I know what you're thinking: "I don't get it. I thought the economy was bad. I thought unemployment was high and getting worse. How in the world can gas prices be rising so fast, and how can oil be shooting up from 40 to 60? Its not like there has been any good economic news or growth or signs of a true bounce off this bottom." "The only good economic news I've seen is the recapitalization of billions of dollars into the banks."
BINGO!!! More dollars for no good reason equals inflation.
All the U.S. Treasury and The Fed have done is print dollars, which has just added to the international pool of the fiat/fraudulent/i.o.u. dollar that they have been cranking out for the last 30 years via a huge trade deficit with no gold standard, making the problem even worse.
What does that mean? More paper money chasing the same amount of products. So the nominal prices rise. "Will that mean higher wages and asset values though?"
NOPE!
Thats what Stagflation is- inflation without real growth. It is a total meltdown of the system, and thats where we are. You just haven't felt the pain to know it yet, but we're seeing it now with pump prices. You make less money at work if you happen to have a job but gas, lunch, and clothes cost even more.
"How can this be?" Well, its simple: These products that we need that are rising in price, like oil, have demand all over the world. The rest of the world is not as bad off as America because they have actually saved and produced, while we have been a consmer/spender nation with a GDP that is 70% consumption, and we have a negative savings rate. We've basically been borrowing from the rest of the world with our lack of production. Our corroding consumer engine has only slowed the rest of the world economy recently. Their production will keep on trucking though while here in America we have not invested in production, so we are plain ole screwed for a while. All our debt, which would have gone to productive measures in most countries has only gone to consumer debt here. The moral of the story is the other countries actually have a demand for all these commodities because they're producers.
Prices rise everywhere on the planet for products that can be used anywhere on the planet. If Asia is cranking away building everything in the world, and they need a lot of oil, then the price for oil will be high here as well, even though we're just using the gasoline byproduct of oil to go to lunch and go to the mall to buy the Chinese products.
If you want a little more of this stuff see my post below that starts "The birds will sing....", but first listen to Peter Schiff here below. He predicted all this stuff long before it happened.
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