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Since the economic collapse of 2008, the Federal Reserve has more than tripled the money supply. This deliberate policy of inflating the currency predated the Obama presidency. But Obama-endorsed schemes such as quantitative easing—the Fed essentially creating vast amounts of money to pay for government operations—have exacerbated inflation.
A better way to think about increased fuel burdens is to grasp that it’s not necessarily the gasoline that is more expensive. It’s that our dollars are worth less than they once were. Money, like widgets, bananas, labor, or any other commodity, is susceptible to the laws of supply and demand. Flood the market with labor, and labor becomes cheaper. Flood the market with blue jeans, and blue jeans become cheaper. Flood the market with dollars, and dollars similarly become cheaper.
A consequence of running huge deficits is to either raise taxes, cut spending, or print money. Barack Obama hasn’t increased the top marginal income tax rate or slashed government spending as he promised. His Federal Reserve has rapidly expanded the money supply. Devaluing currency necessarily escalates the prices of goods purchased with currency. It’s not speculators increasing the price of a gallon of milk, an ounce of gold, or a semester’s tuition. It is, in large part, monetary policy that has done this.
By law, service station owners aren’t allowed to inflate the gasoline supply. But unscrupulous proprietors prime their pumps in just this way. The punishment for diluting petroleum with water or other additives often involves heavy fines and temporary closure of service stations. Just this December, New Jersey cited fourteen stations with selling gas containing octane levels less than advertised. What the government forbids at gas stations is a matter of practice at the Federal Reserve, where they constantly tinker with the value of the dollar. Enforcing honest weights and measures is a legitimate function of the state that the state enforces on everyone but itself.
In the 2008 campaign, Barack Obama faulted the Bush Administration’s energy policies for rising gas prices. He claimed that expensive fuel was proof of “Washington’s failure to lead on energy,” which transformed a “middle-class squeeze into a devastating vise-grip for millions of Americans.”
It wasn’t about speculators then. It’s not about them now, either.
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