Issue Position: Inflation

Issue Position

I believe that our gravest threat, not only to our economic prosperity--but to our very liberties, is inflation. At its core definition, inflation is simply the increase in the supply of money. Rising prices are merely a symptom of this disease. Over time, our federal government has learned that, rather than directly tax the people for its mammoth programs and wars around the world, it can simply "print the money" and finance these deficits through the hidden and insidious tax of inflation. In this way, government has learned it can "conceal" the method of payment, because the higher prices that come about later (which inevitably result from printing more money) can always be blamed on price-gouging, or "greedy" businessmen, or foreigners who are hoarding profit. All the while, our own government continues this course of creating money out of thin air, making the situation even worse. This method of financing government programs has been all the more criminal because it often hits the poor and the middle class the hardest, or the people in our society least able to bear the burden of these rising prices. Food, energy, utility bills--all of the necessary consumer goods and services in our economy normally go up in price first, forcing people to turn over more and more of their income to cover these additional costs. By the time wages go up from this inflationary nightmare, many people have already been forced to eat into what little savings they have left to bear the cost of our government's spending and debt. This fact has not been lost on many West Virginians, especially senior citizens and other groups of individuals who often rely on fixed incomes to meet their everyday needs.

But inflation will get worse, much worse--and we must act now to mitigate the effects of the coming inflation crisis for our citizens here in West Virginia. As Washington D.C. and the Federal Reserve continues to debase the US dollar, by printing more paper money to cover its growing 14 trillion dollar debt, we will likely see further negative and detrimental side effects on the economy. Rising prices, shortages, mal-investments, wide swings in the stock market, and at its worst--civil unrest and rioting. When these effects increase, history has often shown that central governments begin to act in a more authoritarian manner--believing it must use increase force to "fix" the problem it created in the first place. Price controls, wage controls, and even the nationalization of certain industries--like mining and energy--can come into play, putting our liberties, as well as our economy, into further peril (we have already seen hints that the federal government could authorize certain bureaucracies to seize private 401k plans to cover its spending).

More than likely, if we continue down the same path, we will see double-digit inflation in the United States, and ultimately the collapse of the dollar. History teaches us that all "paper money" eventually collapses. In fact, the last time our money was tied to something sound and "un-printable" was in 1971, before Richard Nixon severed the last remaining tie to the gold standard. Since that time, when gold was priced at $35 an ounce, we have seen unchecked inflation run through the US economy. But gold is now 50 times that price in US dollars. Gold is history's "monetary metal" and hence, a good measure of currency debasement. And over these past few decades, it is not that gold has increased in value per se; it is simply that the dollar has lost its own value. Over the span of four decades, the US dollar has been so severely debased that it has lost vast amounts of its purchasing power. Prices do not tend to go up under a system of sound money and free markets. Prices tend to FALL…not rise. It is only when governments create money out of thin air that economies begin to see prices continually rise. For any generation born after 1970, it is EXPECTED for prices to go up. But there used to be a time when the reverse was true, that it was expected that prices would go down. This is when our country had sound money, not fiat money that can be expanded at the whim of bureaucrats and central bankers.

What history also tells us is that inflationary periods typically tend to escalate, as more and more people begin to realize that the central government will never actually "stop" printing more paper money. And though these actions in Washington are beyond the scope of the office I am running for, we can still force the issue of inflation to the forefront, and upon our federal representatives in Congress. Education is half of the battle, and I will make it a priority to educate more of my fellow lawmakers about this critical crisis.

Beyond this though, there are important steps we can take here in West Virginia to mitigate this predictable crisis. For instance, many of our state's investments (including teacher and public sector employee pensions) are not allocated into assets which will protect these funds from the ever-falling value of the dollar. When inflation takes off even more, these funds will become "diluted" in the mountain of government-printed paper money--unless of course, these funds are hedged against this predictable event. Placing at least part of these funds into precious metals, like gold or silver, would help to diversify these savings in Charleston. At current though, nearly all of these pension funds are invested in the stock market or US treasuries. These two "markets"--Wall Street and US Government Debt--will have very volatile swings in the near future, as we have already seen as of late. As foreign creditors willing to lend the US government money begin to realize they will never get paid back, they will cease making our federal government loans. We are already seeing signs of this, and the more foreign creditors that "dry up", the more the Federal Reserve will print money for the US treasury. The Fed will continue its bail-outs and its "purchase" of more American treasury bonds by creating money out of thin air. Placing our current state pension funds into something which will protect them from these reckless actions in Washington is critical to the future health of our state.

Furthermore, the national government's insolvency will be a direct burden on West Virginia. Our state government in Charleston currently operates on an annual "general" revenue budget of 4 billion dollars, meaning our state government raises roughly 4 billion dollars in taxes from within West Virginia's borders. However, the true overall budget for our state government is closer to 12 billion dollars. So where does this "extra" money come from? The federal government supplies West Virginia with much of this "surplus" of extra money, and it has for some time.

In the near future, this federal money will no longer be available. Washington D.C. is bankrupt--it just does not know it yet. Thus, our state can no longer rely on the federal government to bail us out of our financial problems and debts. And because of our large tax and regulatory burden, businesses and individuals have continually left West Virginia to escape this environment of government-induced economic hardship. There is no way of taxing more money from producers in our state, because there are little producers left. The only possible solution--one that is both economic and moral--is that we must shrink the size of our state government, and live within our means. Transitioning to a livable state budget is crucial, else the consequences will be brutal. Spending reduction will not be easy, but it is better for us to realize this as the only viable solution--one that will come whether we like it or not. It's better for us to do it now, on our own terms, rather than postpone this inevitable day of reckoning, when it happens on a far grander scale.

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