Where Is All The Inflation?

By Dan Rubock: One of the most popular questions we receive at our website goes something like this: 'Hey I watched your videos and I get most of it - but if we are printing so much currency why aren't prices rising rapidly?'. It's a great question that we've covered many times before - but it's time for another refresher. Anyone who has watched the first episode of Hidden Secrets Of Money will be familiar with Michael Maloney's hockey stick charts of global currency creation. For those who haven't seen the video, the charts depict the epic levels of lunacy that governments around the world have resorted to in an effort to keep relative currency values in check. 

 

So let's step back a moment. Just why has the whole world joined the party when it comes to these obscene levels of currency creation? 

Here's the nutshell version:

The U.S. Dollar is the world's reserve currency. When the U.S. decides to print currency… the rest of the world has to follow. If they don't, the value of their own currency strengthens in relation to the U.S. dollar - and their export trade suffers. They are stuck in a trap, often referred to as the Race To Debase. This is why markets and currencies around the world shiver and quake every time Federal Reserve Chairman Ben Bernanke opens his mouth. When the U.S. prints, the world prints. And as Michael Maloney also likes to say, 'When the U.S. Dollar catches a cold, the rest of the world gets sick'.

 

Following on from last week's refresher, we understand that newly created currency has to find a home, and eventually returns to haunt a society in the form of price inflation. So back to the question - why aren't prices shooting up like a skyrocket? Where are the wheelbarrows of cash required to buy a loaf of bread? Why isn't gasoline $10 a gallon? 

 

There are just two aspects to understand here. Firstly, a vast proportion of this new currency is still sitting on bank balance sheets. It has been created in a smoke and mirrors attempt to make huge banking institutions look solvent. Remember the bailouts? Here's the interesting part - that currency is available to be used as collateral for high stakes gambling in the markets - by the very same banking institutions who proved that they couldn't be trusted to run a lemonade stand in the first place! Isn't that how we got in this mess? 

 

So now we know where a large proportion of the recently created currency has found a temporary home - the markets. As Michael Maloney said in his most recent video presentation 'Silver & Gold - The Big Picture': "The stock market is up - but it only took 2.2 trillion dollars to get it there!" 

 

 

You may notice that I said temporary home. Why? Because without sound money and a level playing field the markets (and currencies themselves) are nothing more than a confidence game. Now get this - more than half of all U.S. dollars reside outside the United States. For the last four decades, the United States has had the privilege of having no restriction on the amount of dollars it creates. A monumental amount of dollars have been whipped up and sent overseas, and returned in the form of goods and services from foreign countries. Think about that for a second, that’s quite a deal for the United States of America.  

 

But you can’t do a good deal with a bad partner, it just won’t last. 

 

What will happen when the majority of the world starts to realize that the emperor has no clothes and conclude that the trust they placed in a stable U.S. dollar has been abused beyond salvation? Unless you’ve been living under a rock for the past three years, you’d know that this is already happening. We are starting to see more and more countries opting out of using the U.S. dollar in trade, and striking up bilateral trade agreements using their own currencies. Foreign central banks are also in a mad rush to increase their gold reserves. In other words, the world is starting to lose confidence in the U.S. dollar as the world's reserve currency. Faith is eroding. 

 

So finally, in answer to the question 'Where is all the inflation?', I will now direct you to one of the most important sections of Episode 1 of ‘Hidden Secrets Of Money’. It's a short two minute segment near the end featuring none other than G. Edward Griffin. In this clip that that is so vital to understanding our global predicament, Mr. Griffin eloquently explains the thought process he went through when asking himself 'Where is all the inflation?' I'll give you a hint before you click the play button: If those dollars are pigeons - they are coming home to roost. 

 

I'd like to add that interviewing Mr. Griffin for Hidden Secrets Of Money was an absolute delight, and that viewers can look forward to more guests in Episode 2 which is set for release in August. 

 

As the series unfolds, we aim to completely demystify the mumbo jumbo of modern finance, and deliver the evidence that will help to send Keynesian economics where it belongs…to the dustbin of history.

 

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