We are all most all the way back to the bad old days of the Jimmy Carter Administration. People over a certain age have not forgotten the experience of having to deal with prices which were going up at the rate of 10 percent or 12 percent a year.

The new figures are out and they showed that inflation was raging along last year at over 4 percent. That is a scary number. At at the new current rate the dollar will lose half its value in about seventeen years.

Writing in the New York Times Clifford Krauss reports that “The national average for a gallon of unleaded gasoline has climbed to $3.07 from $2.24 a year ago, according to AAA, the automobile club, while a gallon of diesel fuel has climbed to $3.43 a gallon from $2.61…. According to preliminary estimates by the Department of Agriculture for 2007, beef and veal prices rose 4.5 percent, poultry 5.2 percent, dairy products 7.4 percent and eggs 28 percent.”

In the last nine years, the rise in the price of foodstuffs and raw materials has been almost meteoric. Get these numbers: soybeans up 176 percent, wheat up 269 percent, copper up 289 percent, corn up 150 percent and natural gas up 259 percent. Small wonder that a few people, at least, have listened to the likes of Ron Paul and given up paper dollars in favor of gold. Gold is up 212 percent these past years while those of us who have been putting our money in a piggy bank–or any other kind of bank, for that matter–have watched its purchasing power slowly and not-so-slowly diminish.

As long as your income goes up 4 percent a year you have nothing to worry about. But your income won’t. After adjusting for inflation, average incomes went up 0.01 percent in December. Parenthetically, one group of people who don’t have to worry about inflation are the members of Congress. Their pay goes up next year to match its loss of buying power. That fact may have something to do with the relative lack of interest by Congress in everybody else’s shrinking paycheck.

While the eroding dollar may cause pain and misery for most of us it solves a lot of problems for the politicians. It means, for instance, that you can cut the national debt in half and about twenty or twenty-five years simply by allowing inflation to burble quietly in the background.

One of the major reasons for persistent inflation is the Federal Reserve Board’s dedication to low interest rates. Low interest rates are achieved by making money more plentiful. Money is like anything else, the more there is of it the less it is worth.

An article of faith, seemingly held by liberals and conservatives alike, has it that low interest rates bring prosperity. Sometimes they do sometimes they don’t. Japan went through the last ten or fifteen years with interest rates hovering around zero and all that time the Japanese economy was in the toilet.

No group is more strident in its demands for lower interest rates than the stockbroker fraternity. They are always howling at the Federal Reserve Board to drop the rates–and you can see how much good lower rates have done them this past month.

The Fed with Ben Bernanke, its drab, uninspiring chairman, will soon be lowering rates again. We’ll see what good that does for us–or the markets.