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ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

Let’s talk about… inflation

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International Forecaster June 2009 (#6) – Gold, Silver, Economy + More
By: Bob Chapman, The International Forecaster
Posted Sunday, 21 June 2009 

The following are some snippets from the most recent issue of the International Forecaster.  For the full 29 page issue, please see subscription information below.
US MARKETS
Since hyperinflation is clearly in our future, let’s talk about what inflation really is, what causes it, what the different degrees or levels of inflation are, and what it takes to put a stop to inflation?
By modern definitions, inflation is basically an overall increase in the prices charged for goods and services in a particular economy over time. This is a pretty simple concept, but there is some real confusion as to what the root cause of inflation is.  It does not come from people willy-nilly charging more for their goods and services.  People can raise prices all they like, but if there is not enough money and credit available to purchase their goods and services at the prices they are charging, they will eventually have to either lower their prices, or expect to make far fewer sales.

          What you have witnessed for the past two years is the above concept in overdrive, especially in the real estate and automobile markets, as the supply of money and credit has greatly contracted for all but the anointed Illuminist institutions that are parking their profits and bailout money at interest with the Fed for fear that they might lend it out to a zombie financial institution or business corporation and never get it back.  As their money is sidelined with the Fed to sterilize it (i.e. to keep it from stoking inflation) the smaller fry who depend on them for their supply of financial capital are being allowed to die of money and credit starvation so the anointed can purchase the most valuable parts of their financial carcasses at pennies on the dollar via bankruptcy auctions and fire-sales in a blatant attempt to eliminate their competition and consolidate their power.  This deflationary contraction in the supply of money and credit due to the exposed loan, mortgage and derivative fraud is a strong undertow to our economy which threatens to drag it out to sea until it runs out of air and drowns.  The Fed must therefore inflate and swim for shore, or die.  And inflate they will.  We can absolutely guarantee it.  Obama will go down in history as the King of Stagflation, as he joins forces with the inimitable Gordon Brown, the King of Fire-Sale Gold.
On a microeconomic scale, prices for specific goods and services are usually set by supply and demand (that, of course, would be in a free economy which we no longer have, so manipulation becomes an input for pricing specific goods and services in our economy, and is sometimes even the main input, as with gold and silver prices).  However, the microeconomic factors which determine prices for goods and services are by far trumped by the macroeconomic factors of supply and demand.  The supply side on a macroeconomic scale is determined by the amount of goods and services that are produced for sale in the overall economy.  The demand side on a macroeconomic scale is the amount of money and credit available to the overall economy with which those goods and services can be purchased, or expressed another way, the amount of money and credit that is available to chase after those goods and services.
This is why the price of gold and silver must eventually skyrocket. The microeconomic supply, demand and manipulation factors which currently have sway over gold and silver prices will eventually be trumped by the macroeconomic factors, namely, a profligate increase in the supply of money and credit to unheard of levels which will drive prices up across the board.  The Fed cannot suppress the price of all goods and services as it rampantly expands the supply of money and credit, and can only influence a chosen few, such as gold and silver, which are suppressed because they are the canaries in the coal mine.  When everything else gets more expensive, and as fiat currencies are shown to be the “worthless paper” they really are, gold and silver will become the only real safe-havens from the resulting inflation and financial deterioration.  That will then generate a demand for precious metals that is so great, it will drive the price of gold and silver up until they catch up with the overall supply of money and credit, and there is nothing the Fed can do to stop it, short of pulling the plug on money and credit and destroying our economy, along with the privately owned Fed itself and its Illuminist cronies with it.  This eventual destruction is planned to be sure, in order to pave the way for a one world Orwellian police state.  The trick for the Illuminists is how to get out of their paper assets and convert them to real assets on the cheap before pulling the plug on money and credit.  The problem is that as they bail out of paper, and into tangible assets, along with other foreign creditor nations anxious to trade their “worthless paper” in for things of real value, their bailing activities will drive inflation, and the price of gold, silver and other tangible assets, to unheard of levels, thereby dramatically decreasing the amount of tangible assets that they can absorb with their dollar reserves and their sales proceeds from the dumping of paper assets.  The US and its creditors will be competing with one another in the race to dump dollar-denominated paper assets in exchange for precious metals, commodities, real estate, factories and equipment and other tangible assets, as well as shares in companies which own such assets, including shares in gold and silver producers.

          The obvious answer is, of course, that they can’t pull this off on the cheap, and they will use the resulting hyperinflation to wreck the rest of the economy while they are desperately attempting to bail out of dollar-denominated paper assets behind everyone’s backs, as part of their Big Sting Two criminal enterprise.  They will attempt to accomplish this insider trading scam in secret through unregulated dark pools of liquidity such as Project Turquoise and Baikal, as well as through the unregulated gambling casino which some dare to call the OTC derivatives market.  They will use their sales proceeds to buy all the real, tangible assets they can get their hands on and leave everyone else holding a bag full of “worthless paper,” aka Federal Reserve notes, US Treasury bonds and GSE bonds.  But the amount of “worthless paper” is so great, and there are so many substantial players who will be trying to do the same thing, that market chaos will result, and the paper assets will deteriorate, and the price of tangible assets will simultaneously appreciate, at a rate that leaves everyone breathless.  Truly, this will be a situation where he who loses the least, and he who buys gold and silver and their related shares early on, are the ultimate winners.  The biggest losers will be those who fail to take physical delivery of their precious metals, such as gold and silver ETF shareholders and holders of mint certificates, who will be thoroughly Madoff’d, as well as holders of any leveraged gold and silver futures positions who will be wiped out by manipulations before the final run-up, thus losing all their investment capital.
The elitist oligarchs who run America, Canada and Western Europe and their privately owned central banks own tens of thousands of tons of gold already, and will seek to take the proceeds from the sale of their paper assets and use them to increase their gold holdings in an attempt to maintain monetary dominance over major players like China and Russia, who will also attempt to add to their holdings by many thousands of tons.  There is only so much gold to go around, and when all the big players become gold bugs themselves, gold, and also silver, will go ballistic.  They want the gold mine (literally), while you get the shaft.  That is, has been, and always will be, “The Plan.”  Bernanke and Geithner are now Obama’s twin Tattoo’s, with our apologies to the producers of “Fantasy Island,” a show which has become a perfect metaphor for what the US economy with its so-called “Green Shoots” has become.  De plan, boss, de plan.  De plan indeed.
On a technical macroeconomic basis, an economy suffers from inflation when the amount of its total money and credit available over a period of time (the demand) grows at a rate in excess of the rate of growth in its total value of goods and services produced over that period of time (the supply), which valuation is based on price levels in effect at the beginning of that period of time.  In more simple terms, inflation occurs when the rate of expansion of the supply of money and credit exceeds the rate of expansion in the production of goods and services.  In fact, in the past when we still had a modicum of integrity in measuring economic statistics, inflation was defined as an increase in the supply of money and credit, period.  Higher prices were simply a symptom of inflation, not a definition of inflation.  The supply of money and credit was what was inflated, not the prices of goods and services, which simply rose as a direct outcome of the inflated supply of money and credit.
Since central banks are currently in control of the supply of money and credit in most modern economies, it is the bankster-gangsters who are, ergo, solely responsible for any overall increases in inflation, and that goes double for any large increases.
In the US, the privately owned Fed plays the role of our central bank, and it presides over our nefarious banking system, which is a fiat-money, debt-based, European form of fractional reserve banking that once powered the British mercantilist system.  All major US inflationary issues and debacles can therefore be squarely placed at the doorsteps of the Fed, and of our Treasury Department, which is little more than a doormat for the Fed, which together with Wall Street, runs a revolving door with the Treasury.  In fact, our current Treasury Secretary is the former President of the New York branch of the Federal Reserve Bank.  So much for checks and balances and avoidance of conflicts of interest.
We now have the Fed increasing total money and credit (M3) at a rate of 18% while our GDP is contracting at a rate of minus 6%.  That is a 24% differential, and that means that the amount of goods and services being produced has an ever-growing supply of money chasing after it, money and credit that is growing at a pace that is 24% more than the pace at which goods and services are growing.  Based on all the foregoing, we’ll give you three guesses as to what the outcome will be somewhere down the road when the Fed’s ever-burgeoning money blob starts chasing after a shrinking supply of goods and services.
Inflation comes in basically three varieties.  Normal inflation, which is basically harmless, is a temporary increase in prices caused by an increase in the supply of money and credit by the central bank which is intended to precisely anticipate the rate of growth in the production of goods and services.  You have more money and credit, but you also have more goods and services being produced. The temporary bout of minimal inflation caused by the anticipatory increase in the supply of money and credit is offset or absorbed by the greater pile of goods and services that is accumulating, so prices remain stable over time.  This is obviously not an exact science, so there are some up-ticks if the money supply grows a little too fast, but over time this can be corrected.  It is best to overshoot a little so as not to start an economic contraction, which, if left unchecked, could lead to a recession or depression.
The next type of inflation we would characterize as elevated inflation.  This is what we have currently at a rate of about 10% and growing.  This type of inflation results where the central bank consistently grows money and credit at a rate far in excess of the rate of growth in the production of goods and services, measured in terms of GDP growth, over an extended period of time.  What the Illuminati have done for over 20 years now, was to have the Fed, which they privately own, raise the level of growth in the supply of money and credit to ludicrous levels, while they simultaneously ordered their lackeys at the BLS to lie about the rate of the resulting inflation by using hedonics (statistical manipulations) that were intended to greatly understate inflation.         As a result, when real GDP was calculated, the GDP deflator, which is based substantially on the official (and falsely low) rate of inflation, and which is used to calculate real GDP, was obviously far too low.  This farce resulted in higher levels of real GDP than were warranted by the data, because inflation was not being properly taken into account.
This is how they covered up the destruction of our economy via free trade, globalization, off-shoring and outsourcing, along with both legal and illegal immigration (slave labor).  If the true figures were used, our real GDP would show that the rate of growth in our economy has been virtually flat to negative since 1990.  That means all the growth in our stock markets since the early 1990’s has been nothing but false puffery, which resulted from profligate growth in the supply of money and credit, and not from growth in production.  For this reason, when the Dow finally bottoms, we expect it to track back to its levels during the early 1990’s, which means roughly 2,500 to 3,500.  That level will destroy everything, especially the wealth of our middle class, but the elitists themselves are going to take it on the chin.  They are afraid the system will implode before they can bail, and that they will go down with the ship also.  We wholeheartedly confirm their fears.

By Bob Chapman, The International Forecaster
http://news.goldseek.com/InternationalForecaster
Posted Sunday, 21 June 2009 


PART ONE Part Two will be posted mid July

SINCE HYPERINFLATION IS CLEARLY in our future, let’s talk about what inflation really is, what causes it, what the different degrees or levels of inflation are, and what it takes to put a stop to inflation?

By modern definitions, inflation is basically an overall increase in the prices charged for goods and services in a particular economy over time. This is a pretty simple concept, but there is some real confusion as to what the root cause of inflation is. It does not come from people willy-nilly charging more for their goods and services. People can raise prices all they like, but if there is not enough money and credit available to purchase their goods and services at the prices they are charging, they will eventually have to either lower their prices, or expect to make far fewer sales.

What you have witnessed for the past two years is the above concept in overdrive, especially in the real estate and automobile markets, as the supply of money and credit has greatly contracted for all but the anointed Illuminist institutions that are parking their profits and bailout money at interest with the Fed for fear that they might lend it out to a zombie financial institution or business corporation and never get it back. As their money is sidelined with the Fed to sterilize it (i.e. to keep it from stoking inflation) the smaller fry who depend on them for their supply of financial capital are being allowed to die of money and credit starvation so the anointed can purchase the most valuable parts of their financial carcasses at pennies on the dollar via bankruptcy auctions and fire-sales in a blatant attempt to eliminate their competition and consolidate their power.

This deflationary contraction in the supply of money and credit due to the exposed loan, mortgage and derivative fraud is a strong undertow to our economy which threatens to drag it out to sea until it runs out of air and drowns. The Fed must therefore inflate and swim for shore, or die. And inflate they will.  We can absolutely guarantee it.  Obama will go down in history as the King of Stagflation, as he joins forces with the inimitable Gordon Brown, the King of Fire-Sale Gold.

On a microeconomic scale, prices for specific goods and services are usually set by supply and demand (that, of course, would be in a free economy which we no longer have, so manipulation becomes an input for pricing specific goods and services in our economy, and is sometimes even the main input, as with gold and silver prices). However, the microeconomic factors which determine prices for goods and services are by far trumped by the macroeconomic factors of supply and demand.  The supply side on a macroeconomic scale is determined by the amount of goods and services that are produced for sale in the overall economy.  The demand side on a macroeconomic scale is the amount of money and credit available to the overall economy with which those goods and services can be purchased, or expressed another way, the amount of money and credit that is available to chase after those goods and services.

This is why the price of gold and silver must eventually skyrocket. The microeconomic supply, demand and manipulation factors which currently have sway over gold and silver prices will eventually be trumped by the macroeconomic factors, namely, a profligate increase in the supply of money and credit to unheard of levels which will drive prices up across the board. The Fed cannot suppress the price of all goods and services as it rampantly expands the supply of money and credit, and can only influence a chosen few, such as gold and silver, which are suppressed because they are the canaries in the coal mine.

When everything else gets more expensive, and as fiat currencies are shown to be the “worthless paper” they really are, gold and silver will become the only real safe-havens from the resulting inflation and financial deterioration. That will then generate a demand for precious metals that is so great, it will drive the price of gold and silver up until they catch up with the overall supply of money and credit, and there is nothing the Fed can do to stop it, short of pulling the plug on money and credit and destroying our economy, along with the privately owned Fed itself and its Illuminist cronies with it.

This eventual destruction is planned to be sure, in order to pave the way for a one world Orwellian police state. The trick for the Illuminists is how to get out of their paper assets and convert them to real assets on the cheap before pulling the plug on money and credit. The problem is that as they bail out of paper, and into tangible assets, along with other foreign creditor nations anxious to trade their “worthless paper” in for things of real value, their bailing activities will drive inflation, and the price of gold, silver and other tangible assets, to unheard of levels, thereby dramatically decreasing the amount of tangible assets that they can absorb with their dollar reserves and their sales proceeds from the dumping of paper assets. The US and its creditors will be competing with one another in the race to dump dollar-denominated paper assets in exchange for precious metals, commodities, real estate, factories and equipment and other tangible assets, as well as shares in companies which own such assets, including shares in gold and silver producers.

The obvious answer is, of course, that they can’t pull this off on the cheap, and they will use the resulting hyperinflation to wreck the rest of the economy while they are desperately attempting to bail out of dollar-denominated paper assets behind everyone’s backs, as part of their Big Sting Two criminal enterprise. They will attempt to accomplish this insider trading scam in secret through unregulated dark pools of liquidity such as Project Turquoise and Baikal, as well as through the unregulated gambling casino which some dare to call the OTC derivatives market. They will use their sales proceeds to buy all the real, tangible assets they can get their hands on and leave everyone else holding a bag full of “worthless paper,” aka Federal Reserve notes, US Treasury bonds and GSE bonds.

But the amount of “worthless paper” is so great, and there are so many substantial players who will be trying to do the same thing, that market chaos will result, and the paper assets will deteriorate, and the price of tangible assets will simultaneously appreciate, at a rate that leaves everyone breathless.  Truly, this will be a situation where he who loses the least, and he who buys gold and silver and their related shares early on, are the ultimate winners. The biggest losers will be those who fail to take physical delivery of their precious metals, such as gold and silver ETF shareholders and holders of mint certificates, who will be thoroughly Madoff’d, as well as holders of any leveraged gold and silver futures positions who will be wiped out by manipulations before the final run-up, thus losing all their investment capital.

The elitist oligarchs who run America, Canada and Western Europe and their privately owned central banks own tens of thousands of tons of gold already, and will seek to take the proceeds from the sale of their paper assets and use them to increase their gold holdings in an attempt to maintain monetary dominance over major players like China and Russia, who will also attempt to add to their holdings by many thousands of tons. There is only so much gold to go around, and when all the big players become gold bugs themselves, gold, and also silver, will go ballistic. They want the gold mine (literally), while you get the shaft. That is, has been, and always will be, “The Plan.” Bernanke and Geithner are now Obama’s twin Tattoo’s, with our apologies to the producers of “Fantasy Island,” a show which has become a perfect metaphor for what the US economy with its so-called “Green Shoots” has become. De plan, boss, de plan. De plan indeed.

On a technical macroeconomic basis, an economy suffers from inflation when the amount of its total money and credit available over a period of time (the demand) grows at a rate in excess of the rate of growth in its total value of goods and services produced over that period of time (the supply), which valuation is based on price levels in effect at the beginning of that period of time. In more simple terms, inflation occurs when the rate of expansion of the supply of money and credit exceeds the rate of expansion in the production of goods and services. In fact, in the past when we still had a modicum of integrity in measuring economic statistics, inflation was defined as an increase in the supply of money and credit, period. Higher prices were simply a symptom of inflation, not a definition of inflation.  The supply of money and credit was what was inflated, not the prices of goods and services, which simply rose as a direct outcome of the inflated supply of money and credit.

Since central banks are currently in control of the supply of money and credit in most modern economies, it is the bankster-gangsters who are, ergo, solely responsible for any overall increases in inflation, and that goes double for any large increases.

In the US, the privately owned Fed plays the role of our central bank, and it presides over our nefarious banking system, which is a fiat-money, debt-based, European form of fractional reserve banking that once powered the British mercantilist system. All major US inflationary issues and debacles can therefore be squarely placed at the doorsteps of the Fed, and of our Treasury Department, which is little more than a doormat for the Fed, which together with Wall Street, runs a revolving door with the Treasury. In fact, our current Treasury Secretary is the former President of the New York branch of the Federal Reserve Bank. So much for checks and balances and avoidance of conflicts of interest.

We now have the Fed increasing total money and credit (M3) at a rate of 18% while our GDP is contracting at a rate of minus 6%. That is a 24% differential, and that means that the amount of goods and services being produced has an ever-growing supply of money chasing after it, money and credit that is growing at a pace that is 24% more than the pace at which goods and services are growing.  Based on all the foregoing, we’ll give you three guesses as to what the outcome will be somewhere down the road when the Fed’s ever-burgeoning money blob starts chasing after a shrinking supply of goods and services.

Inflation comes in basically three varieties. Normal inflation, which is basically harmless, is a temporary increase in prices caused by an increase in the supply of money and credit by the central bank which is intended to precisely anticipate the rate of growth in the production of goods and services. You have more money and credit, but you also have more goods and services being produced. The temporary bout of minimal inflation caused by the anticipatory increase in the supply of money and credit is offset or absorbed by the greater pile of goods and services that is accumulating, so prices remain stable over time.  This is obviously not an exact science, so there are some up-ticks if the money supply grows a little too fast, but over time this can be corrected.  It is best to overshoot a little so as not to start an economic contraction, which, if left unchecked, could lead to a recession or depression.

The next type of inflation we would characterize as elevated inflation. This is what we have currently at a rate of about 10% and growing. This type of inflation results where the central bank consistently grows money and credit at a rate far in excess of the rate of growth in the production of goods and services, measured in terms of GDP growth, over an extended period of time. What the Illuminati have done for over 20 years now, was to have the Fed, which they privately own, raise the level of growth in the supply of money and credit to ludicrous levels, while they simultaneously ordered their lackeys at the BLS to lie about the rate of the resulting inflation by using hedonics (statistical manipulations) that were intended to greatly understate inflation. As a result, when real GDP was calculated, the GDP deflator, which is based substantially on the official (and falsely low) rate of inflation, and which is used to calculate real GDP, was obviously far too low. This farce resulted in higher levels of real GDP than were warranted by the data, because inflation was not being properly taken into account.

This is how they covered up the destruction of our economy via free trade, globalization, off-shoring and outsourcing, along with both legal and illegal immigration (slave labor). If the true figures were used, our real GDP would show that the rate of growth in our economy has been virtually flat to negative since 1990. That means all the growth in our stock markets since the early 1990’s has been nothing but false puffery, which resulted from profligate growth in the supply of money and credit, and not from growth in production. For this reason, when the Dow finally bottoms, we expect it to track back to its levels during the early 1990’s, which means roughly 2,500 to 3,500.  That level will destroy everything, especially the wealth of our middle class, but the elitists themselves are going to take it on the chin.  They are afraid the system will implode before they can bail, and that they will go down with the ship also. We wholeheartedly confirm their fears.

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