The Federal Reserve’s Contribution to Inflation

March 27, 2008 at 9:00 pm

Though I’m not in favor of a gold standard, it’s interesting to hear Ron Paul talk about how printing more money makes prices higher for the average American.

Think about it this way, if you look at the price of oil in terms of gold, it has remained almost unchanged over the past several years. In 2000, one ounce of gold bought approximately 10 barrels of oil. Today, with gold at $950 an ounce and oil at $105 a barrel, one ounce of gold purchases about 9.5 barrels of oil.

Paul’s point: The fall of the dollar is what is causing oil to seem more expensive.

Now while I don’t think we should necessarily return to a gold standard, the Federal Reserve’s current policy of making money more easily available, seems like it will only depress the dollar further.