*Written by Tho Bishop.

This chart should scare every person in America.

What is it? This is the Federal Reserve’s measurement of the American money supply. It charts the amount of dollars printed by our government. Note the general increase. This is the reason why penny candy no longer exists, why Krystal burgers use to cost a 10 cents and why Gone With the Wind’s $189,523,031 box office is considered to be an even stronger performance than Avatar’s $749,766,139.

And then do you notice how things get really crazy in 2009? That’s when the Federal Reserve’s QE1  spent over a trillion dollars buying up toxic assets and then followed with QE2 which printed up an additional $600 billion. As James Grant,

a witness at a subcomittee meeting on inflation said, the term “quantative easing” should be outlawed and replaced with the more accurate return of “printing money”.

You want to know why gas prices have gone up? And food prices? Why Abercrombie and Fitch will be raising prices, as well Kraft, Haynes McDonalds? ( http://finance.yahoo.com/news/Rising-wholesale-prices-spur-apf-2005267013.html?x=0)

Greedy capitalists you say? Lets look at commodity prices:

Pre QE2:
Gas: $2.64 US Gasoline Price (August 2010)
Cotton: $85 (Contract Size 50,000 pounds)
Copper: $3.25 a pound
Lumber: $200 (Futures Contract –Contract Size 110,000 board feet)
Sugar: $17.50 (Futures Contract-Contract Size 112,000 Sugar #11)
Cattle: $92 (Futures Contract-Contract Size 40,000 pounds)
Milk: $14 (Futures Contract-Contract Size 200,000 pounds Class III)

Post QE2:
$3.50 US Gasoline Price
Cotton Prices at $215 (Futures Contract -50,000 pounds)
Copper Prices $4.50 a pound
Lumber Prices at $303 (Futures Contract)
Sugar Prices at $30 (Futures Contract)
Cattle Prices at $114 (Futures Contract)
Milk Prices at $19.50 (Futures Contract)

It’s a basic role of money that the more you print, the less valuable it becomes.

This means that one of two things are going to happen. Either the Fed maintains or further increases the money supply, meaning that the prices of all goods will eventually rise to reflect the new value of the dollar OR the Fed will have to contract the money supply. Either one will create a bad economic enviroment as the economy has to filter out all the crap and malinvestments from the Federal Reserve’s monetary policy.

You will often hear politicians, and even the Federal Reserve Chairman, talk about how banks are not lending this freshly printed money. Though this is frustrating for individuals seeking a new loan, this has actually been a blessing for the economy and been a check on inflation. Again, look above at the chart – we are talking about an unpredented increase in money, it is better for it to be sitting out in a bank vault (or more accurately, on the banks account ledger at the Federal Reserve) rather than out in the economy where it can do real harm.

This will not last forever.

The economic crisis of 2008 has not passed, it has simply been delayed and made worse. Be ready.