"The embargo is expanding” beyond Japan, said one of the three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities.
This from an article entitled "China said to Widen it's Embargo of Minerals" in the New York Times.
China mines 95 percent of the world’s rare earth elements, which have broad commercial and military applications, and are vital to the manufacture of products as diverse as cellphones, large wind turbines and guided missiles. Any curtailment of Chinese supplies of rare earths is likely to be greeted with alarm in Western capitals, particularly because Western companies are believed to keep much smaller stockpiles of rare earths than Japanese companies.
Most people, even many of the "experts" define inflation as what happens when the price of something goes up at the store. "Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole." according to about.com. This definition has been promoted by the government and Keynesian economists for some time. The CPI (Consumer Price Index) certainly is the tool we use to detect inflation... isn't it? Well actually no... the rules that govern the CPI are rather mysteriously slanted to hide cost increases. Real Clear Markets covered this in an article called "Government Stats Hide Inflation Truth"
Even about.com noticed.
As a pure measure of inflation, the CPI has some flaws:
1) new product bias (new products are not counted for a while after the appear)
2) discount store bias (consumers who care won't pay full price)
3) substitution bias (variations in price can cause consumers to respond by substituting on the spot, but the basic measure holds their consumption of various goods constant)
4) quality bias (product improvements are under-counted)
5) formula bias (overweighting of sale items in sample rotation)
Unfortunately this bias serves those who are hard at work printing money for nothing. The central bankers at the Federal Reserve love to keep people in the dark and they absolutely never mention the invisible tax no one ever talks about. The tax called Inflation.
Wikipedia explains it a little better... one might see the pattern developing...
The term "inflation" originally referred to increases in the amount of money in circulation, and some economists still use the word in this way. However, most economists today call an increase in the money supply monetary inflation, to distinguish it from rising prices, which may also for clarity be called 'price inflation'.
The key for the average everyday person is to know what those "experts" on TV are talking about when they say "inflation" because it could make a great deal of difference. Are they referring to price inflation or monetary inflation? When, for example the Fed Chairman Ben Bernacke mentions controlling inflation at 1 or 2%, you can almost bet he's referring to monetary inflation. Because 1 or 2% could mean much more at the other end... price inflation. But for the guys at the top... they just see the extra money headed their way... and by the time it gets down to the people at the supermarket... they could really care less. A person might also get a idea why deflation is a four letter word to Keynesian economists. That would be like a pay cut to them.
Now back to my article about the Chinese embargo... what does that have to do with inflation? Well... over the years as we've allowed our government to export jobs and business overseas. We have become much more dependent on imports. Remember 1973 when the Arabs were demonized for shutting off the supply of oil? At that time they supplied less than half the oil consumed in the USA... today it's over 70% and now it's not just oil... it's everything... just pick up 10 random items in Walmart the next time your passing through... I would bet a large bill that at least 5 of those products are from somewhere other than the the good ole USA! And you might find that it's much worse than that... today even food is coming from China!
So, unlike past downturns where American industriousness and ingenuity put people back to work through inventions, creativity, manufacturing, etc... we as Americans really don't have the ability we used to... to create new alternatives. And if a new idea does come along... more than likely it's only going to boost the Chinese employment figures when they open the manufacturing plant there. We are reliant on China and the other exporters. So in addition to the Federal Reserve's inflation tax... another hidden tax... but this time it's the Chinese that ring the register. I suppose we could call it "political inflation" or "NAFTA inflation" or "World Trade Inflation"?
If you would like to know more about how our monetary system works, the problems like inflation and even solutions, I have a few suggestions.
Money as Debt (47 min)
The Secret of Oz (~110 min) 2009
The Secret of Oz from Global Change 2012 on Vimeo.
The Money Masters(215 min) 1995 - if it seems daunting just watch the first 5 min.
Also visit Mises.org
***Update 10/28***
The Fed is going to add to this stew... even more fuel... "Quantitative Easing". Monetizing the Debt... something that just a year ago... they said they wouldn't do. I would expect to see Gold, Silver and the Stock Market explode.... but with the new tax laws on capital gains... I would expect to see a huge sell off just before New Years... unless of course... they intend to slip in a new loop hole.
***Update 10/30***
****Update 11/2/10****
Bill Gross on CNBC Dollar to lose 20% of it's value
****Update 11/10/10****
Crop yields down, commodity prices up - Cotton crop smallest since 1925
****Update 11/12/10****
Secret Walmart survey...4.0% Inflation already!
No comments:
Post a Comment