In today’s economic landscape, many are feeling the impact of rising prices that seem to defy logic. Take gas prices, for instance. Here in California, we’ve recently seen costs soar to $3.87 per gallon for regular fuel.
One might expect that such prices would signal a booming economy. However, the reality paints a different picture. According to Business Week, “demand in the U.S. is at its lowest point since 1997.”
This indicates that even as gas prices rise by 8 percent since the end of 2011, demand is at a 15-year low. How can this be explained?
It could be attributed to increasing tensions between the U.S. and Iran, particularly Iran’s recent threats to restrict oil sales to Europe. If conflict arises, we could see oil prices skyrocket to $150 per barrel.
While geopolitical factors may be influencing the surge in oil prices, there are underlying issues that may interest you…
The Impact of Monetary Inflation on You
Nearly a century ago, British economist John Maynard Keynes observed, “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
Today, the government is in desperate need of funds, and that means they’re looking directly at your finances. Currently, they are expanding the money supply at an alarming rate.
Since Ben Bernanke became Fed Chairman in 2006, the Federal Reserve’s balance sheet has tripled, and the federal funds rate has been brought to nearly zero. Either of these actions alone would be alarming, but together they represent a grand monetary experiment, one that even Alan Greenspan, Bernanke’s predecessor, never attempted.
These policies of mass inflation are bound to have repercussions. Unfortunately, the options for safeguarding your wealth as the government encroaches on your savings are dwindling.
Ten-year Treasuries are yielding less than 2 percent, stocks are currently overvalued, and gold—though still in its 11th year of a bull market—might not be the safest haven. Additionally, President Obama’s latest budget proposal includes tax hikes on dividends. Remarkably, amidst this cycle, rental properties may be your most viable investment, provided you can navigate the challenges of managing tenants.
What is behind the climbing oil prices? We suspect it’s a mismatch between the ever-increasing supply of digital currency and the limited production of actual resources. With government bonds offering minimal returns, fund managers are increasingly compelled to take on greater risks to preserve their wealth.
How the Federal Reserve Takes from You
According to Tom Kloza, chief oil analyst at the Oil Price Information Service, much of the recent price increase can be traced to speculative investments pouring into gasoline futures since the year’s start, primarily from hedge funds and large money managers. “We’ve seen about $11 billion of speculative money come in on the long side of gas futures,” he notes, adding, “Each of the last three weeks we’ve observed a record net long position.”
Oil prices are especially significant due to their widespread effect on the economy. When oil prices and, consequently, gas prices rise too high, they siphon funds from the economy. If prices escalate beyond what the economy can handle, both the economic structure and oil markets can crumble.
The fluctuations from oil price spikes caused by monetary inflation create chaos in the economy. High inflation rates introduce instability in financial markets, fostering speculation and misallocation of resources, while making it challenging for those trying to protect their wealth from inflation’s impact.
Ultimately, the real perpetrators behind this situation are those at the Federal Reserve, who, with Treasury’s approval, inflate the currency and encroach on your wealth. But that’s just the start…
Reflect on the hours you could have spent with your family instead of working tirelessly for money. Consider all those times you toiled away for clients while missing out on important moments with your loved ones. Think about the sunny days you sacrificed in favor of late nights at work.
What’s the reason behind these sacrifices? After paying taxes, the little that remains could soon evaporate due to inflation.
Money isn’t just currency; it also represents the time and effort invested to earn it. When the Federal Reserve devalues your money, they don’t just take your cash; they rob you of your life.
Sincerely,
MN Gordon
for Economic Prism