Congressman Ron Paul explains here how inflation hurts the poor. First and foremost, we must realize that rising prices is not a cause of inflation any more than wet streets are the cause of rainfall. In reality, the reverse is true. Just like a balloon is inflated because it has a greater supply of air, inflation in an economy is fundamentally monetary. In a truly free market (without an organization legally permitted to print money out of thin air), inflation would be low or non-existent. As it is, the United States has a Federal Reserve System that plays god with our monetary policy, creating money out of thin air by either (1) printing it, (2) permitting the highly vulnerable practice of fractional reserve banking, or (3) lending to banks at an artificially low interest rate to keep rates low when they should be higher (an interest rate is a price, which rises and falls according to supply and demand; tinkering with them artificially leads to booms and busts within an economy).
First thoughts on this are that we don’t have a free market in the United States when the money supply is strategically connected with the federal government. Indeed, the money supply should be unalterable without ties to a stable currency (historically gold and silver). Otherwise politicians can go to war, run deficits, and borrow money by printing it for their own purposes.
If you read the link cited above, Dr. Paul (he’s a doctor because he’s a gynecologist) explains why inflation is not only caused by increasing the money supply, it directly hurts the poor and leads to wealth inequality. So, for those of you who are against wealth inequality, and want to help the poor, probably the greatest economic cause you can fight for is to end the federal reserve system.
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