How will these huge deficits be funded? Partially by tax increases, but also by the Federal Reserve creating additional money. One economist quoted in the Wall Street Journal put it this way: “Effectively, the Fed is monetizing the Treasury’s debt, a strategy that appears in the encyclopedia under the heading ‘how to trigger inflation.”
While it may be difficult to grasp concept of trillions of dollars in debt, it’s quite easy to understand escalating prices at the grocery store.
Grocery prices grew by more than one-and-a-half times the overall rate of inflation in 2010, according to the U.S. Bureau of Labor Statistics (BLS). Although there are multiple reasons for the increases, excessive money creation likely plays a key role.
Consider the price increases in the following staples over a recent six-month period:
• Cotton = +125.7%
• Sugar = +82.6%
• Corn = +59.0%
• Coffee = +41.4%
• Rice = +40.5%
• Oats = +36.6%
Are these items inherently more valuable that before, or is something else going on?
Part of the problem is that as more money is created, existing money is worth less than it was previously, as explained in a new free report from Sound Mind Investing —Inflation History: The Rise and Fall of the U.S. Dollar. This report will help you understand of what money is, how it works, and how too much money has lead to inflation in the past. And you'll see why many people are concerned that conditions are ripe for a return of strong inflation.
• The six qualities of sound money
• The root causes of inflation
• Why economies moved from a gold basis to paper money
• The rise of the modern banking and monetary system
• Why many economists think an inflationary spiral may be ahead
About Sound Mind Investing
SMI was founded in 1990 by author and former investment adviser Austin Pryor. The goal of the company is to help individuals "understand and apply Biblically based principles for making spending and investing decisions in order that: 1) their future financial security would be strengthened, and 2) their giving to worldwide missionary efforts for the cause of Christ would accelerate,"
The Sound Mind Investing newsletter is distributed in print and online to more than 10,000 subscribers each month.
Get a free copy of Inflation History: The Rise and Fall of the U.S. Dollar at: http://www.soundmindinvesting.com/
Kevin Woo, Director of Marketing
Sound Mind Investing
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Sound Mind Investing is a monthly financial publication and website that helps people apply biblical principles to their finances and investing. Our mission is to help you have more in order to give more.