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Put Inflation on the Political Agenda | The Nation

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Put Inflation on the Political Agenda

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Gas is up, sneakers are up, onions are up and eggs, too. The only thing that is not up is your income.

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Nicholas von Hoffman
Nicholas von Hoffman, a veteran newspaper, radio and TV reporter and columnist, is the author, most recently, of...

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What would he tell Obama to do?

Bank of America's Ken Lewis has done his bit to reinforce the idea that the CEOs who got us into this mess are a pack of liars.

There are exceptions. Your income is up, of course, if you are a member of Congress, some other privileged government employee or a million/billionaire. Congresspersons and such get an automatic pay adjustment for inflation. You do not, unless you are on Social Security--but they want to take that away from retirees if they can. Otherwise, every month or every hour the prices go up the salaried and hourly wage earners in our country take a cut in pay.

Rich people avoid being pauperized by inflation. Most of their fortunes are not sunk into things that inflation robs of their value. Ordinary savings accounts and certificates of deposit, for example, pay around 3 percent or less, while inflation is now running somewhere in the vicinity of 4-plus percent.

Rich people do not keep their wealth in low-yield certificates of deposit. They move their money into euros, which are as protected against inflation by the European Central Bank as the dollar is not by our Federal Reserve Board.

The rich may do other things, such as putting their money in commodities like oil. Such investments preserve spending power and you can make a profit off them in the bargain. Sheltering money in oil drives up the price of gasoline, which the non-rich must buy or walk to work.

Every kind of commodity is way up price--wheat, meat, copper, cotton, coal and so forth. As soon as it begins to look as if commodity prices have gone too high and may collapse, the rich will take their money and move on to another kind of investment which, as it protects them from the inflation, will gobble up everybody else's standard of living .

As inflation worsens, ultimately you will see the numbers in your paycheck grow larger but they will not catch up with costs. Thus it is that a small minority is immune to its ravages while, everybody else takes it on the chin. But a surprising number of people do not seem to mind.

Maybe that is because they are beguiled by statements from government officials and the economics professoriate that inflation can be "contained" or "tamed" or, per the Federal Reserve Board, that though "uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully."

Even low rates of inflation do awful things to people's savings. A 3 percent inflation rate, well below what we are running now, will cut the value of your savings in half in a little more than twenty years. So much for the misnamed "golden years." In your lifetime the penny, the nickel and the dime have become useless units of currency.

The inquiring mind might ask what is the Fed doing about inflation other than monitoring it? It appears that America's central bank, the institution most responsible for inflation, is hoping that the oncoming or already arrived recession will take care of our inflation urges. The reasoning is that as more people lose their jobs or have their wages cut back the less money there will be to put upward pressure on prices so that--SHAZAAM! inflation abates.

Nice idea, but there are many examples of societies with no jobs, no commerce and no trade that still have a raging inflation. Zimbabwe is this year's featured player in that regard, but the United States was another such in the 1970s. No necessary connection exists between prosperity and inflation or the absence thereof. In the Eisenhower years America had virtually no inflation, but also a run-up in good times we still look back on with longing.

The Republican Party is supposed to be the hard money, anti-inflationary party, but you would not know it from its record the last eight years. Between George Bush, the inebriated spending of the Republican-controlled Congress and Alan Greenspan's obligingly cranking out inflationary packets of money over at the Fed what is happening to the much-abused dollar was inevitable.

Intermittently at least, Democrats have been the party of inflation ever since William Jennings Bryan made his "Cross of Gold" speech in 1896 and misled liberals into believing inflation was the key to prosperity. You might have thought after their experience with the Nixon-Carter inflation that they would know better.

Instead you have Barack Obama advocating adjusting the minimum wage to inflation, an idea which might have come from Hugo Chávez's ministry of economics. You would think that what has happened to housing prices would warn anyone who thinks we can solve our problems by upping the prices.

Inflation, as it goes on, hurts the poor first, the middle class next and everybody else after that because unstable money begets dishonest bookkeeping, waste, misallocation of capital, horrendous financial risk taking and finally social disorganization, demoralization and chaos.

Inasmuch as inflation will cancel out both Hillary's and Obama's health programs and most everything else they are bouncing around the country promising, they and John McCain would do themselves and the rest of us a service if they promoted inflation from minor topic status to a top of the list big problem position. Whether or not those who seek to lead us are aware of it, the men and women who drive trucks, who commute, who swoon at the prices at the meat counter and in the clothing stores talk about inflation and they talk about it more with each passing day.

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