Government raises your taxes with new CPI calculations

I have written in the past, Why is the cost of my Bill of Material (BOM) so much higher than last week? The Orwellian doublespeak answer: Quantitative Easing, about how the government is manipulating the money supply, and how it has real world effects on our designs. Dollar Stretcher Guest Blogger Rick Kahler has written about how the government is now inflating the money supply, as my past columns predicted they would, by manipulating how the Consumer Price Index (CPI) is calculated. They have manipulated this number many times in the past such as by adding in the Military Personnel, removing real world items like food, gas and fuel. So do check out Rick's The Ultimate Stealth Tax: Inflation. Also you can get real inflation numbers (1980 and 1990 based) from John Williams ShadowfStats.

"...The chained CPI is a tax increase for much the same reason. Many income tax brackets and deductions are indexed to inflation. Smaller annual adjustments to the brackets because of the lower CPI will push more people into higher tax brackets..."

One of the significant causes, of which there were many, of the Great Depression was when the Federal Reserve contracted the money supply. Even Warren Buffett has stated that he is concerned what will happen once the Federal Reserve Bank starts selling its holdings. Interestingly Governor Ben S. Bernanke has commented on this in the past: Money, Gold, and the Great Depression -- Remarks by Governor Ben S. Bernanke, At the H. Parker Willis Lecture in Economic Policy, Washington and Lee University, Lexington, Virginia, March 2,2004.

Many are saying that we should return to the Gold Standard. That is each 'dollar' is exchangeable for real tangible gold, in theory. Places like the World Gold Council are, of course, all for this. Many banks are already starting to dump US Dollars to stock up on Gold. Hence the same people that are creating the mess we are about to face will be the same people controlling the Gold. Do you see this as an improvement? I do not.

"Central banks have begun to reduce reserve portfolio allocations to US dollars and euros in favor of alternative reserve assets. A portfolio optimization analysis concludes that gold, with its lack of credit risk and deep and liquid market, is one of the most attractive alternatives in this diversification process. Accordingly, building gold reserves in tandem with new alternatives is an optimal strategy as these markets need time to develop and allocations to gold remain largely below optimal levels." -- Central bank diversification strategies: Rebalancing from the dollar and euro. [Registration is required to download the report.]

My past ramblings on the issue of 'Money' and Inflation:

• Is the Dollar Dead? Bank of England says so.
• "We can always print money" - Alan Greenspan on Meet The Press Aug/07/2011
• Why is the cost of my Bill of Material (BOM) so much higher than last week? The Orwellian doublespeak answer: Quantitative Easing

Even the main stream press is catching up to what I was talking about in 2010:

• Central banks souring on the dollar.
• Buffett is worried about Fed policy.
• Markets on edge as Fed officials differ on bond-buying.
• Economic forecasts no better than a random walk.
• Global economy facing hesitant and uneven recovery, says OECD [Organization for Economic Co-operation and Development].
• Introduction to inflation by Rick Kahler.

The Treasury sells bounds, sheets of paper with no intrinsic value, to the Federal Reserve for things that politicians do not have the honesty to come out and say directly that they need to raise our taxes to support. The Fed buys these bonds with 'money' that it created from nothing. This created 'money' is put into circulation, making your money worth less each time it happens. This inflation is the most insidious hidden tax that you and I pay. Few figure this system out because it is usually hidden behind the Orwellian doublespeak of economics such as Quantitative Easing.

Will you be ready for the Greater Depression?

"We can always print money" - Alan Greenspan on Meet The Press Aug/07/2011

I've blogged about how the price of our Bills of Materials appears to be going up, previously. A comment on today's, August 7th 2011, Meet The Press by former Federal Reserve chairman Alan Greenspan, promoted me to write this one.

 Mr. Greenspan stated [Transcripts available here] that "the US will always be able to pay its debts because we can print money". Echos of a speech given before the National Economists Club in Washington, D.C. on November 21, 2002 by Ben S. Bernanke, the current chairman of the Federal Reserve, who also said we can control or create inflation by printing money. Rick Kahler once said "A slow, chronic inflation is the most politically palatable way of reducing the debt in a manner that is somewhat unnoticeable to the electorate." In otherwords the more moeny in circulation, the more your money is worth less. Prices are not going up, the value of the money is going down! Do these people actually understand how the system works to say these things?

If you've listened to any of the 'News' this weekend there has been a big stink that Standard & Poor's downgraded the US's Credit Rating, on August 5th, after the stock markets closed. The Governments rebuttal can be found here. What few places are telling you that is more important, is that Dagong, a key credit information and credit solution service provider in China, Downgrading the Credit Rating of the USA, on Tuesday August 2nd. According to reports on the BBC I was listening to on my daily commute, China has already decided to take their money an invest it in its own people, rather than lend more to the US. What many are worried about is what happens if a Treasury Auction is held, and no one shows up? Then it doesn't mater if there is a Debt Limit or not.

Now we need a bit of a history lesson: Andrew Jackson (March 15, 1767 - June 8, 1845) was the seventh President of the United States (1829-1837). Jackson was strongly against the national bank, he vetoed the renewal of its charter and ensured its collapse. This was the last time the US paid off its "National Debt". Alas when Abraham Lincoln (February 12, 1809 - April 15, 1865) was the 16th President of the United States, serving from March 1861 until his assassination in 1865, needed to fund the Civil War, a new bank system was set up. Various incarnations existed, see Paul Warburg's Crusade to Establish a Central Bank in the United States at the Federal Reserve Bank of Minneapolis, until the Federal Reserve Act was passed by Congress at the Christmas recesses of 1913, under suspicious circumstances; there was no "sign and die" to close that session of Congress.

"Controversy about the Federal Reserve Act and the establishment of the Federal Reserve System has existed since prior to its passage. Some of the questions raised include: whether Congress has the Constitutional power to delegate its power to coin money or issue paper money, why it was passed on December 23 while most of Congress was away for Christmas, whether the Federal Reserve is a public cartel of private banks (also called a banking cartel) established to protect powerful financial interests, and whether the Federal Reserve's actions increased the severity of the Great Depression in the 1930s (and/or the severity or frequency of other boom-bust economic cycles, such as the Late-2000s recession)." -- Wikipedia.

The Federal Reserve has not been audited, no one to date really knows what happens to the 'money'. Worse almost no one understands how this sham system works.

Consider this simplified version: In 1913 the Government declares that all 'money' comes from the Federal Reserve (Fed hereafter). You need to have 'money' to run your business and put food on the table. As the only source of 'money' is the Fed you borrow 'money' from them, which is happy to loan it to you, at interest. The interest rate varies, but they'll get more back, you think. Now what is wrong with this picture? If the only source of 'money' is the Fed, where does the 'money' used to pay the interest come from? It has to be borrowed from the Fed. Remember the Government has declared that the Fed is the only source of 'money', you have no choice, unless you want to barter tangible assets, like real Money, coins, from the US Treasury. The National Debt can never be paid off, because if it was the system falls-apart, as the last 5000 years have shown always happens to this type of system in the end.

This schema is really a hidden tax on you and I. It works like this: The Treasury sells bounds, sheets of paper with no intrinsic value, to the Federal Reserve for things that politicians do not have the honesty to come out and say directly that they need to raise our taxes to support. The Fed buys these bonds with 'money' that it created from nothing. This created 'money' is put into circulation, making your money worth less each time it happens. This inflation is the most insidious hidden tax that you and I pay. Few figure this system out because it is usually hidden behind the Orwellian doublespeak of economics such as Quantitative Easing.

For a far more detailed look at the history of 'money' and its coming end, check out The Money Masters, the works of Milton Friedman, and the Laffer curve.

People far wiser than I have told me that when the end of the Dollar comes, it will be over a three day long holiday weekend. Columbus Day is Monday, October 10, 2011, would be such a day. I wonder if it is any coincidence that comet Elenin comes by at the same time...