Right-Wing Rant: The Joeverkill Plan to End Inflation

I'm Joeverkill, and I haven't thrown down a Right-Wing Rant in some time. So here it is: the Joeverkill Plan to End Inflation.

Inflation is currently somewhere around 10-12%, contrary to the official numbers provided by the consumer price index (the Analyst posted on this a while back). These numbers are simply outrageous. A middle-class worker in the U.S. generally pays between 20% and 40% of his income in taxes every year. If you include sales tax, excise taxes, luxury taxes, and property taxes, that number is well over 60%. This in itself is ridiculous -- the pay you early from January to some time in July goes to the government. Add inflation to that and you realize that you only get to enjoy about 20 cent out of every dollar you make. Much less if you keep that dollar and don't invest it in our already overspeculated and oversaturated markets.

Readers of this blog have perhaps come to see that Joeverkill likes to propose plans. What's his plan for inflation? It's a tough nut to crack since any measure you can take against it poses a risk of de-stabilizing the economy.

We had the gold standard for a while. In my opinion, it wasn't all that bad of a thing. The Bretton-Woods system probably would have worked if there had been enough gold for every G-8 economy to tie its currency directly to it, rather than using the dollar as a proxy. The earlier U.S. silver standard faced a similar problem as the supply of silver was rapidly outpaced by economic growth, until the point where people realized that it was not mathematically possible for banks to issue that much silver.

We know from history that tying currency to a hard commodity can work for a while, but that it eventually causes problems. Metal standards end for one of two reasons: either A) because economic growth outstrips the supply of whatever commodity the currency is tied to, or B) because the government simply gives up and decides that it needs to print more money, eschewing its own currency standards.

I can't speak to the second issue -- governments are stupid and they have plenty of power to mess things up. But the first issue can be solved under the Joeverkill Currency Plan. Here's how.

Rather than tying the currency to a specific hard commodity, tie it to an index of hard commodities. The index -- let's call it the Joeverkill Commodities index -- would need to be robust and relatively stable. It would be tied directly to the most basic materials an economy requires to function. Here's a short list: corn, wheat, sugar, cotton, light sweet crude, iron, zinc, tin, gold, platinum, silver, copper, bauxite, aluminum, rubber, electrical wattage, (EPA approved safe-to-drink) tap water, natural gas, beef, pork, chicken, and soy.

The more economically-minded readers of this blog may be asking, "What about labor? Isn't labor a basic commodity whose value should remain stable relatively to the currency?" Sure. We already have minimum wage laws in the United States, so that value will remain stable in relation to the index.

So the formula for calculating the value of any given element within the index can be expressed as such, with "Y" referring to the amount of each given commodity one can purchase for one dollar:

[(corn x Y) + (wheat x Y) + (sugar x Y) + (cotton x Y) + (light sweet crude x Y) + (iron x Y) + (zinc x Y) + (tin x Y) + (gold x Y) + (platinum x Y) + (silver x Y) + (copper x Y) + (bauxite x Y) + (aluminum x Y) + (rubber x Y) + (tap water x Y) + (natural gas x Y) + (beef x Y) + (pork x Y) + (chicken x Y) + (soy x Y)] / 21 = $1.00

Values of individual commodities within the index can fluctuate against other commodities within the index, and even against the dollar, but by definition the other values adjust proportionally to compensate. For example, if the price of platinum doubles in a given year (an increase of 4.7 cents on the dollar for the index), the sum of the prices of the other commodities will decrease by an average of 0.22 cents.

As I already mentioned, gold and silver standards were phased out in the past because of shortages of gold and silver in relation to economic growth. It will therefore be necessary to back the currency with actual commodities. Since it would be impractical for the government to stock enough of these commodities to back every U.S. dollar, I would propose an enforced privatization of the currency backing system. Domestic companies dealing in these commodities would be required by law to abide by the index’s price points (not to say their value can’t increase; as I already discussed, that value can indeed fluctuate). And market forces will essentially guarantee that foreign companies will sell commodities at index value.

What do you guys think? Insane enough to work? Or not quite insane enough to make sense?

I'm Joeverkill, and this has been a Right-Wing Rant.