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IPFS News Link • Ron Paul Says...

Inflation Even Hurts the Penguins

• Ron Paul Institute - Ron Paul

The reason the aquarium switched fish is because rampant inflation has made it impossible for the aquarium to afford the higher quality fish. The penguins' reaction illustrates the flaw in governments claiming that even if inflation makes it impossible for you (or penguins) to eat steak (or higher quality fish) your quality of life has not been diminished as long as you can afford hamburger (or cheap fish).

Minimizing the impact of inflation by taking a "let the penguins eat lousy fish" approach is the basis of the "chained CPI" that is one of the ways the government underestimates price inflation. According to John Williams of Shadow Government Statistics, the real inflation rate (calculated without the government's "modifications") is over 15 percent! While they continue to understate the true rate of price inflation, government officials have been forced to admit at least that price inflation has reached levels not seen in forty years.

This has led the Federal Reserve to raise interest rates. But, so far, the Fed's rate increases have not stopped price inflation. This is why the Fed's next rate increase may be a rare full percentage point increase. Yet, even if the Fed raises rates by a full percentage point, rates will still remain well below what they would be in a free market. The Fed cannot raise rates anywhere close to market rates because doing so would make it impossible for debt-ridden consumers, businesses, and the federal government to manage their debt.


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