I don’t completely agree with those who claim that inflation is created when the Federal Reserve prints massive amounts of money. The only time inflation significantly happens because of this action by the Fed is when it prints excess money and somehow the cash trickles down to the 99 percent in a big way. In which case, inflation and hyper-inflation can occur, which is what happened in Germany during the 1920s.
However, the Fed’s actions in printing money do help to redistribute income and wealth from the 99 to the 1 percent in the form on inflation.
The primary and perhaps only purpose of the Federal Reserve is to save Wall Street and its investors from their really bad investment decisions. So when Wall Street’s Ponzi schemes, mortgage backed bonds and credit default swaps on mortgage backed bonds, went bad, the Fed printed up trillions of dollars and simply gave it out to the investors that had made dumb, losing, investment decisions to buy these things. The Fed purchased these worthless investments at their face value. If an investor bought a bond for $1000, for example, the Fed bought it from the investor for $1,000, even though its value had plummeted to zero. See, Breakdown of the $26 Trillion the Federal Reserve Handed Out to Save Incompetent, but Rich Investors and The Federal Reserve Lost $9 Trillion? What Liars! They gave that money away!
In this way, no matter how bad the investment decisions at, say, Goldman Sachs, are, the Fed will always step in to save the fools. Mechanisms to ensure modestly good investment decisions don’t exist in the investment markets since the big boys know the Fed will always save them. That’s why they have incentives to make really risky decisions.
The 1 percent have taken the reimbursements from the Fed and then invested them elsewhere, such as in the futures markets. A futures market is an “auction market in which participants buy and sell commodity/future contracts for delivery on a specified future date.” Trading is carried on through open yelling and hand signals in a trading pit. We’re not talking pennies here. We’re talking billions of dollars of investments. When you get a large number of investors bidding up the price of goods in the futures market, they’re hoping to create profits for themselves by creating inflation for the 99 percent.
The futures market includes such commodities as oil, natural gas, wheat, soybeans, corn, coffee, lumber, sugar, gold, and many other things. When the prices of these commodities are bid up in the futures market, they cost more for us on the market shelves, or in the lumber yard, or at the gas station.
The Fed handed out tens of trillions of dollars to reimburse investor losses in the mortgage backed bond and credit default swap markets. If it hadn’t done so, if the investors had simply been real men and accepted the losses, the real inflation rate would be much lower than it is today; those same investors are taking their billions and probably trillions of dollars in reimbursements that the Fed gave them to bid up the price of commodities in the futures markets. If the Fed hadn’t saved their asses, they wouldn’t have had the money to bid up the prices of commodities.
That’s why we’re paying higher prices for goods during a time of slack demand. And it’s all thanks to the Federal Reserve’s welfare program for the 1 percent. It redistributes income from the 99 to the 1 percent via inflation.
As you can see from the graph below, real inflation is about 8.5 percent per year. That’s the price we’re paying for the Fed’s welfare program for the 1 percent. It’s a tax to support a parasitic and unproductive class, the 1 percent. By the way, the Federal government has changed the way it measures inflation 20 times since 1982 in order to understate inflation, which is simply another way to help cover up the income being redistributed from the 99 to the 1 percent via inflation.
And that’s what happens to the