Inflation stood at a staggering 13%. Interest rates rose to 21%. Unemployment rose to nearly 9%.
For these reasons I have been adamant in my assertion that our current financial crisis is clearly NOT 'the worst since the Great Depression,' as the mainstream media is fond of saying.
For example, interest rates have been amazingly low for the past 16 years. Unemployment has also been historically low despite a spike in the last 2 quarters of 2008. And inflation has been nearly non-existent, except for the rise in gasoline prices in 2008, which led to a hike in food prices.
But even then, inflation has rarely topped 6% in all of the years since Jimmy Carter.
That is about to end. And the government's 'fix' for the current problem is the root cause.
The U.S. is heavily in debt. There is no money to give to the various entities the government insists we must bail out. The only way this can be done is to borrow more money or print more 'money.'
Our good graces with our creditors are quickly coming to an end. Thus, Washington will be forced to print more money out of thin air. Barack Obama has stated that he is willing to do exactly that.
The problem is that these courses of action are a prescription for stunning spikes in inflation. That is the price the market forces us to pay when we engage in activity that is foreign to sound financial practice.
As Robert Romano states in the article linked above:
The laws of supply and demand apply to dollars just as any other good, service, or commodity. Put simply, the more there is of something, the less it is worth in value. Taken together—the monetary base expansion, the national debt expansion, the bailout mania, the deficit-spending—and that is a whole lot more money than there was previously in circulation.
In short, if your money is increasingly worthless because there is more and more of it in circulation, then it will be more and more difficult to purchase goods.
