Just last week, I has started publishing information about energy-based inflation. I had the idea and predicted it in a paper I wrote for an economics class almost 5 years ago. It was the first, and only, B graded paper I had ever written in an economics class. The professor gave it this low grade because he ultimately disagreed with me that energy could cause a ripple of inflation in the American economy.

This morning, I check my email to find further support for my theory of energy-based inflation. The Washington Post published an article about how Coal Can’t Fill the World’s Burning Appetite. To sum up their article, circumstances have shot the price of coal up by 50% or more over the last five month. While this short-term spurt in price may be able to be absorbed by businesses, don’t count on it. The price of coal is not going to be coming down any time soon. Same with oil.

What does this mean for America? Well, if you read the report from our government, guess where we get 49% of our energy from? If there is a sustained increase in the price of the resource that generates 49% of all of our energy, you can bet your house that prices are going to go up everywhere!

The bottom line is that energy is driving inflation in our economy, not interest rates. Watch what happens to all the rate cuts by the Federal Reserve this year. They will go to offset the energy costs. It will temporarily stabilize energy inflation, but it is not a permanent solution. Energy costs will rise, and the Fed will be powerless. Changes in the energy market are the only thing that will curb energy-based inflation. I’ll post my solution on Wordscause this evening.

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