in sound economic policy.

I want 10%. Why? Because most middle-class America owns a home with a fixed-rate mortgage. Inflation has the effect of making that monthly mortgage payment take a smaller and smaller chunk of our paycheck. It’s like a free raise, every year. Banks hate inflation, obviously, because they want as much of our paycheck as possible. I’m middle class. We want a break.

Inflation also has the lovely effect of reducing the debt by making the money cheaper and easier to pay back, just as in a mortgage. The problem, is that the people (and countries) who hold our debt won’t be happy with inflation because they’ll lose money. But in just 5 years, at 10%... the debt is cut in half!

One big problem with inflation is that it moves people up the tax brackets, raising taxes. This can be countered easily by sliding the brackets up with the inflation rate, something that should have been built into the system a long time ago. Not to forget that minimum wage requirements should slide up with inflation as well.

Not to panic. No, your paycheck won’t go down as prices go up. Salaries have always followed inflation in the past. I will keep an eye out to make sure nothing goes wrong. Yes, I’m watching.

I want the Feds Fund Rate back down around 1 or 2%.

Caution: The following may make your brain hurt...

Greenspan, and now Bernanke, are doing their best to hold down inflation. Why? A number of reasons, actually:

1) If inflation gets too high, then investors who have already bought US bonds get upset, because they lose money. Think of it this way... You buy $100 in bonds at 5%. After one year you've got $105, right? Yes, except that's assuming a 0% inflation rate. If we assume a 10% inflation rate, you've still got $105, but that $105 will actually only buy $95 worth of stuff now. You lost 5%. In other words, because the original $100 you invested is only worth $90 after inflation, adding your 5% interest doesn't add up to a gain. High inflation makes unhappy bond-holders. Bankers get upset too, because they start losing money on your fixed-rate loans, and the Fed doesn’t like unhappy Bankers, not at all.

2) Because of the above affect that inflation has on the value of a dollar, the higher the inflation rate, the higher the interest rate we have to pay people to buy bonds. Which, in times of deficit spending, means we have to pay more to borrow, which increases the deficit and the debt even further.

OK. So now you understand why inflation is bad for banks and bad for the debt. Here's another question for you: Why do we have inflation right now? Give up? No, it's not rising labor costs. It's energy costs. Primarily, the price of oil is going up. Oil is used in everything, from manufacturing, to farming, to transportation. Oil goes up, we pay more for everything.

So why is the price of oil going up? Alas, no, it's not because there's an oil-man running the country and oil companies ripping us off. As convenient as that would be to believe, and perhaps it may be a small contribution, no, that's not it. It's China. Yes it is. The demand for fuel in China has skyrocketed in the last 10 years. Oil companies, quite simply, are having a difficult time keeping up with the demand. It's "supply and demand" doing it's thing. Short supply + big demand = higher prices.

So why has China's fuel demand skyrocketed? Because it's economy is growing at over 10% a year, fueled by Free Trade and cheap labor. They're just screaming along.

So what does holding down inflation have to do with our economy? Well, because oil prices are going up, the only way to keep inflation down is for something else to get cheaper to compensate. The Fed has made it too expensive for companies to grow as fast as they want, so there are more unemployed people around, which makes labor cheaper, which means your salary and benfits are going down. They raised the rates to slow the economy to a crawl.

Now let's put it all together... Ready?

China’s growing economy demands more oil... Higher oil demand creates higher oil prices... Higher oil prices create inflation... Inflation is being held down by higher interest rates... Higher interest rates cause paycheck pressure... Paycheck pressure reduces inflation.

So, what have we done in response to China's growing economy? We've put a throttle on ours!

Oh, what the heck. Let’s keep going... Ready?

Your paycheck getting pressed causes you to shop for cheaper prices... Cheaper prices means not made in America... Not made in America means made in China... Made in China is what’s causing China’s economic growth.

Don’t you just love a nice spiral?

Now that China has built up over $1T in National Surplus, they have just established a commission who's sole  purpose is to find ways to invest it to make more money. Make more money than what? Make more money than what they are making on our US Government bonds, of course. They are a huge stakeholder. Yup. They're going to dump our bonds on the market and invest that money elsewhere.

Which, brings up another problem, of us trying to borrow while the Chinese dump even more bonds into the market. We're going to have to pay through the nose to borrow. Ouch.

Folks, like I've said before, we are in an economic war, and our leadership isn't even aware it exists. We're losing, and don't even know there's a game. Except it's not a game. It's real life. It's for keeps. It's you and I who will suffer this loss.

There are better ways to control inflation. In this instance, cutting fuel taxes to keep the prices level here would be a good move. Closing a few tax loopholes and trimming some pork can make up the difference in income without hurting the working or middle classes. We keep our economy rolling, and competing, instead of slowing down and giving up. A booming economy more than pays for itself with the taxes it generates. There’s an even better way to fix this problem, and and many more at the same time, it’s called: putting an end to “Free Trade”.

Holding inflation down artificially causes just one thing: an explosion when it cannot be held back any further. With the current tactics, we’re looking at an economic explosion, or rather implosion. A nice big recession. We’re pushing ourselves down, instead of pulling the world up.