24 August 2009

follow the money (the FED 1977-2009)

... all calculations use yearly CPI figures from the U.S. Bureau of Labor Statistics ... http://www.bls.gov/data/inflation_calculator.htm ...

it just so happens that since the US Federal Reserve issued it's first Federal Reserve Notes with Benjamin Franklin's picture on them ($100) there have been exactly six 16-year blocks coinciding exactly with four presidential terms each.
prices up 138% in 16 years as FED monetary policy, through an era of record deficits, re-deregulation, personal computers, maturing baby-boomers, the end of the cold war, the 'peace dividend', the rise and collapse of the "Japanese Goliath", and de-unionization via global 'free-trade' policies, resulted in more than another doubling of prices. in 1993 it took more than $2.38 to purchase what $1.00 did in 1977 (or $14.60 to purchase what $1 did in 1913, as if anyone worried anymore what a dollar would buy sixty years before... an uncompounded increase rate now up to 17% per year for 80 years)
the 'peace dividend', the 'world police', a short period of governmental fiscal 'sanity' (so called 'balanced budgets') coinciding with 'irrational exuberance' in the newly computerized financial markets as computer technology matured into the Internet, high finance is further de-regulated, unprecedented global trade allows inflation to be deported and deflation to be imported (debasing the currency stealthily, reducing the price of ever more capable computers, yet destroying domestic manufacturing jobs) and of course, the 'off-budget' 'little' wars that serve to feed the defense sectors of the economy and the political aspirations of the office-holders of the moment (with their preponderance for use of 'air-power' in order to minimize casualties to a rate not much more than was experienced in training exercises each year at the height of the 'cold war') FED monetary policy resulted in "only" a 50% increase in consumer staple prices in 16 years. (almost another 'return to the mean' as prices tripled and a half in the previous 32 years)

up next... the summary (or caveats and bon mots)