Why prices are going up

Anybody who has gone to the grocery store or gas station lately has seen that prices are going up.  It used to cost $30 to fill your tank with gas — now it is $50.  It used to cost $100 to do a week’s worth of shopping for a family.  Now it is $150.  What has happened?  What is going on?

To answer this question correctly, we must examine first:  are all prices going up or just some?  It turns out just about everything you need is going up in price.  Check out the price of milkOr the price of wheatIn fact, all food and beverages are way up.

So, logic would dictate that if nearly all items are going up in price, something must be happening to the entire economy, not just to one sector of the economy.  Many politicians right now are blaming the price of oil on speculators.  But what about the price of milk and wheat and all foods and beverages?

No, something is happening to the entire economy, and we must find out what it is.  This graph may help.

The above graph shows two things:  the rise in commodities prices (the CRB index is an index of most commodities) and the increase in the money supply by the Federal Reserve.

The Federal Reserve is the super-secret agency that controls interest rates and the money supply.  The Fed decides on its own either to lower interest rates or increase interest rates.  Many interest rates follow Fed policy.  So, your mortgage rate may go either up or down (if you have an adjustable mortgage) based on Fed policy.

The Fed has kept interest rates near zero for the last two years, the first time in history this has happened.  This is called a “loose money” policy.  The Fed is deliberately pumping money into the economy so that people will spend money, open new businesses, etc.  But even interest rates near zero have not been enough.  The Fed has also engaged in what is called Quantitative Easing.  There have been two rounds of QE, and we are in the middle of the second round of this Quantitative Easing.

During QE, the Fed has been buying up toxic assets and using other measures to inject more money into the economy.  Normally, nobody would buy these assets — they have literally zero value.  But the Fed is buying them.  In effect, the Fed is “printing money” by giving money to big banks with the expectation that this money will flood into the economy and help stimulate the economy.

This policy is having three main effects:  1)The stock market is going up because there is so much money on Wall Street.  2)The dollar is losing its value.  3)Commodities are booming in price.

So, the reason your prices are going up at the supermarket is because of the latter two effects of the Fed’s policy, ie, a lower dollar and an increase in commodity prices.  Let’s look at why.

Remember back to Econ 101 when they discussed supply and demand? Prices and nearly everything in the economy are determined by supply and demand.  If you have a restricted supply and stable or increasing demand, prices will go up.  Think about what happened during Prohibition to the price of alcohol.  Demand for alcohol was stable but supply was restricted.  People were willing to pay more for alcohol.  Supply and demand, the price of alcohol went up.

Now think about what will happen if you increase the supply of dollars, which is what the Fed is doing.   To make this easy to understand, imagine you are in a gold rush town on the American frontier.  Before all the people came with all of their money, a pound of sugar would cost $1.  But the money supply has gone up, meaning that there are more and more people with more money bidding for that same pound of sugar.  They are willing to pay $2, $3, maybe even $5.

An increased money supply means prices will increase.  The same happens on a national scale.  You can’t blame Wal-Mart because their suppliers are also charging them more.  You can’t blame the gas station on the corner because their suppliers are charging them more.  An increased money supply means everything costs more to everybody.

Why is the Fed doing this?  Don’t those idiots in Washington know that inflation is the worst tax of all on the poor and the working man?

The Fed is doing this for three reasons:  1)we have a huge budget deficit.  The only way to finance it is for the Fed to buy our own debt because nobody else will buy it at low interest rates.   Yes, you read that correctly.  We are printing more money so that we can buy our own debt because nobody else will buy it.  Sad, isn’t it.  2)The Fed wants a low dollar to stimulate exports (if the dollar is low compared to other currencies, people will buy stuff made in the U.S.).  3)The Fed wants to stimulate economic growth and sees the stock market boom as a sign the economy is recovering.  Unfortunately, the economy is barely growing, with the latest GDP figures at less than 2 percent.

We are caught in a trap.  The Fed is like the little Dutch boy with his finger in the dike, keeping the water from destroying the town.  If the Fed stops printing money, interest rates will go up because we will need to increase the yield on our debt to get people to buy it.  Higher yields mean higher interest rates.  This will slow down the economy in the short run.

There is really one good long-term solution:  we need to balance the budget and stop printing money.   We need to raise interest rates and cause a short recession.  It is kind of like taking medicine that tastes bad to cure an illness.  If you don’t take the medicine, the illness (inflation) gets worse.  The sooner you take it, the better.

Sorry to be a pessimist, but this probably isn’t going to happen.  What is more likely to happen is that some kind of false “budget deal” will happen in Washington that will not really deal with the debt.  The Fed will have no choice but to continue to print money.  Inflation will continue and probably get worse.  A year from now, gas will be over $5 a gallon and milk and cereal and bread will be 20-30 percent more expensive.

Sorry to be the bearer of bad news, but it is our likely reality.

By the way, here is something to think about:  what is the price of gas in gold or silver?  Actually, the price of oil has gone down in those currencies.  So has the price of milk and wheat and just about everything else.  This is why so many people are buying gold and silver:  in real money (the only money that is mentioned in the Constitution), there is no inflation right now.

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About Geoff B.

Geoff B graduated from Stanford University (class of 1985) and worked in journalism for several years until about 1992, when he took up his second career in telecommunications sales. He has held many callings in the Church, but his favorite calling is father and husband. Geoff is active in martial arts and loves hiking and skiing. Geoff has five children and lives in Colorado.

38 thoughts on “Why prices are going up

  1. I’d like a few of your assertions followed up on.
    – What is the current rate of inflation
    – What is the trend of the dollar value
    – Who is saying no one wants to buy our debt? As I understand the bond market is very robust.

    I’m not saying I agree with the fed’s policies, but I think your writeup is too simplistic with a bent on demonizing the fed. Why do you not mention the increase in wealth of emerging nations? Does that not affect the demand for basic goods significantly? How many more cars are driving around China now compared to just 5 years ago?

    This push for gold backed currency is crazy. Give everyone in the world a 5$ gold piece or silver and you would run out of precious metals before leaving China.

  2. What about housing prices and prices for durable goods, consumer electronics, etc? They’re flatlining or even declining in $.

    Gold and silver aren’t mentioned in the Constitution, by the way, not exactly, and going back to gold coinage wouldn’t prevent hyperinflation in the age of electronic money.

  3. Stan,
    you’re demonizing the gold and silver stuff. Its a policy proposal that people brighter than you or I take seriously, so no need to call it ‘crazy’. It’s wrong, I think, but so is your particular objection.

  4. Stan, let’s see if you can keep your comments civil. You already have two strikes on this site.

    Regarding total inflation, here is the CPI.

    .5 percent increase in March, which would be a 6 percent increase on a yearly basis. Worst in years.

    http://www.bls.gov/news.release/cpi.nr0.htm

    Stan, you need to do some homework on bonds. Pimco, the largest bond trader, said it wouldn’t buy any more U.S. debt. The Chinese have stopped buying our debt. The Fed buys 70 percent of our debt right now. Google is your friend.

    Adam, the lower value of electronics and housing are the only things keeping the CPI from going through the roof. As you probably know, the poorer you are the worse off you are in an inflationary environment. Inflation is the worst possible tax on the poor.

    NOTE TO THE HUMORLESS AND THOSE WITHOUT IMAGINATION. THE CONSTITUTION DOES INDEED MENTION GOLD AND SILVER. THE US IS NOT GOING TO MOVE TO A GOLD STANDARD ANYTIME SOON. MY ONLY POINT IS THAT THERE IS NO INFLATION IN GOLD AND SILVER AT THIS PARTICULAR TIME. IT IS SIMPLY AN OBSERVATION. PUT DOWN THOSE KNIVES. THANK YOU.

    You may or may not know that the govt changed the way it calculates inflation a few years back. When you calculate inflation the old way (which would be comparable to the 1970s, for example), our actual inflation rate is closer to 10 percent.

    http://www.shadowstats.com/alternate_data/inflation-charts

    The US dollar is the lowest it has been in years at 73 vs. a basket of currencies:

    http://www.fxstreet.com/rates-charts/usdollar-index/

  5. Couple things. 1st, the Fed isn’t an agency. It’s a privately held bank. “We” aren’t buying our own debt. The Fed is buying US debt. This is just one way that the Fed pumps money into the economy. The other is buy loaning money to banks. Money that didn’t really exist in the first place. Either way they are printing new money. They aren’t doing it to help the US, they are doing it to protect themselves. 2nd, you are definitely right about us needing to take our medicine and suffer a short recession rather than suffer a huge depression in the future. Take the GM bailout for example. Had it not been bailed out it would have had to file for bankruptcy. Other auto makers would have come in and snatched up the pieces. GM would have been turned around and become profitable by the new owners. And those auto workers, they would all still have jobs in a profitable company. Instead the taxpayers are stuck holding the bag and GM is still sitting there, not doing well and paying huge salaries to undeserving execs and under-worked unions.

  6. Adam G, the main reason electronic prices are stable or falling is because production technology keeps improving. Housing prices aren’t rising because we have a considerable oversupply of housing from the recent housing bubble, and banks won’t lend to anybody with little more than a pulse any more.

    Monetary inflation tends to affect commodities and anything with a strong international market first. Primarily because the market for materials is far more liquid than for services. Wages are sticky, commodity prices are not.

    If monetary inflation continues, everyone in the United States who can will start demanding extra wage increases to compensate, and we will set on an inflationary spiral similar to the one in the 1970s.

    If all prices automatically adjusted when the Fed printed excessive amounts of money, there would be no effect at all, other than to water down the value of savings, bonds, and other dollar denominated assets. Everything would just cost X times as much as before.

    Unfortunately, money is not neutral. The people in a position to borrow get to spend the new dollars first, before everyone else has had a chance to adjust their prices to compensate. In other words, new borrowers get a government subsidy, the bigger borrower the better.

    Ultimately monetary inflation is the Fed’s attempt to heal the economy by subsidizing the activities of Wall Street hedge funds, and hope that the rest of us don’t wise up too fast, so that the hedge funds can pay with the newly counterfeited currency at the old lower prices instead of new higher ones.

    Even if prices (including wages) react instantaneously though, monetary inflation acts like a rolling Chapter 11 program for all borrowers (heavily leveraged ones in particular). The Fed, instead of a federal judge, just writes down the real value of all debts by whatever percentage they think is appropriate.

  7. Geoff B. —

    One piece that is missing in this analysis is that commodity prices are soaring worldwide — not just in the U.S.

    Thus, the price burst has causes beyond the U.S., in particular, the rise of the middle class in China, India and other 3rd World countries and their increasing demand for meat, other foodstuffs, etc.

    I do agree that the Federal Reserve’s efforts do have the potential to create domestic inflation. But, the current economic softness minimizes that risk.

    The really critical issues in our economy are boosting economic growth and putting our fiscal house back in order.

  8. Geoff B,

    Do you have a copy of that graph that extends out over say ten years? I’d like to see if the correlation extends back prior to 2008.

    My understanding is that prior to the ’08 collapse prices for oil and commodities were going up as well, due to the global economic boom and rising standards of living in India and China. Now that the global economy is picking back up the same factors are at play.

    Long term the price of oil is only going to go up. It takes oil to grow food, the price of food is going to go up as well.

  9. ArJ, the price of oil is actually pretty low if you adjust for inflation, and especially if you compare it to other commodities. We just keep on finding new oil deposits, despite the best efforts of environmentalists.

    The boom and bust cycle caused by the Fed has taken place in the past, certainly in the 1970s and during the housing bubble.

    Steve, your point about worldwide commodity prices is exactly correct. But what is the reserve currency? Do you think that trillions of dollars of new money is not going to have a worldwide effect? The Fed’s printing is also causing inflation in China, precisely because China gets paid in dollars. The same applies worldwide.

  10. Absolutely disagree. High gas prices have a trickle down effect. High gas prices mean people start to cut down on luxuries. Less smovies, less retaurants. Companies start to lay off people because people just aen’t coming out to spend money. Airliness have to charge less because people are starting to cancel bookings. Look at grocery stores. If no one buys the high priced food, the price is lowered. They have no choice. Oil comes down and with that prices.

  11. Re: what Geoff said about the change in “inflation accounting.” The metric has been changed to include the increased value of goods at the same (or slightly higher) price. So if you buy something that is twice as good but only costs 10% more, it’s actually deflation. Because this assumes productivity or R&D etc. has increased to offset that increase in price. You’re getting more bang for your buck to to speak.

    It is very unfortunate this is factored in because no major brand continues producing old technology for a rock-bottom price simply because the new version has come out. So while you’re iphone4 has great features, etc. etc. you can’t exactly walk into the shop and buy an original iphone new in the box for $25. Consumers don’t really benefit, they just have to pay the same or more to get supposedly a ton more features. Now, don’t get me wrong, I’m not saying there should be a law against feature/price creep.

    But the fact is, take wireless routers for instance. They used to cost 60-80 bucks (approx.). Now routers cost… 60-80 bucks. But it’s wireless N this time instead of G or B… Of course you can find some knock-off budget brands, and that’s good. But generally the big brands that the majority of people buy (and the majority of resellers sell) are the same/higher price versions with more features (that most people don’t need but pay for). Again, not railing against capitalism, but just including this aspect of it into the inflation metric.

  12. I want to bring up the alternate way of measuring inflation again. This is a crucial point. Please look at this chart:

    http://www.shadowstats.com/alternate_data/inflation-charts

    The reason you are feeling that the same amount of dollars buys less stuff right now is because there really is inflation. The above chart shows it.

    It is true that if the price of oil goes up a lot of other things go up. Farmers use oil for fertilizer products and to power their tractors. But you need to ask: 1)what is causing the increase in the price of oil and 2)what is causing the increase in the price of other stuff?

    The single greatest factor in the increase in the price of oil is the decrease in the value of the dollar. Oil is paid for in the US in dollars. The dollar is at a low point. If the dollar were worth 20 percent more (more or less where it should be), the price of oil would be 20 percent less. The second factor is the overall increase in the money supply, which is causing more money to chase the same amount of goods. This is called “monetary inflation.” Other factors such as the Libya invasion have an effect but a relatively small one. Other countries can easily make up the different in the disruption of Libya supplies.

    I want to repeat this point because it is important to understand the way inflation really works: if you used gold to buy oil, there would be real deflation in the price of oil. Oil would be at near-record lows. This means two things: there are no real problems with supply and the source of inflation is not due to oil, it must be due to something else.

    Let me try to explain this a different way. Commodities have value based on supply and demand. The gold supply is relatively stable. If there were a huge disruption in the supply of oil on the worldwide markets, then the price of oil would surge against the value of gold. The price of oil would be very, very high compared to the price of gold. But in face, oil is actually cheap in historic terms compared to the price of gold. So, the problem cannot be a lack of supply or speculation — the problem must be something else, ie monetary inflation.

    Jon Miranda, you may want to read this:

    http://inflationdata.com/Inflation/Inflation_Articles/Oil_and_Price_Inflation.asp

  13. “The dollar is at a low point. If the dollar were worth 20 percent more (more or less where it should be), the price of oil would be 20 percent less.”

    This seems to be more correlation than causation.

    In 2008, oil prices shot up 85% while the dollar only decreased 10%. It doesn’t seem to add up.

  14. Tim J, I don’t think Geoff is making the claim that the dollar is the only cause of rising oil prices. Certainly such things as unrest in the Middle East have something to do with it.

    The claim is that the price of oil as measured against a broad based currency index is a better metric of the real price of oil than the price of oil measured against a single inflating currency.

  15. Adam, the lower value of electronics and housing are the only things keeping the CPI from going through the roof.

    Yes. The point is, if some prices are going up big while others aren’t, how do we know which set of prices really reflects the state of our money and which set of prices are due to confounding factors? I know some Austrians who argue that we are a in a deflationary mode right now because of the collapse of credit and that rising commodity prices are due to other factors.

    More and more, I’m moving to the position that in economics no one knows anything.

    THE CONSTITUTION DOES INDEED MENTION GOLD AND SILVER.

    Hmm, turns out you’re right. Section 10 – No State shall . . . make any Thing but gold and silver Coin a Tender in Payment of debt. That actually tends to mildly suggest that Congress *can* make paper money legal tender.

  16. Tim J, that is partly my point. There was a one-time and relatively short rush to oil in 2008 caused by the financial crisis. During the 1970s, there were also other oil spikes caused by other factors, including supply problems. It is true that oil can be extremely volatile. But is is worth pointing out that during those spikes oil was also expensive relative to gold. Now, it is not.

    My point is that oil is not the only factor causing inflation. Even Labor department stats, which exclude oil, show 6 percent inflation on an annualized basis. The primary source of our inflation right now is monetary policy.

  17. Adam G, it is worth pointing out that it was the Austrians who correctly predicted the high tech bubble of 2000 and the housing bust of 2006-2007. They put their money where their mouths were and made billions by shorting at the right time and investing in gold and silver. They have been warning about Fed policy for the last two years, and they correctly predicted a further increase in gold and silver and inflation.

    You can search a bit on Peter Schiff, who is probably the most prominent Austrian investment adviser.

    So, some economists do know some things. Btw, they are predicting gold and silver will continue to increase and inflation is pretty much inevitable unless Congress immediately balances the budget. I think they are correct.

  18. Adam G, regarding money and the Constitution, please note that the widespread interpretation of that until Bretton Woods and Nixon was that paper money could be issued but it must be backed by gold and silver. You could issue a $100 bill, but it had to be worth three ounces of gold (more or less).

    This does not mean you had to carry around coins — it means that the dollar had real value backed by a real commodity.

    The Austrians blame the delinking of gold for our current woes. They have a point. Our real debt problems did not start until we completely rejected the gold standard.

    The Austrian solution is to do exactly what Utah did, ie, to make gold and silver competing currencies to the dollar. Many more states are likely to do this. Again, this only makes gold and silver legal currencies, it does not mean people will be carrying around coins (although some people could). It will be extremely interesting to see how this all unfolds. As I say above, we are not likely to get back on the gold standard on a national scale anytime soon. More than 90 percent of economists believe the gold standard is ludicrous. But as our current malaise continues, demand for solutions will increase.

  19. My thing about the food prices may have seemed jokey, but I wasn’t really joking. My employer is cutting our pay next year (well, same pay but with an increased workload), yet my food prices have gone up. Milk that was under 2 bucks is now nearly 2 and half. The celery stalks I buy are 40 cents more expensive.

    Gas has killed me. It takes two full tanks of gas to visit my kids on the weekends I get them. At this point, I’ve sold off my entire DVD collection and am working on my CDs, just to eat.

    I was never convinced, when he was elected, that Obama would be all that bad. Now I have some inkling of what my parents were always complaining about whenever they complained about Carter. And from what I’m hearing in the grocery store line, Obama is going to have a hard sell for re-election (of course, it may still happen. Never underestimate the ability of the Republicans to snatch defeat from the jaws of victory).

  20. Ivan, sometime if we meet in person I will lament with you the unfairness of the divorce system for men who want to keep on seeing their kids. The goal seems to be to push you to either stop seeing your kids or to impoverish all divorced dads.

    On the issue of inflation, I think it’s important to understand the true source of inflation so we can find a way to deal with it. We are re-living the 70s (I started getting politically aware during the Carter years, so I remember it quite well). The worst thing about inflation and the chaos of Carter-style economics is that there are some winners (people who invested in silver and sold at the right time made out like bandits), but the majority of working stiffs like you and me suffer. It took a brave president with a real plan like Reagan to get us out of Carter-style staglation. (I am coming to learn that Reagan was a disappointment in many ways, but on the specific issue of the early 1980s economy he was right on).

  21. Gas is over $4.00 a gallon in Connecticut, due in part, I think, to high taxes on gas. Needless to say, I will start driving to Massachusetts where gas is oddly about $0.20 per gallon cheaper.

    I miss the relatively lower prices of gas in Arizona.

  22. The basic problem with measuring monetary inflation is that it takes too long to filter the noise out from the prices of critical commodities like food and energy. To do that reliably we would need something like a three to five year long weighting function.

    We probably could conduct our entire economy by using an inflation metric based on the weighted average of the price of celery sticks. The problem is that the current price of celery sticks doesn’t give a very good indication of the long term price.

    So if we see celery sticks shoot up in price one year we won’t know if that is a long term inflationary indicator until we stick around for a while and see if the price falls back to normal months to years later.

  23. Mark D. –
    that sound all well and academic, but it doesn’t really work. Food prices are rising across the board. It isn’t just celery stalks. I used that because I buy three to four a week, so notice them more. But bread, eggs, hummus, bags of broccoli – all cost more. The few items that don’t cost more have reduced portion sizes, so they cost more per serving.

    Besides, it’s not just anecdotal evidence. It’s pretty well established food prices are going up and will continue to go up for the foreseeable future:

    “In 2011, the Consumer Price Index (CPI) for all food is projected to increase 3 to 4%. Today the U.S. Department of Agriculture’s Economic Research Service released its March 2011 figures finding a 0.7% increase in all food prices from February to March 2011 and a 2.9% increase from March 2010.

    Meat, poultry and fish products and dairy products saw a price increase of 1.3% for the month. Egg prices dropped 0.2%, although still 1% higher than a year ago.”

    http://www.feedstuffs.com/ME2/dirmod.asp?sid=F4D1A9DFCD974EAD8CD5205E15C1CB42&nm=Breaking+News&type=news&mod=News&mid=A3D60400B4204079A76C4B1B129CB433&tier=3&nid=AFCC5FEE8F7A49168799D12B89E6FAF3

  24. Ivan W, I believe you are wildly misreading my last comment. Did I make an argument to the effect that contemporary inflation isn’t real or isn’t monetary in nature?

    I don’t think so. What I said was that one could derive a price rule from almost any commodity given a sufficiently long averaging period. Clearly a price rule based on a basket of commodities is going to be more reliable, and require a shorter averaging period than a price rule based on a single commodity.

    So yes, a rise in food prices across the board is an excellent indicator of monetary inflation. The point is we won’t know exactly how much without averaging over several months to come. You can’t get reliable numbers out of short term data. Other than that, I completely agree.

  25. Well, without much examination on my part, Prices of essential goods always go up with the rise of gas prices. ( Due to transportation ) … nonetheless, that’s an interesting deep analysis. Good read.

  26. Phill, thanks for reading. I want to take a second to slay this dragon, which I have read a few times so far, that inflation is being caused by the price of oil increasing.

    1)Even without the price of oil, inflation is going up 6 percent a year according to govt stats.
    2)The govt stats are biased because they include housing and electronics, two areas where there is false deflation. Chris discusses this above regarding electronics (just because a computer has more features and costs the same does not mean there is deflation because you can’t buy the less-expensive computer). Housing deflation is not a good thing for anybody owning a house and hurts overall personal wealth.
    3)If we measure inflation the way it was done until the early 1980s, we get real inflation of about 10 percent a year right now.
    4)What is causing oil to increase in price? Well, there are several causes, but the most important is the decrease in the value of the dollar. What is causing the dollar to fall in value? The dollar is falling because the Fed is printing more dollars. It is also falling because people are betting that other economies will grow more than ours. So, the increase in the price of oil is a sign that, overall, the economy is not doing so hot.

    It is important to concentrate on the real causes of inflation and lack of economic growth because the only way we can solve the problem (hopefully someday) is to know what is causing the problem in the first place.

  27. The fed is a privately held bank? Held by who? or whom, whatever.

    A lot of this is over my head, but I do have a comment on the GM bailout. Bill sells cars for GM via a small dealership in town. He totally opposed the bailout. He pretty much agreed with what Troy said.

    I feel for families with kids. We don’t have kids at home anymore; our milk budget is negligent. I never even look at the price of gas. I fill my car up once a month and it’s all good–Bill’s gas is paid for by his employer. Every once in awhile, we’ll go somewhere and have that shock realizing how much it costs to fill the tank.

    But when my kids were little, boy, I knew all that to the penny and budgeted carefully to keep them fed.

    But, how much of this is just the fact that it’s the last days? A lot of things happening in the world today have been prophesied. Can we just chalk it up to Christ’s impending return, roll with the punches and strengthen ourselves spiritually?

  28. Geoff, some good stuff here. I started listening to the Austrians quite a while back. I especially started listening a few years back to Peter Schiff, and am glad I did. I had no idea silver would go from $4 an ounce just a few years ago, to almost $50 today.

    I think the Fed is doing us all wrong, and along with our Treasury Secretary Geitner, who helped create the housing bubble, is now creating a money bubble that is just waiting to burst. They are enriching their Wall Street friends, and impoverishing the middle class and poor. All I can think of is Isaiah’s warnings to the rich and princes of the people who ground the faces of the poor.

    The TARP didn’t work. QE1 didn’t work. QE2 is obviously not working. Big Banks are getting rich, but Americans are being left holding the debt. I cannot believe that such “educated” people can be so stupid. So it must truly be a conspiracy to enrich their friends.

    IF we needed a bailout, it would have been for the American people with their collapsing mortgages. Had we spent $4 Trillion on paying off mortgages, we would have paid off over 1/3 of everyone’s mortgages in the USA, and kept most people in their homes. The money would have trickled Upward into the banks, saving them as well. Instead, we’ve made the rich richer, and people are still losing homes at an increasing rate. Only now, they also cannot afford food.

  29. The Federal Reserve is a bank owned by banks. Member banks are paid dividends fixed by law, surplus goes to the Treasury. The real subsidy for banks though is having interest rates manipulated in their favor and being able to borrow at lower rates than the U.S. government.

    The primary control we have over the Fed is through the presidential appointment of members of the Federal Reserve Board of Governors, which is effectively a federal agency.

  30. Sammyone, politicians can’t and won’t save you, as they are servants of the Fed. Left vs right is just a game they use to divert people from the root of the problem, which is the central banking system and the yoke it puts on the people; namely social security and income taxes.

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