Does anybody besides Federal Reserve Board Chairman Ben Bernanke really believe the U.S. economy is not suffering from increasingly serious inflation?
Bernanke — like the rest of us — has seen soaring prices for precious metals, base metals, gasoline, diesel fuel, crude oil, and corn, wheat and other foodstuffs. He has seen big increases in the nation’s producer price index and a record high in the United Nations food price index, up about 25 percent in the past year.
And through it all, he has played down the dangers of inflation.
I wonder what he’s thinking now that even the cost to produce money has soared. By money, I mean the kind we can hold in our hands and slip into and out of our wallets and purses. The kind that really is printed, not the magical money that exists only as a series of zeroes after whatever digits Bernanke puts into a computer for whichever banks he smiles on at the moment.
No, I mean real money. Well, as real as money can be when it’s backed by nothing but government promises.
Some economists have watched with a mix of horror and bemusement at the trillions of dollars the Federal Reserve has created since 2008. They have warned that the flood of money would eventually cause the price of goods and services to climb.
They have warned, in other words, that the value of the dollar would fall, forcing people to spend more dollars to buy the same amount of goods and services.
How richly ironic, then, that the government has announced the cost to print dollar bills has climbed more than 50 percent since 2008. The reason? Dollar bills contain cotton fiber, and prices for cotton have soared along with the prices of so many other items.
Now that it takes more dollars for the government to print more dollars, do Bernanke and other government leaders finally see the inflation they’ve caused?
Economist Mark Thornton of the Mises Institute sees it. Here’s what he recently wrote in FIRE (Finance, Insurance and Real Estate) Policy News, a publication I edit:
"The Fed has the power of the printing press, which means it can buy assets simply by changing a bank’s account using electronic entries. Money created out of thin air eventually works its way into the economy, and we have ‘too much money chasing too few goods.’ The result is higher prices for you and me."
And, apparently, higher prices for our printers of paper money.
The U.S. Bureau of Printing and Engraving recently reported it produced 6.4 billion new currency notes last year at a cost of 9.6 cents each for paper and printing. The bureau noted it cost 6.4 cents a note in 2008, barely changed from the cost in 2007.
Our national government has gone to great lengths to deceive us over the years. It’s changed the way it measures inflation, taking out items such as food and energy costs to focus on "core inflation," which usually makes inflation look lower than it really is. It has changed the way it counts the unemployed to make unemployment look lower than it really is.
We have come to expect government officials to deceive us. But how much more evidence do they need before they stop deceiving themselves?
Steve Stanek is a research fellow for The Heartland Institute and managing editor of FIRE Policy News.