Tuesday, June 02, 2009

The 800 Billion Pound Elephant in the Room

There's a hidden tax you've been paying. Barack and his cronies will go on CNN and claim that they've lowered taxes for most Americans. And technically they're correct. But you're still paying for all this government spending, just in a roundabout way.

You feel it at the gas station. Gasoline prices have soared in 2008. Why? Because oil prices have soared.

But why have oil prices soared? Demand is stable. Supply hasn't changed. So why is the price going up?


Oil is traded in dollars. Everyone in the world buys and sells oil with dollars. And the value of the dollar has steadily decreased the past few months, as more and more dollars are printed by the US government in an effort to pay for all the spending.

So for other countries, buying oil costs about the same in their own currency, as they get more dollars for their Pounds, Euros, Yen, and Yuan.

This is a bit simplistic: $1 is worth a percentage of the US economy. It's almost like a share of stock. So the more dollars out there, the smaller percentage each one represents, and the less it's worth. Furthermore, the US economy has shrunk at a pretty steady clip, and will likely continue to shrink slowly but surely.

Demand for US dollars is going down. Supply of them is going up. So the $500 in my bank account today will be able to buy $499.999999 worth of stuff tomorrow. It's slow, but it can get faster. In Zimbabwe, their hyperinflation reached an annual rate of 231 million percent.

CNBC correspondent Rick Santelli concocted a great metaphor for inflation. I semi-quote: "If I stick a hose into your basement window and turn it on, and you sit in your living room, just because you don't feel the water yet, doesn't mean your house isn't flooding."

Inflation is the worst thing in the world. And this unrestrained spendfest is a potential cause of inflation. Inflation can cripple an economy, and tends to lead to civil unrest and even revolution (See: Germany, 1920s and 30s).

Now every time the subject is broached to one of Barack's talking heads, or the man himself, the first part of their answer is invariably "We inherited this problem."

Whoever is elected President or F├╝hrer in 2016 should learn from Barack. Not learn about his economic policies, or his defense policies. But he should learn how to start every answer with "We inherited so many problems from the previous regime." Because it will be the truth.

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