There is no subtler, surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.
— John Maynard Keynes
All those who pay attention to prices are used to the fact that our government routinely lies to us about inflation. They have devised a number of cheap tricks to disguise alarmingly high food prices in the official statistics. For example, rather than measure the rise in prices for a fixed basket of goods, the government uses substitutions in their calculations (e.g. beans for hamburger, a protein substitution). No doubt this is done for our own good, as with everything else the government does. Otherwise, there might be riots in the streets
The obvious problem with the government's clever strategy is that most Americans must do their own food shopping. The Awful Truth is right there in front of them as they stand there in the aisle agonizing over life and death decisions about what sustenance they can afford to buy. On my latest trip to the grocery store, I noted that a small jar of oregano (a few ounces) goes for somewhere between $4 and $6 dollars. All the other spices were similarly priced, including ground black pepper. To the best of my knowledge, the world is not running out of oregano or black pepper. Farm-raised catfish costs $9/pound. God only knows what wild-caught catfish would cost. We may be running out of bluefin tuna as I have written, but we're not running out catfish (yet). Most meats are simply unaffordable.
The reason for these absurdly high prices is the debasement of the currency. That was Simon Black's subject in $7 Gasoline, Thanks Ben. Simon has been traveling in Europe, which is remarkably similar in this respect to going to your local grocery store.
The consistent theme from my travels so far in Europe& #151; the UK, Scandinavia, Lithuania — has been noticeably higher prices. Shockingly so, in some instances.
London, where I spent a rather pleasant and rare sunny weekend with friends and colleagues, has gone from being ‘stupid’ pricey, to just plain absurd. Tube prices, taxi fares, food prices, restaurant bills, train fares… it all keeps going up.
And to cap it all off, the British government’s VAT increases have ensured that absolutely everyone is paying a little bit more.
Here in Lithuania, the buzz around town is the spiraling gasoline prices, which have shot past $7/gallon in local currency. The bootleg fuel industry is thriving here as smugglers bring in cheaper fuel from neighboring Belarus and sell it at a 30% discount...
Now, the official story for rising prices across Europe usually involves some insipid excuse about tensions with Iran or weather. And in nearly every instance, the government propaganda machines simply insult people’s intelligence and understate inflation by an entire order of magnitude.
At this point, Black quotes Keynes, which was my lead-off quote. And then he talks about the ancient Romans to demonstrate that debasing the currency is nothing new.
Prescient words from the man [Keynes] whose General Theory constitutes the playbook from which modern politicians and central bankers routinely pillage the livelihoods of billions of people across the planet.
Currency debasement, though, has a long and distinguished history.
In his 1958 work State and Currency in the Roman Empire to 300 A.D., Sture Bolin outlines the systematic (and almost constant) debasement of the silver denarius coin of ancient Rome, which I have reproduced below:
Subsequent emperors became even more clever at debasing the currency; Caracalla (reign 211-217 AD) created a new coin, the Antoninianus, which had a face value far greater than its weight and metal content.
Under Gallienus (reign 260-268 AD), the Antoninianus was composed of less than 5% silver. By the time of Aurelian in 270 AD, further debasement was essentially impossible… though they kept trying.
Such debasement led to rampant inflation in the empire. A slave under the reign of Commodus that cost 500 denarii was five times as expensive under Septimius Severus. A second century modius of wheat (about 1/4 bushel) sold for 1/2 denarius. By the time of Diocletian’s price fixing in 301 AD, the nominal price was 200 times more expensive.
In Roman Egypt, where the best documentation on pricing has survived, a measure of wheat which sold for 200 drachmae in 276 AD increased to more than 2,000,000 drachmae in 334 AD, roughly 1,000,000% inflation in a span of 58-years.
Thus we live in a world in which the Earth keeps shifting beneath our feet, but these shifts are not random. They all go in one direction and these persistent tilts are designed, whether the designers acknowledge it or not, to take us off our feet.
We are told by central bankers like Ben Bernanke that the debasement of the dollar, which has lost 95% of its value since the establishment of the Federal Reserve in 1913, is meant to "stimulate" the economy. Simon Black comes to the correct, unavoidable conclusion about such policies.
Today, the Fed’s balance sheet has expanded to nearly $3 trillion of shaky, questionable assets… while posting a mere $55 billion in capital, roughly 1.8%. This is about the same level to which Lehman Brothers was leveraged before its own spectacular collapse in 2008.
Yes, there’s a reason the fuel smuggling business is thriving in Lithuania and prices in London have become absurd. Like the Roman Emperors of the past, today’s political elite is throwing the burden of its insolvency onto the people.
And as history further shows, when you cannot trust them with your currency, you certainly cannot trust them with your liberty.
We should pay close attention to what Chris Whalen tells us in the video below (hat tip, Tim Iacono).
The Fed has become so corrupt and so captured by the banking industry that we’ve turned the whole thing on its head. The Fed is now there to support the speculators and they let the real economy go to hell.
When your dollar no longer buys what it used to, and especially in the case where the number of dollars you have is now and forever limited, you already know what it means when Whalen says the Fed has let the real economy go to hell.