Gas prices are rising because dollar is falling

A news story about rising gas prices omitted the falling value of the dollar. Here’s my comment:

Prices are rising because the dollar has lost value. When the dollar falls by five percent, then merchants raise their prices just over five percent to get the **same value**. Iran, cold weather, refineries may worsen the problem, but the article does say demand has fallen.

The dollar has lost value because of deficit spending. The U.S. gov’t needs more money than it taxes. So Federal Reserve creates new money and lends it to the gov’t. That new money forces the value of your money to fall.

Eventually you are a seller of dollars and as any store owner will tell you if more people are selling what you are selling, then prices will fall. You start out selling your occupational service, such as graphic design or marketing or pottery. You sell your service or product for dollars. At that point, you are now a seller of dollars, and you don’t want there to be an increase in dollars, just as if you were selling blueberries and you don’t want there to be a glut of blueberries. You might sell dollars to get dinner. You might say the price of your ten dollars is one meal. Then a government contractor arrives, flush with new Federal Reserve money, and this contractor sells 10 dollars for 1/2 meal. So the restaurant owner can get 20 dollars for one meal from the contractor. So you must lower the price of your dollars to 20 dollars for one meal to compete. And that is how your money is devalued by the new money.

Though it gets worse. You now can buy only half as many meals. Where did the other half go? To the government. Your meals paid for the deficit spending.

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