Short
term inflation is irrelevant. The long term pattern is easy to see for a
Vietnam Era vet like me. When I was a kid, candy bars cost a nickel,
silver was $1.25 an ounce and gold was $35 an ounce. I grew up in
Missoula, Montana, where I got my allowance as a single Morgan silver dollar
coin every week.
I
haven't bought a candy bar lately, but the last time I did it was $1.25.
Silver is $15.96 an ounce today and gold is $1,323. A 1921 Morgan
silver dollar coin is worth about $27.
The
traditional solution for bankrupt governments is to debase the money.
Henry VIII had trouble paying for his 6 wives, so he minted primitive
sandwich coins with copper centers and silver overlay. Because of where
the silver wore off on the coin, he was known as "Old Coppernose."
In modern US terms, we electronically print
more money. Calling it quantitative easing doesn't change what's going on. The
ultimate result is convenient only in the very short term. Longer term, it
wrecks the economy and creates political instability. Hitler would have been
trapped in beer halls if it hadn't been for the instability of runaway
inflation.
The US has been inflating the dollar for years. After the Obama spending binge, I think we can expect more of the same. The only question is the timing.
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