The real cause in rising gas prices is the shrinking dollar and the Federal Reserve

For the first time in history, the average price of a gallon of gasoline reached over $4.00, with no end in sight! How high can prices go? Who is to blame? The CEOs of Exxon, Chevron, and Conoco? The "soccer moms" riding around in their SUVs? Or is it the "nasty" free-market at work?

Part of the answer lies in understanding the economic bubbles and monetary inflation, but the root of the problem lies in the Federal Reserve System (which causes the economic bubbles and monetary inflation in the first place). The Federal Reserve is charged with controlling the money supply through interest rate manipulation. However, as most of us failed to realize, creating money by raising or lowering interest rates is its only tool. When the Federal Reserve creates money by lowering interest rates, more people will want to borrow, the banks will satisfy the need, and new money is injected throughout the economy. That creates an economic bubble. But also, when more money is chasing the same amounts of goods, that's the text-book definition of inflation, and prices will rise. But in reality, it is actually the fall of the dollar which causes the price to rise.

Let us take an example. Let's say the only thing you can buy in "Thomas' fantasy world" is widgets, and it is a finite amount of widgets. Let's say there are $1 million in the world, and there are 100,000 widgets, so a widget is worth $10. You need 100 widgets to accomplish your goal, so you take $1,000 to buy 100 widgets (in Thomas' world, there is no sales tax, or any tax, as I requested). But you are tired, so you put your money in a safe, went to bed, and planned to buy widgets tomorrow.

But during the night, the Federal Reserve (it has the Feds in my world too, in spite of my rants) printed $1 million more dollars, out of thin air, so there are $2 million and the same 100,000 widgets. I go to the store with my $1,000, but 100 widgets now cost $2,000! The Feds cut my money in half! Now you know why the Federal Reserve, through inflation, is robbing us blind, and there is nothing we can do about it.

Federal Reserve notes (aka US dollars) are nothing but ink and paper, and tended to be inflated. Precious metals (e.g., gold and silver), on the other hand, are "inflation-proof" (you can't print more gold!). As for gas prices, in reality, the price will remain the same. In 1947, the average price of a gallon of gas was 23¢ (i.e., slightly below a quarter). In 1947, a quarter was composed of ¼ ounce of fine silver. Today, an ounce of silver costs around $17.00, so ¼ ounce of fine silver costs around $4.25, so the average price of a gallon of gas is slightly below ¼ ounce of silver--the same! Inflation caused by the Federal Reserve caused the dollar to plummet in value, not the gas prices to rise! The Federal Reserve is evil in my mind.

The bottom line is average Americans are being seriously hurt by these flawed policies, and they are not getting good information about the true dynamics at work. The important thing concerning monetary concepts is to address the subjects of central banking and fiat money, and the destructive tendencies of both in our financial lives. The only way to have stability is to get rid of the Federal Reserve and introduce sound money (money backed by gold and silver) again. Government needs to get out of the way, so that the people can go to work and correct government's mistakes. By doing that, we can get our economy back on stable ground. If we continue to do what we are doing before, the American economy is doomed.