Dear Mr. Shaw:

 In response to your letter printed in the Newtown Bee on July 21, 2006, I can understand your concern of rising prices, and to government officials that seem powerless to address the concerns.

 Here are some additional ideas you may wish to address with legislators.

 1. The underlying cause of rising prices for the consumer is the almost unprecedented devaluation of the US dollar. Since its creation in 1913 the Federal Reserve has continuously increased the money supply to the point where one dollars purchasing value in 1913 is now worth about three cents. In a society where GDP grows at three percent, if the money supply grows at 8.7 percent, which it did in the US in 2005, the end cost of products will increase as there is more money chasing fewer goods. (All other things being equal of course.) This is a fundamental problem in all governments that are not restrained in spending in their respective federal budgets. As expenses increase above revenue, the government(s) simply prints more paper to cover the shortfall. The average American citizen has virtually no clue that the paper in his or her wallet is worth “less” every year, eventually this will come to a point where the paper money will be “worthless”. The German Republic in the early 1920s is the textbook classic example.

 2. A primary cause of high gas prices is the increased demand from over two billion new consumers in Asia and India. Chinese cities are new and bustling and the economic development rivals the United States of 70 years ago. Now consider the last great oil field was discovered in Saudi Arabia 30 years ago, current production from major fields is decreasing yearly and the NGO’s and environmentalists don’t want exploration in “pristine” areas, where is the supply going to come from to feed demand? Coupled with no new refinery construction in the US in 30 years, our supply chain is stretched to the max, as witnessed by shortages during Katrina. We also hear about E85 as a solution, however, Ethanol is by some measures 25 percent less efficient that gasoline, so your cars mileage drops and you burn more to travel the same distance.

 Legislators need to address cost issues via: demands for limiting federal spending, mandating a balanced budget, restraint of money supply growth, allowing for increased exploration of oil and natural gas on government land, and to demand increases in refinery capacity.

 Americans soon will see the world is changing and as populations of the rest of the world are able to grow their economies, they will have increased capital to demand goods and services and to compete with the American consumer for natural resources of all types.

Sincerely,

Keith Thompson

20 Mount Nebo Road, Newtown                                   August 2, 2006