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May 4, 2006

Fighting the threat of inflation

Today’s Downsizer-Dispatch . . .

Please forward to friends who value the value of their money.

* In 1913 $20 bought an ounce of gold.
* In the 1930s that ounce of gold cost $35 dollars.
* In the late 60s and early 70s Nixon devalued the dollar relative to gold by 8% and then 10%
* Then Nixon ended the dollar’s gold backing completely.

Two things happened . . .

* Prices rose dramatically all through the 1970s
* The price of gold also rose dramatically.

This was the era of The Gold Bugs — people like Harry Browne who advised Americans to buy gold as a hedge against inflation. What is inflation? Inflation is the creation of new money. New money bids up prices. Monetary inflation causes price inflation, including a rise in the price of gold.

Gold is always the best measure of how much new money the government is creating. And the price of gold has been soaring! The dollar relative to gold has lost 60% of its value since 2000. That’s bad news, because monetary inflation causes booms-and-busts.

* Government inflation in the 20s drove up the stock market and real estate
* The bust that followed was the start of the Great Depression
* Inflation in the 70s led to stagflation — high prices combined with a long recession
* Inflation in the 90s led to a boom-and-bust on the stock market
* Recent monetary inflation has caused massive over-investment in housing

And everyone everywhere is talking about the housing bubble bursting. But still the government printing presses roll-on, creating more-and-more new money to finance federal over-spending and provide tons of corporate welfare to the banking system. How do we know? Three ways . . .

* The price of gold is still rising
* The prices you pay for food are rising (I’m sure you’ve noticed!)
* The government no longer wants to admit what it’s doing

Until March of this year the Federal Reserve published a statistic called M3. This number measured the level of monetary inflation. The Fed has stopped reporting this number. Do you think maybe they’re planning to create a whole bunch of new money they don’t want us to know about, until after we feel the punch at the check-out line, or check to see what the price of gold is doing?

Waiting for the price of gold to rise is like having to wait for the canary in the coal mine to die before you start evacuating the shafts. Gold works as a measure of inflation, but it would be better to know in advance. M3 would give us that advance warning. Fortunately, Congressman Ron Paul has sponsored a bill requiring the Federal Reserve to resume reporting M3. We need to support this bill, and get it passed. We need M3 as a check against the wealth-destroying boom-and-bust policies of the Fed. Send Congress a message telling them to pass this bill. You can do so by clicking here.

Thank you!

Perry Willis
Communications Director
DownsizeDC.org, Inc.

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