Saturday, January 2, 2010

Prices 10 Years Later

Here is an interesting chart (click here) with prices on various goods and services and their changes over the last decade. Most mainstream economists tell you that inflation is a general rise in prices over a period of time. This is amplified by the mainstream media and educational outlets. What is omitted is the most important question: WHY?? The answer is the increase in the money supply. This increase is aggravated by high taxes and excessive government spending, especially that designed to "stimulate" the economy. 



You can see in the chart that there are some areas where prices decreased. A desktop computer is less expensive, more than likely due to innovations and more people using laptops. But the one price decrease that needs to be give then most attention to is the prime rate, posting a -61.76% drop. The prime rate, which is usually about 300 bps (3 percentage points) higher than the Federal Funds rate, went from 8.50% to 3.25%. Low rates come with an easy money and loose credit policy. Essentially the price is low because there is too much money in circulation. More money, less purchasing power, higher prices. In other words, INFLATION!

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