Hel-lo, as the young people say, or knock-knock or wake up and smell the coffee: you guys running for President with your chatter about how you are going to bring change to Washington. Change has already come to Washington and the rest of America--it's our economy.
Neither of the candidates look like they will be agents of change. Instead, whoever is elected will be forced to react to change. In the bleakest economic moment in decades, one of the changes to be faced is that there is no money left. It's disappearing in front of our eyes, thanks to a raging inflation, but that is a word no one likes to use.
You can hear McCain talk about the high cost of gasoline and Obama talk about the cost of groceries, but the word "inflation," meaning a critical, galloping loss of purchasing power, is avoided. Tens of millions of prospective voters have a lot to say about it, however. While the candidates yammer about who is the red, white and blue-est, millions in this back-to-school season are talking about the high cost of clothing, books and food.
The latest numbers, showing an inflation rate we have not seen in a generation, were news only to the economists, politicians and business writers who have been refusing to look at what has happened. And what is going to continue to happen, for prices will not level off soon. "American consumers, business people, and political leaders should all be bracing for double-digit inflation, probably as early as 2009," warns John K. Castle, CEO of Castle Harlan, a private equity company.
At the July annual inflation rate of 5.6 percent, the dollar's buying power is being destroyed too rapidly for politically controlled economists and editorialists to react. Even they are giving up on that nonsense about "core inflation rates" and how you should not count food and fuel prices in figuring the cost-of-living index.
Unless steps are taken--big, strong, ten-league boot steps--we'll soon be back to the late '70s and early '80s, with 20 percent interest rates, high unemployment and a standard of living falling faster than it already is now. Our money is disintegrating as we drive to the bank to deposit our paychecks.
Its buying power is lessening so rapidly that the twenty-dollar bill is becoming the new ten-dollar bill. Depending how old you are, you may have already watched first the penny, then the nickel, then the dime, then the quarter become worthless. Now the dollar bill is headed in the same direction.
At the current 5.6 percent inflation rate, our savings--and that includes bonds and certificates of deposit--will lose half their value in the next thirteen years. Millions do not have to wait thirteen years to feel the pain. The New York Times reports:
In July, rank-and-file workers--those in production or non-supervisory roles -- earned 3.1 percent less than they did a year ago, after adjusting for the rising cost of living. "Any way you slice it, incomes aren't keeping up with the inflation rate," said Michael T. Darda, chief economist at the trading and research firm MKM Partners. It [July] was the 10th consecutive month that the weekly average salary had failed to keep pace with inflation, according to statistics from the Labor Department.
Inflation is the result of the Federal Reserve Board's "stuffing the world with dollars," says Benn Steil of the Council on Foreign Relations. Dollars are like anything else--the more there are of them, the less they are worth.
The Fed and Ben Bernanke, its chairman, believe that by printing dollars they can prevent the stock market from dropping, and that they can save both Wall Street and distressed home buyers by keeping interest rates low. Laudable motives, maybe, but they ought to have learned by now that printing money does not get the desired effect. They have swamped the society with money, and yet the stock market has gone into a major bear- market swoon, interest rates are rising and inflation grows worse by the month.
In a campaign in which the candidates will submit to such indignities as making public confession to a Baptist preacher on national TV, is it asking too much of either of them to talk about the crisis which is changing the lives of the people whose votes they are seeking? For the time being, at least, we are leaderless. We will have to pick our own way as best we can, hoping not for a new and bright day but for a means of escaping ruin.