A not for profit research group American Institute for Economic Research
(AIER) has determined that consumer prices have gone up this past year.
This group claims that if you remove the big one time purchases made in
this country such as houses, cars, furniture, etc. AIER states these
big ticket items attenuates the results of inflation's "Sticker Shock"
effect; in other words, the average items citizens buy to sustain their
welfare. When this group removed these items from calculations, they
found an increase of 8% for the consumer price index. These kind of
price increases on essential goods will place greater weight on
families. More specific details from the AIER group:
"Motor fuel and transportation costs are up 21.06 percent from year-ago
levels. The cost of food, prescription drugs, and tobacco also have
increased faster than the government's inflation measure, rising 3.56
percent, 4.21 percent, and 3.4 percent, respectively."
These prices increases sound depressing for the consumer; unfortunately,
it gets worse for the USD. An article from Xinhaunet from March of
2011:
"The amount of foreign exchange reserves should be
restricted to between 800 billion to 1.3 trillion U.S. dollars, Tang
told a forum in Beijing, saying that the current reserve amount is too
high.
China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March."
China's foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March."
If the Chinese remove these funds, this money will return to the
federal reserve in the U.S. This decrease in USD reserve in the Chinese
central banks will add to our inflation problems in the coming years.
The problems continue for the USD with a statement from central bank
governor Mahmoud Bahmani:
"In its trade transactions with other countries, Iran does not limit
itself to the U.S. dollar, and the country can pay using its own
currency."
The U.S. and U.N. trade embargo have created new stresses for Iran's
economy which has forced the country to trade oil for gold or other
curencies. If the Iranians have the audacity to trade oil for gold, this
action will spell big trouble for the USD. The reason the federal
researve can freely print trillions of dollars without inflation
problems comes from the petrodollar. The petrodollar is a word which
refers to all oil traded is in USD. This makes the USD an essential
currency in the central banks of foreign countries. This fact gives the
U.S. a huge amount of credit, and it ensures American military and
economic dominance. The biggest oil trade partners with Iran are China
and India which are also the most rapidly developing counties, so they
are hungry for oil and USD; however, if Iran begins trading in gold for
oil, the confidence of the USD will decrease,
and we will be seeing more USD returning to the states adding to our
inflation problems.
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