From: "Michael J. McKay" Date: June 27, 2008 3:17:01 PM CDT
To: undisclosed-recipients: ; Subject: My OTHER letter on Inflation that no one will publish All By now I have sent to all of you copies of my letters on Fiat Money, Legal Tender Laws and Fractional Reserve Banking. These three topics, plus understanding that Price Inflation is caused by Monetary Inflation comprise, in my opinion, the four most important A Priori Knowledges required to understand how money works. In January, February and March 2008 I submitted and had published the first three, although the local paper started balking in March. This balking, not coincidentally, occurred when a couple local financial management business people scolded me that my letters were "Scaring their clients to death." Starting in April I began a dance with my local papers where they would not publish my next letter on 'Inflation', would ask me to re-submit it, and then would not give me a straight answer why they would not publish it. That first letter on Inflation is below in BLUE. Then, last week I sent another letter, that took a different tack on the topic of Inflation. Same thing. They will not publish it and they will not say why. That second letter is in GREEN, below. I believe it is imperative that folks learn WHY their purchasing power is slipping away and what they can do about it. But, at least in Fairfield Iowa, the press is actively trying to keep the public in the dark on the topic of Inflation and its causes. So please forward these letters to all you care about and please educate yourself on the various Financial Defense Strategies that you can use to protect your Purchasing Power and any assets that you have. Price Inflation is accelerating and the need for the public to be properly educated is more important now than ever. Thank you, Michael McKay Editor, The price of gas is going through the roof. It costs more to buy Groceries. What is happening? Most of us think we know only too well what Inflation is. Just ask any Senior Citizen on a fixed income watching - with alarm - their grocery and energy bill rise higher and higher year after year. Or just ask anyone trying to make ends meet on a tight budget. Food, gasoline, insurance, basic needs, virtually everything is constantly more expensive. Prices always seem to be going up. Why is this happening? A little study will reveal that Price Inflation (what we see) is caused by Money Inflation which is what the public really needs to learn about. Monetary Inflation occurs every time the Federal Reserve prints a new dollar bill. It also occurs every time a bank lends more money than it has on hand (called 'Fractional Reserve Lending' where banks create money literally out of thin air). These two things cause each previously printed/created dollar to be worth less; it dilutes each dollar's value. Think of pouring water into milk and you get the picture. Every time the Fed "lowers interest rates" it is also printing/creating new dollar bills thereby inflating the monetary supply. When this happens you should immediately think: "My paycheck will now buy less. My savings are now worth less." The Federal Reserve has been doing this very thing since 1913. In the last 95 years our Purchasing Power - which is the key thing we all want - has dropped over 95%. Put another way, something that cost 5 cents in 1913 now costs $1.00 or more. You may have wondered where Penny Candy went; now you know. It is important that we all understand the sequence of Inflation. First, dollars are printed, or loaned into existence, which dilute the Purchasing Power of each previous dollar created. Then everybody, from producers to processors and finally consumers see prices go up. Consumers are the last to see it. Consumers have a natural impulse to blame the stores or businesses from which they buy, because that store or business is where they see the prices 'going up'. But this is wrong. Stores and businesses must, in order to continue being stores and businesses, pass on the higher costs they experience. First, stores and businesses experience higher prices, then they pass them on. Consumers are left holding the bag. In summary: Inflation means an increase of the Money Supply which then causes each unit of money to become worth less and therefore to be able to buy less. Prices rise after Money is inflated. Please learn more about Money Inflation and Price Inflation from, "Whatever Happened to Penny Candy" by Richard Maybury, and "What has Government done to our Money?" by Murray Rothbard, which are at the Fairfield Public Library. Michael McKay Dear Editor, Money is the Yardstick we use for Economic Calculation. Just like a measuring cup or a thermostat we need to know that 8 ounces equals a cup and that 98 degrees means its time to turn the AC on. With our money, what we call our dollar, we need to be able to measure how much it is going to take to fill the fridge or the gas tank or save for our kid's education or our retirement. Now, what would happen if someone in the Official Government Office of Weights and Measures simply re-defined a Yardstick to be 24 inches long instead of 36? What if they decided that the 'Cup' should be scheduled to hold a half an ounce less per year? All of a sudden it would be harder and harder to figure out how to build a house or follow a recipe. Why? Because we all need Stable Measuring Tools to effectively get through life. In 1913 a dollar was worth a dollar. Now, 95 years later, our dollar measuring tool has been shrunk about 95%. Now our Money-yardstick is less than Two Inches Long. Penny Candy is no more and a 5 cent candy bar costs a dollar, or more. This did not happen suddenly. It was like a mouse nibbled at our Yardstick a little each year. It is still nibbling at us even now. It has become harder and harder for us to figure out how to plan, how to do proper Economic Calculation. Michael McKay
