“Confiscate, Secretly and Unobserved”
“Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.”
John Maynard Keynes penned these words after World War I (The Economic Consequences of the Peace); and all Fed governors, certainly Chairman Ben Bernanke, should be required to read them out loud each morning.
When inflation isn’t particularly hot, it’s praised as something desirable, though in its gradual, nearly invisible way it continues its insidious work. And the inflation data released today (BLS PDF) fall into that category: flat for the month and up 2.3% over the last 12 month. It will trigger palliative lingo such as “moderate” or “well anchored,” and any spikes would be “temporary.” But spikes in inflation, along with moderate, well-anchored, and temporary inflation, unless followed by deflation, become permanent. Result: a CPI-U index value of 230.085, where “100” represents price levels of 1982-84. Hence, 130% inflation over the last 30 years. In the process, the Fed “debauched” the dollar, to use Keynes’ term, by 56.5%.
CPI without food and energy was up .2% for the month and 2.3% for the year. While again in the soothing category of “moderate,” it shows a pernicious trend: the consistent rise in core inflation, part of it imported from China and other countries: