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.

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