The most sinister of all taxes is the inflation tax and it is the most regressive. It hits the poor and the middle class. ~ Ron Paul
In this week’s Off the Cuff with Mish & Chris podcast, Mish has the week off, so Chris takes the mic and delivers an in-depth look at consumer price inflation. He cites a plethora of data that validates what anyone who eats, drives, or visits the doctor already knows: The “official” CPI (Consumer Price Index) numbers released by our government and others around the world are completely bogus.
Money expansion is a cornerstone of modern central banking strategy. With so much outstanding total debt, increasing the money supply (i.e., inflation) becomes increasingly essential for perpetuating the system.
Today, Chris focuses on the question, What is going to happen when that strategy no longer works?
The short answer is that you would expect to see price increases manifest in the essential staples (food, fuel, health) first. Check.
Further money-printing ensues, as central planners continue to try to douse the fire with more gasoline. And more statistics will be trotted out, claiming things are much better than how reality appears and feels. But instead of having a curative effect, this approach drives cost of living so high that consumers can afford little else, and investors begin to worry about currency risk.
Consumers begin to revolt by going on strike with their wallets. Commerce suffers and businesses start laying off employees, compounding the situation. Then the big shoe drops: The bond market starts demanding ever-higher interest rates. As Greece, Ireland, and now Spain are demonstrating, things accelerate downhill very quickly from there.
It’s no coincidence that Gregor also has a report on our site this week focused on inflation heating up. After a few quiet years on the topic, you’re going to hear a lot more about it in 2012.
Click the play button below to listen to this week’s Off the Cuff with Mish & Chris (runtime 17m:21s):
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by hrunner