Thursday, May 28, 2009

Hyperinflation Part III

I've written on hyperinflation a couple of times previously, so I apologize for harping on the topic yet again. But famous economist and investor Marc Faber is quoted in Bloomberg as saying, "I am 100 percent sure that the U.S. will go into hyperinflation."

Faber, according to the Bloomberg report, is famous for advising his clients buy gold "at the start of its eight-year rally, when it traded for less than $300 an ounce. The metal topped $1,000 last year and traded at $949.85 an ounce at 12:50 p.m. Hong Kong time. He also told investors to bail out of U.S. stocks a week before the so-called Black Monday crash in 1987, according to his Web site."

Of course a couple accurate predictions doesn't mean that Faber is right again, but his prediction should be heeded because of the rising chorus of warnings by famously prescient economists and investors like Jim Rogers and Peter Schiff.

Update 5/29/09: Business Intelligence Middle East has an article quoting both Marc Faber and Jim Rogers who are both anticipating the next coming crisis that will be in currencies.

Wednesday, May 20, 2009

No Good Can Come of This

According to the Wall Street Journal, the Democrats have a 946 page "climate bill" that they want to put to a vote in the House of Representatives. Energy and Commerce Committee Chairman Henry Waxman is afraid that Republicans will force the bill to be read prior to voting. So what have the Democrats done? They've got a speed reader on retainer--ready to go should the Republicans demand that this monstrous bill actually be read and displayed for all to see.

The bill will take at least nine hours to read, according to a source.

No good whatsoever can come from this. I cannot even fathom the depths of evil in a 946 bill on climate change the Democrats and the green lobby can come up with. As if we don't have enough to worry about already.

The State, Guantanamo, and You

Lew Rockwell has penned an excellent column using the metaphor of Guantanamo Bay prisoners to us. It is a good read, and demonstrates the human desire for power.

Here is a teaser:

"The state is driven by its own internal interests, which can only be fulfilled at the expense of society. The state operates according to the principle of violence. Violence is the ultimate bargaining tool of the state. This is true in domestic and foreign relations, whether running a health program or a prison camp."

Tuesday, May 19, 2009

The Government's Best Friend: Inflation

On May 1 I wrote:

"Basically, there are four things the government can do to eliminate the massive debt we're accumulating: tax the country into the stone age, inflate the currency so that it becomes worthless, repudiate the debt, or cut spending significantly. The government has already set the course of taxation and inflation. This combination will be devastating and you absolutely do not want to have your financial portfolio to have any significant exposure to the U.S. dollar. Get out while the gettin's good!"

It has not taken long for "Fed and Friends" to confirm my prediction regarding inflation. Bloomberg is reporting that economists Greg Mankiw (former White House adviser) and Ken Rogoff (Chief Economist at the IMF), "argue that a looser rein on inflation would make it easier for debt-strapped consumers and governments to meet their obligations. It might also help the economy by encouraging Americans to spend now rather than later when prices go up."

Rogoff states, "I’m advocating 6 percent inflation for at least a couple of years."

Bloomberg adds, "For the moment, the Fed’s focus is on preventing deflation -- a potentially debilitating drop in prices and wages that makes debts harder to repay and encourages the postponement of purchases."

Bloomberg continues, "Given the Fed’s inability to cut rates further, Mankiw says the central bank should pledge to produce “significant” inflation. That would put the real, inflation-adjusted interest rate -- the cost of borrowing minus the rate of inflation -- deep into negative territory, even though the nominal rate would still be zero."

Read the whole article to get the chilling effects of what our elites think best for us all. I've already written that the CPI, which the government uses to measure inflation is based on funny numbers and grossly underestimates the rate of inflation. And I've ridiculed the notion that the Fed actually has the ability to restrain the rate of inflation.

The truth of the matter is that "Fed and Friends" use inflation to reduce the national debt, tax its citizens, and perpetuate the oppressive national government. This is immoral and should be exposed by all as theft and deceit.

The government is in such great debt that it must inflate the dollar to be able to service the debt and fund future government spending without the politically untenable tax increase that it would otherwise require. The government fears deflation because it would make it impossible to pay off its debts and destroy the government.

This is serious business. By setting an inflationary course our government is choosing to play with fire in a tinderbox. Aiming for an official rate of six percent inflation will lead to a higher, yet unreported rate of inflation closer to ten percent. Aiming for such a high rate of inflation will also make it that much more difficult for "Fed and Friends" to restrain the rate of inflation making a hyperinflation scenario that much more likely.

As I've been saying for months now, this is precisely why it is so imperative for those with savings to purchase gold and silver. Our government is about to rob us blind, protect your assets in ways that the government cannot so easily rob you of your wealth.

More Secesion Talk

Those that find secession an implausible political maneuver will be surprised that Staten Island and Long Island are both discussing secession from the state of New York. This is of course, a far cry from actually seceding, but our desperate times are calling for desperate measures.

New York State Senator Andrew Lanza is quoted in the article as saying, "People from every party are very frustrated that government doesn't seem to be responsive, accountable, and acting according to the will of the people."

There will be a day when states will determine that it is no longer in their best interest to remain a part of the massively indebted and overly governed United States. They will seek alternatives, and secession will prove the most appealing option.

If You're Not Petrified, You're Not Paying Attention

Here are two interrelated links based on an interview of Howard Davidowitz, chairman of Davidowitz & Associates. Go to the Yahoo link and watch the six minute video.

From the Yahoo article:

"Davidowitz, who is nothing if not opinionated (and colorful), paints a very grim picture: "The worst is yet to come with consumers and banks," he says. "This country is going into a 10-year decline. Living standards will never be the same."

Mike Shedlock elaborates on the Davidowitz interview and article, saying:

"Obama is now looking ahead to the next election and is attempting to buy union votes at the expense of everyone else but especially legitimate bondholders with senior rights. In a possible repeat of Smoot Hawley, Congress is again threatening to label China a currency manipulator. And like FDR, Obama is targeting corporation with anti-trust legislation (while consolidating already too big to fail banks into even bigger banks.

One thing's for sure. If you're not petrified of what Obama's doing , you're not paying attention."

Monday, May 18, 2009

A Visual Aid

Okay, so here's a good visual aid for all of us regarding our national debt:

Do you really think it is politically viable (or even possible) for us to ever pay off our debts in anything approximating our current dollar? If you do, I'd like you to tell me how it could be done. This is why inflation is our government's best friend--if the future value of money is worth less than the present value (our debt), our government will be better positioned to pay off the ridiculous debt. But under that scenario, anyone saving their money is going to be huge losers because their savings won't be worth beans.

As I've said before, this national debt is going to lead to massive taxes or massive reductions in government spending. A revolution is brewing, whether you realize it or not. When the bill comes due, there are going to be millions of really angry Americans.

Wednesday, May 13, 2009

Good Articles on Inflation

Here are a couple good articles on inflation that I've read the last couple of days. There are three of them, only two published so far:

A Whole Lot of Inflation to Come, Part 1

A Whole Lot of Inflation to Come, Part 2

Here is the conclusion of part 2:

"In his April 3rd Interest Rate Observer, James Grant reported that the combined Federal Reserve and US government response to this economic crisis, defined as the change in the Federal Reserve's balance sheet plus the US government's fiscal deficit as a percent of GDP, is some 30% of GDP. To put that number into perspective, that's 10 times the postwar recession average of 2.9% and 3.5 times the previous record of 8.3% seen in you guessed it, the Great Depression.

The size of today's government's reflation efforts truly dwarfs anything we have seen in the past and suggests some truly eye-popping price inflation rates in the future. On that score, it's interesting to note that the greatest price surge in the post gold standard / FDIC era, one that saw the CPI rocket to 15%, began during the 1973-74 recession with a combined Federal Reserve and government response of a mere 4% of GDP. At today's 30%, and we are not done yet, one can only imagine the kind of price inflation that awaits us this time around."

I have been pounding on this for months, inflation is coming. Just because this is America doesn't mean we're immune to massive inflation, if not hyperinflation. Get ready, this is going to be really unpleasant.

Thursday, May 07, 2009

America's History of Regime Change

Stephen Kinzer gave a fascinating speech on America's history of interventionism in the affairs of foreign governments. A transcript of the speech is now available and is a fascinating read. He raises important concerns about the unintended consequences of intervening in the affairs of foreign nations. He writes specifically about Cuba, Vietnam, and extensively on Iran.

He summarizes his arguments:

"The lesson of all this is that when you violently intervene in the political development of another country, you’re doing something like releasing a wheel at the top of a hill. You can let it go, but once you let it go you have no control over how it’s going to bounce or where it’s going to end up. American foreign policy has gotten off onto a tangent that I think our own Founding Fathers never envisioned and would be horrified to see. We’ve decided there is only one way everyone in the world should live, and it’s the way we tell them they should live. This is the essence of the policy and the face that the United States is presenting to the outside world. We’ve decided that we’ve discovered something that other people can never discover and we’re going to force them to do it. This creates a kind of resentment that deeply undermines our security."

Wednesday, May 06, 2009

The Fed is a Fraud

Mish has an excellent post arguing that fractional reserve lending (i.e. our Federal Reserve system) is fraudulent and ought to be terminated. I wholeheartedly agree and urge you to read his post.

Here is his conclusion:

"The central point in a free market based banking system is to avoid violations of property rights. However, the current system of 100% fractionally reserved banks allows money to be created out of thin air robbing savers, by making those savings worthless over time. A pernicious effect of this system of permanent inflation is that it creates malinvestment and large boom-bust cycles that destroy wealth.

The Fed is a failed institution. Fannie Mae is a failed institution. Freddie Mac is a failed institution and fractional reserve lending is a fraud.

The correct policy decision is to abolish all of them, not to add layer after layer after layer of regulators watching over other regulators, who in turn watch over still other regulators, where some "god-like" super-regulator at the top supposedly has infinite wisdom and knows exactly how to regulate."


For all the talk of "sustainability" in terms of environmental concerns, we, collectively, have no understanding of what constitutes a sustainable government. Since the New Deal we have been spending money that we don't have, and eventually it is all going to come crashing down. But, as Mark Thornton writes, we face a culture that has bought into the myth that "government can solve our everyday problems at no cost so the more the merrier."

He substantiates this claim by referring to a poll by the AARP.

"... according to a AARP poll of Americans (45 and older) 83% want the government to help unemployed people get health insurance, 78% want government to provide unemployment benefits as long as people continue to look for work, 71% want the government to make home mortgages more affordable, and 68% want the government to help people facing foreclosure to stay in there homes.

That pretty much explains everything. Americans who are 45 and older are not going to get smarter and likely will not improve their education. They are the "backbone" of America and ¾ of them have beliefs that helped make the current mess politically possible and will make it very difficult to achieve a real economic recovery. Let's hope that those 44 and younger are better informed."

He writes of health insurance:

"Everyone seems to think health insurance is a cure all for the rising cost of medical care, but comprehensive health insurance is the cause of rising medical care costs. If you don't pay for the cost of medical services as you chose them, then there is a huge tendency to overuse medical services and to choose the most expensive means. Imagine if you could buy comprehensive dairy insurance so that you pay a set fee, like $120/month, for the insurance, but that as a result you can get as many dairy products as you would like for a 25¢ co pay. Is it not too difficult to imagine that people with this insurance would consume more dairy products and that as a result the price of dairy products would increase and would eventually be too high for some people to afford? Comprehensive health insurance is a creature of government. Catastrophic health insurance is rational because no one really wants to use it."

Government cannot solve economic problems, it can only make them worse. Until we learn that lesson, we're going to find life unnecessarily complicated, cumbersome, dangerous, and difficult.

Friday, May 01, 2009

Hyperinflation Continued

I've written before about concerns over hyperinflation. I encountered an interesting interview of John Williams of the Shadow Government Statistics website.

Williams, an economist, says of the "stimulus plan:"

It will not stimulate the economy. The cost of all this is inflation. We will see inflation levels not seen in our lifetime by as early as the end of this year. Eventually we will see liabilities of $65 trillion – more than four times U.S. GDP, more than global GDP. There will be a hyper inflation where the dollar becomes worthless, where the paper is worth more as wall paper than as currency.

He continues and says:

"We are headed into a hyper-inflationary depression that will become a Great Depression. When hyper inflation hits, it will disrupt the normal flow of commerce and turn it into a Great Depression.

What about paper assets based on the dollar? You want to get into something like gold or silver –physical gold or silver, not paper. Perhaps get some assets outside the dollar. It’s a time to preserve your wealth and assets, not to start speculating on the stock market. There is a lot of volatility ahead. Over the long term, gold and silver are your best hedges."

Basically, there are four things the government can do to eliminate the massive debt we're accumulating: tax the country into the stone age, inflate the currency so that it becomes worthless, repudiate the debt, or cut spending significantly. The government has already set the course of taxation and inflation. This combination will be devastating and you absolutely do not want to have your financial portfolio to have any significant exposure to the U.S. dollar. Get out while the gettin's good!