Being prescient after making against-the-grain predictions is a UCAN tradition. Now that the price of oil has reached $105 a barrel, the mainstream media is finally admitting what we've been saying for years: that OPEC's price "increases" aren't really increases at all - what's really happening is that the dollar's value is dropping so quickly that it takes $105 in U.S. dollars to buy what used to cost $75 U.S.  Not only that, these cuts in the value of the dollar actually help the U.S. Treasury pay its debts. Good for Uncle Sam, but very bad for you ... especially if you happen to live in America.

Economists have a word for this: They call it "Inflation."

Unfortunately our government has not been monitoring inflation. About ten years ago, the United States began reporting what was called the "Core Rate" of inflation. This "Core Rate" is deceptive ... it does not include the cost of energy, food or housing - those items are considered mere "statistical noise"

That's why Mr. Bernanke has been able to claim that our inflation woes are manageable. The official numbers do not reflect the true price of anything that people actually buy. Apparently, Mr. Bernanke has not purchased a gallon of gas lately ... gone grocery shopping ... or tried to buy a home or pay rent.

Mr. Bernanke's claims that we have "minimal inflation" are wearing thin. Even mainstream economists are waking up and smelling their overpriced coffee (as evidenced by Starbuck's recent financial woes). 

Here's how bad it is - the Mexican Peso is actually gaining on the U.S. dollar. That's right, the currency of a third-world country - a country where flush toilets are considered a luxury -- actually has a stronger monetary system than the U.S.A.

So why would our government inflate your money? They have three very good reasons:

1) in the short term, it stimulates the economy by creating the illusion of wealth. When there is more money in the system, it is easier to get into debt, because the money available to banks is cheaper.

2) In the long term, it is a great way to cut the benefits of wounded veterans and social security recipients.

It's ugly but true: Government benefits are tied to the Core rate of inflation" which doesn't measure the true rate of inflation. That means that COLAs (Cost of Living Adjustments) do not keep up with inflation. This process cheats Americans, but helps keep the government in the black. 

3) It is a fantastic way to pay off war debts and other foreign debts, such as money we've borrowed from the Chinese ... the debt is payed in dollars that are worth far less than the value of the money that was originally loaned. This is how Germany paid its debts to allied nations after World War I. At one point, it took a wheelbarrow of money to buy a loaf of bread in post-war Germany. Hopefully it won't get that bad here.

UCAN is known for making some pretty good predictions. We didn't predict that the Peso would outstrip the dollar, but we did tell you that the government was lying about the inflation rate more than two years ago. And we observed (correctly) that every major economic upheaval of the last 50 years has been accompanied by high oil and energy costs.

Of course UCAN members knew all about this trend TWO years ago, because we explained it in our Spring 2006 newsletter, which is available in print form to our members long before we ever put it on the Internet.

So the next time somebody offers you a penny for your thoughts, say "No Thanks, I prefer a stable currency, like the Peso."  And don't forget what President Gerald Ford said, "Inflation is the cruelest tax of all."