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Paying the Price for the Free Stimulus Money

Do you recall that $3 trillion in stimulus money that the federal government sent out to people? Do you recall it was free because, as everyone knows, the federal government is rich? Do you recall how the mainstream press was talking about how generous the federal government is to its citizens?

Do you recall also how almost no one asked where all that free money was coming from? It was as if most everyone thought that the federal government had saved all that free money under its bed, available for use in an emergency.

It was done through borrowing and monetary expansion — also known as inflation — by America’s central bank, the Federal Reserve. In essence, they print up those trillions of dollars in free money that is disbursed to the citizenry. In the process, they are inflating — or expanding — the money supply.

The increase in the supply of money reduces its value. That reduced value is reflected in higher prices for the things that people buy.

One of the first signs of this phenomenon is now occurring in food, where prices are soaring. In an article entitled “For the Unemployed, Rising Grocery Prices Strain Budgets Even More,” the Washington Post writes:

The cost of groceries has been rising at the fastest pace in decades since the coronavirus pandemic seized the U.S. economy, leading to sticker shock for basic staples such as beef and eggs and forcing struggling households to rethink how to put enough food on the table….

….Indeed, nearly every category of food become more expensive at some point since February, according to data released Friday by the Bureau of Economic Analysis. Beef and veal prices saw the steepest spike (20.2 percent), followed by eggs (10.4 percent), poultry (8.6 percent) and pork (8.5 percent).

Compared with this time last year, prices for beef and veal are up 25.1 percent. Eggs are up 12.1 percent, and pork is up 11.8 percent from a year earlier, according to seasonally adjusted BEA data.

Sure, the increase in food prices is due partly to strains in the supply chains arising from the Covid-19 crisis, as the article points out. But that sort of thing is temporary and soon gets sorted out in a free market. There is no reason for rising prices to continue, except for the debasement of dollar.

Confirming this phenomenon is the recent plunge in the value of the dollar in international markets versus foreign currencies. In July, the dollar index fell 4 percent. That means the dollar now buys less in foreign currencies that it did before July, even though foreign regimes and inflating and debasing their currencies as well.

And then there are gold and silver, both of which are soaring in dollar prices. That means that it takes a lot more in dollars to buy one-ounce gold coins and silver coins than it did before. In fact, gold usually provides the first sign of monetary debasement, which is one reason why politicians and bureaucrats hate gold so much.

Higher prices are what happens when a regime debases its currency as a way to give free money to people. The higher prices rise to reflect the cheapened value of the currency.

It’s just another way to tax people. And as Americans are once again learning, this time with soaring food prices, it’s the poorest people who pay the biggest price for all this free money that is doled out to voters prior to the November elections.

The post Paying the Price for the Free Stimulus Money appeared first on The Future of Freedom Foundation.


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About The Author

Jacob G. Hornberger

The Future of Freedom Foundation was founded in 1989 by FFF president Jacob Hornberger with the aim of establishing an educational foundation that would advance an uncompromising case for libertarianism in the context of both foreign and domestic policy. The mission of The Future of Freedom Foundation is to advance freedom by providing an uncompromising moral and economic case for individual liberty, free markets, private property, and limited government. Visit https://www.fff.org

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