation because government spending is out of control. If a household spent more money than it earned and ran a bootleg printing press, they’d be arrested. If our government does not get the budget balanced, the U.S. could very well suffer a severe depression or, worse yet, become a nation enslaved to its debtors. Ordinary citizens need the simple facts. The solution: buy gold and silver because they have intrinsic value. Throughout time gold and silver have been valuable. Knowledge of our economic and monetary system is one thing that will determine who are the winners and who are the losers as the economy further declines. There is a scripture in the Bible that says, A feast is made for laughter, and wine maketh merry; but money answereth all things (Ecclesiastes 10:19). In other words, if you have money you will have food, clothes, shelter. If you do not have money, you will be dependent on the government or relatives or friends. Simply stated for today’s world, government handouts and worthless currency causes hyperinflation.