Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why Is the Fed Punishing My Parents?

Politics / US Federal Reserve Bank Mar 30, 2015 - 02:00 PM GMT

By: MISES

Politics

Shawn Ritenour writes: In September 1993, President Bill Clinton reassured his radio audience that “if you work hard and play by the rules, you’ll be rewarded with a good life for yourself and a better chance for your children.” Picking up that theme over eighteen years later, President Barack Obama affirmed that “Americans who work hard and play by the rules every day deserve a government and a financial system that does the same.” The trouble is neither the government nor the financial system backed by the Federal Reserve rewards people like my parents, who have worked hard and played by the rules their entire lives, only to have their savings wither away.


Instead, Federal Reserve officials and the intelligentsia who support them are continuously working to make their lives more difficult, frightening the masses of what shoppers look for every day — lower prices. Price deflation, the cry, is disastrous for the economy. They worry that lower prices will reduce profits, leading to shutdowns and lay-offs and that lower prices make it harder for people to pay their debts. Sound economic theory and history, however, both indicate that price deflation is nothing the social economy needs to fear. If prices fall because the economy is more productive, this is unambiguously positive. However, if prices fall because people spend less, their desire is for larger real cash balances. Falling prices help them achieve their goal, which precisely is the purpose of economic activity.

Lower prices and wages can make it harder to pay fixed debt. This, however, serves as an excellent incentive to stay out of debt in the first place, as my parents have done as a result of significant sacrifice. Before creating even more money out of thin are to ward off lower overall prices, we should at least consider some of the ethical issues involved.

Many men from my father’s generation are not unlike John Adams who wrote to his wife that he “must study politics and war, that our sons may have liberty to study mathematics and philosophy.” My father embarked for twenty years of hard labor in a meat packing plant providing for his family until he lost his job due to his union pricing him and his fellow workers out of a job. When his plant closed in the mid-1980s, he embarked on a second successful career with my mother operating their own barbecue business for another twenty-plus years. I saw firsthand the challenges they faced trying to keep quality up and costs down, while producing top-drawer barbecue meat and sandwiches for a demand that was always uncertain. I saw the stress on my mother’s face one week in the early days when they netted a mere $15 before taxes. My father indeed “studied” meat packing and barbecue, in part, so I could go to college and become an economist and college professor.

Additionally, Mom and Dad had the foresight and character to make the sacrifices necessary to stay out of debt. Indeed, they are Paul Krugman’s worst nightmare — a family determined not to live beyond their means. Now retired, like many in their generation they are enjoying life the best they can on an almost fixed income. Because they have no debt, they have been able to live without tremendous economic hardship thus far. The Federal Reserve’s inflationism, however, increasingly makes life for them more difficult as steady price inflation daily chips away at their livelihood. Since 2009, for example, the Consumer Price Index has increased over 9 percent. This masks, however, significantly larger price increases for important necessities. Prices of dairy products are up almost 17 percent since 2009. Gasoline prices are up almost 11 percent despite the recent decline. Prices for meat, poultry, fish, and eggs have increased a whopping 26 percent since 2009. Higher overall prices do not help people like my parents at all. They instead act as a thief, snatching wealth away from them in the form of diminished purchasing power. What they long for is to see the value of their savings increase. Far from creating economic hardship for them, lower overall prices would be a boon.

Both sound economics and ethics, therefore, demand that we give up the anti-deflation rhetoric and the inflation it fuels. Charity demands that we cease striking fear into the hearts of the masses, softening them up for ever higher prices. The Federal Reserve should stop punishing people like my parents who have worked hard and played by the rules their whole lives. After all, what did they ever do to Greenspan, Bernanke, and Yellen?

By Shawn Ritenour

http://mises.org

Shawn Ritenour teaches economics at Grove City College and is the author of Foundations of Economics: A Christian View.

© 2015 Copyright Shawn Ritenour - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in