To the editor:
In response to international student Byoungho Jang’s comments about inflation in the Oct. 23 edition of The Call, there will always be price fluctuations due to changes in supply and demand, but ongoing inflation isn’t a case of merchandise being more valuable or scarce. It’s because the value of our money is decreasing. The dollar is being devalued by an economic partnership between the federal government and the Federal Reserve Bank.
Here’s how it happens. The federal government fails to balance its budget and creates a deficit. It then sells bonds to finance the deficit. If the bond auction fails to attract buyers, the Federal Reserve Bank steps in and “prints” new money to buy the unwanted bonds. This new money floods the market, making the existing money less valuable — its value is diluted. It costs virtually nothing for the Federal Reserve to create paper (or electronic) money, but it costs the people a lot in lost purchasing power. You can somewhat track the money printing with the Fed’s M2 money supply data.
This deficit spending and resulting dollar devaluation cycle might seem unethical and immoral, but politicians of both parties have no problem with it. Almost 250 years ago, the authors of our Constitution foresaw this and required government money to be gold or silver to prevent the use of easily made paper money and the resulting easily inflated money supply. Unfortunately, politicians have priorities and the well-being of the people and protecting the value of their labor is nowhere near the top of their list. The politicians somehow got away with changing from a value-based currency to a debt-based paper currency. My opinion is that the politicians should be personally responsible for funding any deficit spending out of their own pockets. They shouldn’t have the right to put the people, or even worse, our children and grandchildren, in debt.
The bottom line is that inflation goes hand in hand with deficit spending. Don’t expect it to stop anytime soon.
Jack Bruns
Crestwood
