Congressman Ron Paul May 30, 2008

These past few weeks have provided an unfortunate opportunity to discuss inflation. The dollar index has reached new all-time lows. The total money supply, M3, as calculated by private sources, is growing at a disturbing 17% rate. The Fed is pumping dollars into the economy at an alarming rate. Just recently the Fed announced new loan auctions totaling $100 billion. That is new money created from thin air. If these money auctions, combined with the bailout of Bear Stearns, continue to be the trend, we are in for some economic stormy weather. The explanation lies in understanding the basics of money, and why it is dangerous to give government and big banks control over it.

First, money is not wealth, in and of itself. You cannot create more wealth simply by creating more money. Wall Street bankers cry out for more liquidity,

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Alex’s Notes: One of the biggest problems our nations faces today is that the common American has a very low level of financial literacy. Generations of spin and information control have led us to a current generation of Americans and even “Financial Experts” who do not truly understand how our economy works. Beginning at US college level teaching economics studies, you can find misinformation teaching our future generations of financial leaders that you can simply create wealth through debt, unchecked printing of money, and federal spending. A quick look at the facts show that healthy growing economies are based on savings and capital investment, not expansion funded by debt. China for example has a national savings rate approaching 52%. China has a growing middle class and will be able to make the transition from an export economy to a more balanced economy dependant more on domestic revenues. Yet, when we see a massive devaluation ...

Nearly all the pieces are now in place for inflation to strike with increasing speed and fury, catching Wall Street by surprise, throwing government policy into turmoil and, at the same time, opening up broad opportunities for investors.

I know. I’ve seen this movie once before. And the script will forever be ingrained in my mind.

It was 1978. Jimmy Carter was president. Oil prices had been surging for nearly seven years.

Other commodities — including silver, gold and food — were following closely behind.

Wholesale prices, import prices and the price of critical resources were climbing swiftly.

Most important, the Fed’s pipe-smoking Chairman Arthur Burns, fearing a chain reaction of financial failures, pumped up the money supply with wild abandon, slashed interest rates — and set the stage for the worst U.S. inflation since the Civil War. …

Looks like the "fertilizer correction" is over. Adding to all 3 of my names on their bounces off support; actually like the Potash (POT) chart the best here, but they all move together. I love this market. Uncle Ben has apparently created so much money, but none of it goes to people who need it out on Main Street. Instead it is flooding Wall Street pushing up equities (along with commodities) :) Kind of perverted but we all thank Uncle Ben as investors, as we curse him at the grocery aisle. $122 oil? No problem. That only affects US consumers - stocks are independent of the "little people". (X amount of stock) versus (Y amount of money supply x 20% annual growth rate) = prices go up. Economics 101. Equities are simply another commodity at this point, it appears. Every other commodity is going ballistic ...