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Renke Grunwald

Here, in Europe, one encounters high oil prices, too, but—thanks to the strong €—we are able to absorb the increasing oil price. I really wonder, what future brings to the USA, for it is still widely involved in the global trade.

Marbux

Economics 101: a nation can buy guns or it can buy butter, but it can't do both at the same time.

We've been fighting two wars for five years now near totally financed by debt and deficit spending. To boot, we passed out tax cuts instead of raising taxes to pay for our wars as we go. I.e., our leaders are trying to have guns and butter at the same time. The result is the all too predictable steep devaluation of the dollar against other nation's currencies.

Throw into the mix that the U.S. agreement with OPEC has OPEC requiring that all customers internationally pay for oil in U.S. dollars. As our currency devalues, OPEC raises its prices to acquire the same value in the currency exchange markets.

Enter stage left the mortgage crisis as the increased cost of petroleum and foreign goods work their way through the economy, leaving increasing consumers unable to maintain their mortagage payments.

How does the Fed respond? Inflate our way out of the mortage crisis; increase the money supply so fewer consumers will face foreclosures and bail out the mortgage lenders with government insured loans. Keep the bubble expanding.

But that just leads to further devaluation of the U.S. dollar against foreign currencies and predictably higher costs (in U.S. dollar terms) for imported goods and raw materials like petroleum.

I can't even remember how many times I've seen the same cycle repeat in my own lifetime. But I have firm memories from the late 1960s of top sirloin steak selling for 17 cents a pound at the grocery store, cigarettes selling for 19 cents a pack, and 17.9 cents per gallon gasoline.

I was a journeyman union typographer in those days, earning about $650 per month. I bought a new car every year and had money left to burn.

I also vividly recall a elderly "tramp printer" I worked with for a few weeks as he passed through. He showed me a pay stub from 1903, when he was making 1-1/2 cents per hour in the same trade and said that was big money in those days.

I guess what I'm trying to impart is the view that our economy is being severely mismanaged. Our current crop of powers that be are playing for time instead of paying the piper, hoping they can keep the bubble inflating until it's someone else's problem.

And so it goes. Inflation is the cruelest tax of all but the easiest to impose. Economists may teach that you can't have both guns and butter at the same time, but political history teaches that the U.S. nonetheless has invariably resorted to the printing press to pay for its wars. The resulting devaluation is inevitable.

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