The Other McCain

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Stock Market Inflation: The Rich Get Richer Because the Fed Is Cheating You

Posted on | October 7, 2010 | 5 Comments

One of Instapundit’s savvy readers writes:

The latest surge higher in the Dow is folks betting on a Bernanke “put” . . . that the Fed will debase the dollar so much that prices will rise in nominal terms. Stocks aren’t going up in gold or Euro terms.

You don’t have to be a “gold bug” or an anti-Fed fanatic to understand how the inflationary policy of the Federal Reserve has been reflected in stock prices. Inflation isn’t caused by scarcity, it’s caused by the devaluation of currency, and Ben Bernanke’s policy for the past two years has dramatically devalued the dollar, as the rising gold price shows:

This just goes to show that you can’t hide inflation. The price of gold has gained $153 per ounce — an increase of 12.8% — since May. (You should have listened to Glenn Beck!)

In the spring of 2009, I talked to a friend of mine who’s a private-sector economist. Because he works for an investment firm, he isn’t authorized to issue public analyses, but when I asked him what was going on with the economy, my friend said, “They’re trying to re-inflate the bubble.”

We haven’t seen inflation in consumer prices simply because deflationary pressures have been so strong since the collapse of the housing bubble. Home values have plummeted, foreclosures have skyrocketed and the unemployment rate is at a 30-year high.

So ask yourself, “Who got bailed out?” Wall Street, that’s who. Goldman Sachs and other “too big to fail” companies have made out like bandits in the past two years.

Now ask yourself, “Who did the stimulus help?” Government employees, that’s who. The main focus of the Obama/Pelosi/Reid stimulus package was transferring money to state and local governments to prevent them from having to lay off public-sector employees.

And look: Here’s another bank bailout!

Big business is already sitting on piles of cash. Wall Street investment firms and government-employee pension funds are doing OK in the current environment, and all the economic pain is being felt by private-sector employees and small businesses. The inflationary policy of the Fed, combined with the Democrats’ bailout-and-stimulus policy, therefore amounts to a transfer of wealth from the majority of Americans to the special-interest groups which influence economic policy in Washington.

The government expects to bribe the dispossessed with chump-change “benefits” — food stamps and unemployment checks — so as to avert a political backlash. Fortunately, Americans aren’t that stupid.

The average voter may not be aware of all these economic policy details, but he has a gut hunch that a swindle is being perpetrated. We are now less than four weeks from the Day of Reckoning depicted in this awesome Ace of Spades video:

Category: Ace of Spades, Economics, Election, Instapundit

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