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John VIII, 44 2005While most of us are mesmerized by the catastrophe on America's Gulf coast some of us have noticed a rapid spike in gas prices. In fact all fuel prices have been increasing at unprecedented speeds. The word gouging is becoming a commonly used anachronism for what is transpiring in the energy sector. Make sure you clearly understand that these horrific price increases will have no effect on our rate of inflation, because fuel, housing and taxes are except from statistic of American inflation. Thus we might well ask some poignant questions about the Federal Reserve as well as our governments actions in relationship to our currency value, and fuel prices. Allen Greenspan has been at the helm of the Federal Reserve System since 1987. This, touted by the Washington Times as the guru of finance, has been idolized by scores of politicians and pundits for his “brilliant” management of our American economy. Just exactly what he has done that is so eminently worthy of such praise is never mentioned. An examination of Greenspan's tenure as governor of the FRS is certainly warranted. Before we get to that however let us all remember that the FRS is not Federal, not a Reserve, and certainly not a System. The Federal Reserve System is a private banking monopoly indirectly granted by congress in 1913 as the 16th amendment, (U.S. Constitution) which was not properly ratified. The power as vested in congress to levy taxes and issue coinage was relinquished to the FRS. Since 1987 according to information from the Bureau of Labor Statistics we can surmise that what was purchasable for one dollar in 1985 costs $ 1.81 in 2005. Put in a different way what Mr. Greenspan has accomplished is to reduced the value and purchasing power of the dollar by (87-06) 72% in a short 18 years. Had our country been financially mismanaged in the same manner since 1800 the value of the dollar would be 205% less than it is today, or in other words worthless. This process is called inflation. Inflation benefits bankers and tax collectors and none else. If we now go back to 1913 and review the value of the dollar at the time of the inception of the FRS we can begin to understand exactly what these bankers are up to. The variance of purchasing power of the dollar from 1913 to 2005 is $19.74. Or put in a different way the currency was inflated astronomically. Or what you could purchase for a dollar in 1913 now costs a $19.74. The big issues in all this are taxes. Remember that taxes are one of the three items not considered when our government calculates inflation. The other two major items are housing and fuel. Remember that our income tax is progressive (actually regressive) the tax rate increases as the income rises. We call, this regressive because it penalizes effort. As a consequence every time the currency is inflated your personal income increases to keep pace with the inflation and so does your tax rate. Worse than that is the fact that every item you purchase is affected by this inflationary spiral. To simplify this let's look at gasoline prices in Florida. Florida State gasoline taxes are .14 cents per gallon. Federal taxes are 18.5% per gallon; the county tax rate that fluctuates from 0,06 to 0,12 cents per gal is not included in the calculation. Taxes paid by refiners (property, licensing, income, production) are not calculated here, and neither is transport. The rate of price increase also boosts the total tax cost you pay. Price per Gal 2.20 2.30 2.40 2.50 2.60 2.80 2.90 3.00 3.20 Total tax paid .55 .56 .57 .60 .64 .66 .67 .69 .73 This is what happens when currency is inflated or when prices skyrocket. By the time you read this gasoline prices will likely be about 3.00. At per example $3.50 equates to a tax of $.79 cents about a quarter more tax then 2.20 you paid less than one year ago. The average refinery works on a 4 to 5% profit margin at a $2.20 retail price they make about 10 cents of profit but at 3.00 they make .13.5 cents per gal. You can see where this is going. The retailer's part is about 3 to 4 cents per gal; so independent fuel retailers are certainly not getting rich. So we must ask the question who is in fact price gouging and ripping us off? At $3.00 per gal certainly not the retailer who on a 10 gal sale makes about 30 cents. Not the refiner who is lucky if he makes $1.35. The taxman however comes our smelling like a rose with a take of $6.90 per every ten gal sale, and at $3.20 per gal that works out to $7.30. Were we to transpose those numbers back to 1987 when fearless Allen took over at the fed we can surmise that our price per gal. Would be $1.14 on which based again on 10 gals the state and fed would collect. $3.50 cents, and the refiner about .40 cents and the retailer about .40 cents. So ask yourself who is really ripping you off? The currency situation where the dollar is in competition with the euro pound and Swiss frank is even worse. The euro was introduced less than ten years ago at 0.87 cents to the dollar. The last time I looked it was up to $ 1.30. Almost doubling in less than ten years. Gold is up 120% Silver 180% and platinum 82%. Feckless Allen did not do a good job his performance was dismal at best. Far be it that the media FRS or any branch of government report these facts to you, after all they don't want a revolution do they? |