Hornberger's Blog

Hornberger's Blog is a daily libertarian blog written by Jacob G. Hornberger, founder and president of FFF.
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Rising Prices and a Falling Dollar

by

It seems that the mainstream media might finally be coming to realize that the soaring prices of commodities is not so much due to reduced supplies or increases in demand but instead to the enormous fall in the value of the dollar.

In an article in Sunday’s New York Times entitled “A Peek Behind the Price at the Pump,” Nelson D. Schwartz hit the nail on the head when he wrote, “But even as the presidential candidates debate whether to cut federal taxes this summer and legislators look at other ways to ease prices at the pump, a harder-to-control factor is emerging as a main reason behind the increase in energy costs: the sinking dollar.”

Welcome to Empire 101: What They Don’t Teach You in High School Civics and College Economics.

Since items sold in the United States [and elsewhere around the world] are priced in dollars, the price must inevitably reflect supply and demand for both the item and the currency.

If the value of a currency goes down because of an increase in supply of the currency or a decrease in demand for the currency, the only way that can be reflected is through an increase in the price of things that the currency buys.

As most every American should know by now, ever since 9/11 the dollar has been cratering in international markets. What many Americans are just now discovering, however, is that that phenomenon is a direct result of out-of-control federal spending, the type of spending that has characterized the federal government for the last seven years. Do the imperial adventures in Iraq and Afghanistan come to mind?

Unfortunately, many in the mainstream press still don’t get it. For example, in an editorial yesterday the New York Times, the same paper that published the Schwartz piece, lamented the high financial costs of Iraq and Afghanistan, especially medical costs for soldiers.

So, does the Times call for an immediate withdrawal from these imperial adventures? No. Instead, it declares:“Fortunately, the solutions are clear — more money for mental health services….”

As Americans are now discovering, empires are not cheap. As people continue to pay ever-increasing prices at the pump, in the grocery store, and elsewhere, it’s important that we keep the reason in mind: out-of-control spending by federal officials. Such spending not only pays for ever-rising welfare at home, and not only for such wasteful and destructive things as the war on drugs, but it also pays for deadly and expensive imperial projects abroad.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.