I have written about how recent upward consumer price trends for Starbucks and McDonald's are indicative of America's slide into penury as the credit crisis hits and the US dollar sinks, and fast-food chains become increasingly unaffordable for millions of Americans.
Add Coca-Cola to the mix to fully understand America's toxic cocktail of inflation, dollar collapse, and loss of empire.
The Romans, to pay for the cost of maintaining their empire, started a debilitating cycle of inflation by expanding the money supply.
They accomplished this by 'clipping' bits of gold from the existing coins in circulation and then used the purloined gold flakes to mint new coins. The coins kept getting smaller. The empire kept getting bigger. Prices went up while the purchasing power of each clipped coin went down.
In America today, the cost of maintaining the empire has prompted the government to start a debilitating cycle of inflation by expanding the money supply.
The difference between the Roman and American empire is that the Romans had a gold-backed currency that they physically needed to shrink to engineer empire-killing inflation. In America, the government, not having a gold-backed currency, just prints more worthless paper [and credit].
It took hundreds of years for the Roman empire to fall, but it will take less than one generation for the American empire to expire because unlike the Roman empire, the American empire was built on borrow-to-consume rather than produce-to-save.
Foreign governments (the new Vandals or 'axis of evil') are waking up to the fact that America has run out of cash, bullets and bombs and can't force the global US dollar hegemony to continue.
All the Vandals have to do is stop buying US dollars. They don't need to invade America to destroy America. All they need to do is switch from buying US dollars for their Forex reserves and buy any one of dozens of other currencies instead.
The Pentagon is in a particular mess. They are the biggest customer of oil in the world, and as the dollar collapses, and the price of oil (priced in dollars) goes up, and the American military can't afford to force the world to take their dollars anymore, they turn inward.
This only incentivizes the world -- not happy with America's attack on its own currency (inflation) and people (spying, unreasonable searches, unlawful imprisonment, etc.) -- to flick a switch and dump dollars.
In response, the American military and central bank, to pay for the oil it uses, and the bailouts it engineers, to pay itself huge bonuses and no-bid contracts, has turned more aggressively inward.
Increasing the prison population in America works to bring in some much needed dough as nothing is more profitable than prison labor camps run by authoritarian governments.
But just expanding the paper money supply and prisons is not enough. Stimulus checks are not enough. Socializing Fannie Mae and Freddie Mac is not enough...
Roman style coin clipping makes a come back, but in a way compatible for a consumer society fatally indebted.
As we see in this FT story, the idea of coin clipping as a way to inflate the money supply is alive and well as producer companies like Coca-Cola are now shrinking the size of their products; the equivalent of gold coin clipping.
From today's FT:
*Coca-Cola is shrinking the size of its Coke and Fanta cans in Hong Kong as it battles soaring aluminium prices, a move analysts say foreshadows broader packaging changes from the world's leading soft-drink brands.
*The soft-drinks group is reducing its can sizes to 330ml -- the most common can size -- from 355ml.
*Rising commodity prices have increased the cost of soft-drinks' packaging as well as the drinks' ingredients.
*Aluminium prices have risen by 65 per cent over the past three years to record levels as rising energy prices have pushed production costs sharply higher.
*Energy accounts for about 45 per cent of the cost of producing finished aluminium.
*Meanwhile, rising corn prices have raised the cost of high fructose corn syrup, which is used to sweeten most soft drinks.
*The US economic downturn is adding to companies' woes with PepsiCo this week reporting that sales were slowing at convenience stores as people become
*Cutting the volume or weight of products is becoming an increasingly popular way companies are pushing through effective price rises and protecting profit margins, according to John Kemp, analyst at RBS Sempra.
Link to FT article: Coke to shrink size of cans in Hong Kong