Inflation Portent

According to this article at CNSNEWS.COM "the Fed has surpassed mainland China as the top owner of publicly traded U.S. Treasury securities." There can be no doubt that the Fed is monetizing U.S. debt, which can mean only one thing: our government has decided -- as all governments eventually and inevitably decide -- that the easiest way out of the hole it has dug itself is not spending reductions or tax increases but money printing. Inflation is the means most preferred by politicos because inflation allows them to repay debt with devalued money. Inflation is their silent partner who, at least in their mind, allows them to have their cake and eat it too.

The game they are playing reminds me of house-flipping during the housing bubble. The money is easy and plentiful so long as you are not the unlucky player left holding the bag when the bubble bursts. The problem is the bubble they are fooling with is the money supply. The fools do not appreciate the critical role money plays in our modern, division-of-labor economy. For the most part, modern human beings dwell in huge cities. The lifeline for these human beings is money, money they either earn by barter or obtain by government gifts, grants or subsidies. As the value of money declines, the stuff men need to live increases in price. Foodstuffs become dear.

This difference between the United States in 1929 and the United States in 2011 is the number of Americans who are self-sufficient, who have talents and skills suited to barter for stuff men need to live. In the time of the Great Depression a vast majority of the country was rural. People were accustomed to being largely self-sufficient. Moreover, people then were producers first and consumers second. Nowadays people do not produce what is needed to live. They produce -- at least those few who actually produce -- what is needed to play, to entertain, to amuse, to gratify. For years and years after the War Americans have increasingly lived primarily as consumers. This trend must and will take its toll.