Up until recently, “inflation” was a buzzword known primarily to economists and a small group of libertarians. That has massively changed. Today, after record prices hit the everyday goods Americans use – food, housing, gas; everyone is familiar with the I-word. 

However, Americans are struggling to understand how it happens. Is it Putin? Is it Biden and the Democrats? The Pandemic? Bad luck? In the midst of dealing with the economic consequences of inflation, Americans are confused enough about how it happens that they don’t know what to do about it. 

Rarely does an opportunity come to teach such a complicated economic concept to a public willing to listen. Economics classes are right up there with accounting. Supply and demand. Marginal analysis. Opportunity cost. Yawn. 

But Americans are listening for the “I” word now. A majority of Americans say that inflation is causing them “financial hardship,” including over half of Black and Latino households saying that inflation was causing them ”serious financial problems.” The average U.S. household is spending up to $500 more per month due to inflation – the equivalent of an astounding 38 percent tax increase.

Young people have been shielded from some of the worst effects so far, but college tuition freezes are expiring and bringing with them rising education prices. Working some of the lowest paid jobs, increases in inflation are also cutting major holes in young people’s minimal pay raises. 

Worst of all, inflation isn’t new, just happening faster. Reckless monetary policy in the U.S. has been stealing our future for over 100 years.

The FED: stealing your future since 1913

In 1913, the U.S. dollar was stable. The U.S. dollar’s value could be exchanged for gold at any time. The dollar you had in your pocket could buy the same thing next month as it could last month. This is how most people thought money still worked until 2020. 

However, on December 23, 1913, The U.S. Federal Reserve Bank (Fed) – a new central bank of the United States, was established. Seeking to free themselves from the cycles of booms and busts that had defined the U.S. economy until that point, this private, central bank was established to centrally control U.S. currency. The main two levers the FED was given to start doing this were adding money to the economy and taking money out. 

By adding money to the economy, the Federal Reserve could stimulate growth. Free money meant more consumers would borrow more, spend more, and use the money they had in their pockets. The second was taking money out. By taking money out, the Fed could restore the value consumers had, cool off the economy, and encourage people to save money. With these two levers, the FED could act to control the impact that major crashes and panics could have on the U.S. consumer. 

The problem is that free money is nice. Not free money isn’t. 

For nearly 50 years, from 1913 to 1971, the Federal Reserve mostly added money to the economy. The value of the dollar compared to its value in 1913 fell by 75 percent, from $1 to $0.25. Then the wheels came off. Faced with the costs of President Lyndon Johnson’s “Great Society” programs and the high cost of the Vietnam War, the U.S. abandoned the gold standard entirely and went to “money is what we say it is.” 

Since 1971, the value of the dollar has cratered. Compared to the value of a dollar in 1913, the dollars in your pockets buy only 3 cents of what they used to. For comparison, while there wasn’t a minimum wage in 1913, the U.S. Federal minimum wage was introduced in 1938 at 25 cents an hour. This was assumed to be enough to support a family. 

Today, the U.S. Federal minimum is $7.25 an hour. Leaving alone whether or not it is high enough or should exist at all, without inflation, this minimum wage today would be a mind-boggling $207.99 an hour. Could you pay your bills with $200/hr? Would you worry about capitalism and the fact that your boss made more? Could you afford to have vacations, leisure, health insurance, or a home on $200/hr?

Instead, most young people are struggling to work and pay for college. Many millennials will never own a home. Health insurance, even with massive government subsidies, is still out of the reach of many young families. There has been no bigger single destroyer of futures than inflation. 

This process happened slowly, crisis by crisis, and decision by decision, as one generation after another sacrificed the future of the next generation to satisfy what they wanted now. But COVID took it to a whole new level.

COVIDflation 3000

As the world grappled with a global pandemic, investors looked to the U.S. Federal Reserve to see what it would do. And it acted. Giving away free money like it was candy. 

From February 2020 to September 2021, the U.S. Federal Reserve printed trillions of dollars, over 50 percent of all U.S. dollars ever printed, into existence to bolster the stock market during the pandemic. While individual Americans were getting $500 and $1000 checks, some of the largest companies in America were walking away with billions. While typically the Fed could keep a handle on the effects of the printing spree, as they did after 2008, that was not the case this time. 

Inflation that was supposed to be “transitory” has now rocked American households, hitting a four-decade high – nearly as high as the inflation seen in the gas shortages and economic recession of the Carter administration. Just since the pandemic, Americans have lost nearly 15 percent of the value in their wallets

This kind of inflation has slammed Americans that are already economically disadvantaged even worse. According to the Urban Institute, nearly 1 in 5 Americans reported having food insecurity this year. The rising cost of rent is sending those who already had a hard time paying their bills into homelessness. Inflation is rising so fast that the automatic cost-of-living increases in Social Security are not keeping up. 

Because young Americans tend to spend most of their money on the most inflated goods, food, housing, and fuel, they have particularly felt the impact of inflation on their monthly budgets. In the past year alone, the cost of gas at the pump rose by nearly 30 percent, and rent for a one-bedroom apartment and the cost of in-home food rose by nearly 15 percent

While stealing just 4-5 percent of the next year’s future was a sustainable model for a while, the Fed overplayed its hand this year. Inflation is now the number-one issue for Americans according to Gallup, leaving other specific issues behind by nearly double. The future will belong to those who provide solutions to this crisis – or be stolen from us if we don’t.

Students for Liberty North America is launching a month-long campaign to educate Americans on the causes of inflation, the widespread impact of inflation, and the libertarian solutions to inflation – Stop Stealing our Future. If you’re a current student and would like to join the program, be sure to click on the button below to get involved.

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