[Congressional Record Volume 141, Number 70 (Monday, May 1, 1995)]
[Extensions of Remarks]
[Page E888]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


     IF YOU HAVE A JOB, YOU AREN'T CAUSING INFLATION--GUESS WHO IS?

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                          HON. PHILIP M. CRANE

                              of illinois

                    in the house of representatives

                           Monday, May 1, 1995
  Mr. CRANE. Mr. Speaker, the Orlando Sentinel recently featured an 
article which destroys numerous myths pertaining to inflation.
  Mr. Charley Reese, author of the article, highlights congressional 
responsibility for inflation. He goes on to argue that economic 
progress has been hampered by inflation stemming from actions of the 
Federal Government and Federal Reserve System.
  I commend to the attention of my colleagues ``If you have a job, you 
aren't causing inflation--guess who is?''
     If You Have a Job, You Aren't Causing Inflation--Guess Who Is?

                           (By Charley Reese)

       There's a big con game going on. The con is that 
     politicians in both parties and the bankers talk about 
     problems caused by inflation without mentioning that they 
     cause it.
       To hear the central bank talk about it, you would think 
     inflation is caused by people getting jobs. Uh, oh, the 
     central bankers are saying, too many Americans have jobs, and 
     so we had better increase the rates of usury to keep 
     inflation under control.
       In a country with so many millions of people unemployed and 
     underemployed, it is impossible for people to cause inflation 
     by getting a job. Even if we had 100 percent employment, 
     people getting jobs would cause little if any inflation.
       There are, to keep it simple, two kinds of inflation. One 
     is called cost-push inflation and the other is monetary 
     inflation. Politicians and money-lenders would like you to 
     believe that cost-push inflation is the only kind that 
     exists.
       Not so. An example of cost-push would be a situation in 
     which there were a great drought in the Midwest followed by a 
     plague of locusts, so that the grain crop would be severely 
     reduced. Because there would be insufficient grain to meet 
     the demand, people would bid up the price in an effort to get 
     what was available. That's cost-push: a rise in prices 
     produced by an increased demand for a commodity or product.
       Monetary inflation, however, is when the monetary 
     authorities put so much money into the system that the value 
     of each unit declines. Demand and working people have nothing 
     to do with it. That type of
      inflation is entirely in the hands of the government and the 
     central bank.
       That's really what Mexico's peso crisis is all about. As it 
     always does, the Mexican ruling party turned on the printing 
     presses and greatly boosted the money supply during the 
     election campaign. When this happens, eventually the monetary 
     unit will decline in value.
       As the value of the monetary unit declines, people are 
     forced to raise prices just to maintain their same level of 
     income. Because of continued deficits and the profligate 
     policies of the Federal Reserve, the U.S. dollar has lost its 
     value.
       Money is not wealth. What one buys with money is wealth--
     houses, clothes, tools, services, etc. How much a given unit 
     of money can buy is called purchasing power. Well, the 
     purchasing power of the U.S. dollar, thanks entirely to 
     Congress and the Federal Reserve, has declined so much that, 
     if you made $10,000 in 1967, you would have to make $40,000 
     in 1995 just to be where you were 28 years ago. To put it 
     another way, it takes $4 today to buy what $1 would buy in 
     1967.
       But the key point to understand is that this is the fault 
     of Congress, not the fault of the private sector. Back in the 
     1960s, Congress gave up any effort to maintain a stable money 
     system and indexed--those famous cost-of-living allowances--
     most federal programs. It did that to take the sting out of 
     inflation, a policy it was consciously pursuing, because it 
     is more politically palatable than bringing the federal 
     budget into balance and reining in the central bank.
       But, of course, if you aren't on the federal teat, your 
     income didn't get indexed to inflation. Inflation never 
     affects people uniformly. Some can prosper; some can stay 
     even; and some will fall behind.
       What outrages me is to hear bankers and politicians talk 
     about the real misery their inflationary policies have caused 
     while pretending that it is not their fault but someone 
     else's, either greedy consumers spending too much or some 
     unexplained, uncontrollable mysterious ``thing.''
       It's they. It's the 100 senators and the 435 members of the 
     House. It's the Federal Reserve System, which Congress 
     created and which Congress could, if it had the sense and the 
     guts, seriously reform or abolish. They caused the economic 
     misery. Now they are blaming the victims.
     

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