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Posts Tagged ‘hyperinflation

German Pope, Italian Central Banker

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by Gary North
Posted November 24, 2011 

CONCLUSION: EUROPE IS IN BAD SHAPE. This is hedge fund manager Kyle Bass’s assessment of the situation in Europe. He stated this in a rousing interview on the BBC’s TV network. Here is the segment:

He made two crucial points – points that stock market investors are ignoring. First, over the last nine years, there has been an increase of world debt from $80 trillion to $210 trillion. These numbers are staggering. Global debt over the last nine years has grown at 12% per year, while GDP has grown at 4% per year.

While he did not verbally spell out the conclusion for the interviewer, it is this: when credit must grow by 12% per year in order to produce 4% GDP growth, at some point there will not be enough GDP to supply sufficient credit. It is time once again to quote economist Herb Stein: “When something cannot go on forever, it has a tendency to stop.”

Bass had a great metaphor: the PIIGS have “sailed into a zone of insolvency.” Second, he explained, the sovereign debts in Europe will be written down. There is no other solution. The airhead interviewer with the Oxbridge accent seemed to be doing a college-skit imitation of Emma Thompson. She challenged him. What about Germany? Can’t Germany continue to fund Europe’s “southern neighbors”? Germany has “the earning power.” (Note: this means German taxpayers.)

Bass responded instantly. First, the German court has determined that any further bailouts are unconstitutional. Second, Greece – and, by implication, the other “southern neighbors” – will spend every euro it borrows from Germany and then come back for more, threatening a default if its demands are not met – exactly what it has done so far. This goes on until the write-down takes place, which it will.

There are two ways of looking at this: the Bass way and the Bass-ackwards way. The airhead chose the latter.

He draws conclusions from the numbers. No one in the mainstream media and mainstream investment fund world seems to be willing to do this. They talk and invest as if the process can go on forever. Debts need not be repaid. This is ancient Keynesian dogma that goes back to the New Deal. “We owe it to ourselves.” On the contrary, specific borrowers owe it to specific creditors. At some point, the specific borrowers are going to default, leaving specific creditors with huge losses. How huge?

THREE TRILLION EUROS!

Charles Hugh Smith agrees with Bass. He says that there will have to be a write-down. By “write-down” he means write-off. He estimates the losses at three trillion euros. Someone will have to take the hit. The great political debate in Europe today is over who will take this hit, and how soon.

It will be investors. But, to forestall the day of reckoning, Europe’s politicians pretend that taxpayers’ credit lines can be used by superficially solvent Northern European governments in order to borrow more money from creditors in order to lend to the PIIGS’s governments, so that the PIIGS’s governments can continue to (1) delay real austerity measures, i.e., massive layoffs of government workers and massive cuts in welfare payments, and (2) make payments on what they owe to investors, mainly banks.

Smith admits that three trillion euros is a guess. Nobody knows how much bad sovereign debt there is, so we must start somewhere. In a world of $210 trillion worth of debt, his estimate seems reasonable to me.

Let’s start with the most basic fact about all this uncollectible, impaired, bad debt: every euro of debt is somebody else’s asset. Wipe out the debt and you wipe out the asset. That’s why there’s no willingness to accept the writedown of debt: somebody somewhere has to suck up 3 trillion euros of loss.

This is the source of Europe’s present policy of “kick the can,” or more accurately, “kick the can with press releases and summits.” If there were a pain-free solution, it would have been implemented long ago. There is no way Europe is going to “grow its way out of this debt.” How much of the eurozone’s “growth” was the result of rampant malinvestment and risky borrowing? More than anyone dares admit. It won’t take austerity to crash the euroland economy, all it will take is turning off the debt spigot.

Europe is facing the problem that Bass raised when he spoke of 12% per year increases of credit and 4% increases per year of GDP. There is no way to grow your way out of this. This is not just Europe’s problem. It is the world’s problem. But Europe is facing it now because the debts are coming due now. They must be rolled over. Creditors must agree to re-lend. But why should they?

The Establishment world of crony capitalism speaks of “re-structuring” the debt. What does this mean? Smith does not pull any punches.

“Restructuring” is a code word for writeoffs. Here, let me “restructure” the euro bond you bought at a 4% coupon yield. Now you’re going to get 2%, and you’re going to like it. Bang, your bond just lost half its market value, but everyone gets to keep it on the books at full value. Nice, until you have to sell it to raise cash. Oops, the euro has slipped in value so you lost more than 50%.

The banks keep the assets on the books at face value. The underlying value is down by at least 50% for Greek bonds. The European experts admit this. (Why the debt is worth that high a percentage is beyond me.) The Greeks are going to default, one way or another.

Who will take the hit? Smith writes: “There’s a fundamental truth that everyone has to understand: what the government spends, the public will pay for sooner or later, whether in taxes or inflation or having their debt defaulted on.” This is reality. But it’s not precise enough.

WHO IS THE PUBLIC?

If there is hyperinflation – price inflation above 30% per year for a decade or more – the public that takes the hit will be almost everyone inside the eurocurrency zone. There will be almost universal hardship.

On the other hand, if monetary inflation ceases for more than a few months, there will be a depression. Big banks will fail. Their depositors will lose everything. The money supply will shrink. It will be 1930-38 all over again.

Central bankers do not allow such things. The European Central Bank will try to walk the tightrope, just as the national central banks in Europe did after World War II. The ECB will pursue boom-bust policies, refusing to capitulate either to a Great Depression or hyperinflation.

But how can it walk this tightrope? The losses will be huge for large banks. The politicians will try to transfer the cost of bailing out Europe’s banks to Germany. But the debts are too large.

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Dear Ben, please print us more money

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by testosteronepit
Posted August 30, 2011 

DEAR BEN,
Please print us more money. We want you to prop up the stock market. Everybody knows it’s a Ponzi scheme that will collapse without your support. You don’t want us to end up like Bernie Madoff’s clients. No, Ben, we love Ponzi schemes. We get in early and get out before they collapse. That’s why we’re rich. The bad thing is that they sometimes collapse before we can get out. But you already bailed us out twice in the last couple of years through printing trillions of dollars. Why not a third time?

That will also keep the bond-market bubble inflated. We have to admit that you’ve done an excellent job there, hands down. Negative real yields all the way up the yield curve! Awesome. Now if you could just print a few trillions and buy up the sovereigns from the PIIGS. Euro crisis over. End of story. And we’d get richer because we’d sell them to you at face value though we bought them at fifty cents on the dollar.

And why not forever? Just keep printing. Because as soon as you stop, stock markets will crash again, and credit markets will seize, and then we’re back on this awful ride to hell.

Of course, it’ll cause inflation, which is good. You yourself said that. You stated many times that you want inflation. In fact, you said that one of the goals of the Fed, after propping up the markets, is to create inflation. So stick to it, Ben. Don’t slack off suddenly just because some cowboy threatened you.

Inflation, in conjunction with your near-zero yields, has all sorts of benefits. For example, it will eat up the Social Security trust fund, whose $2 trillion balance is invested in treasuries. Fixed-income investors, retirees, and everybody who has any savings will also be demolished. And homeowners. But don’t worry. They won’t figure it out. They don’t get a statement every month that shows how much inflation cost them. It’s a quiet way of stealing from them, and it’ll impoverish them over time, but it’ll make us, the recipients of the money you print, richer.

You see, Ben, we can charge higher prices for our goods and services. And even if we have to pay more for raw materials, we look good. Our inventories increase in value, and we can claim sales jumped 10% because we raised prices by 10%. Analysts dig that.

Recently, Ben, you’ve done a decent job on inflation. In July, we were running at an annual rate of 6%. Not bad. But you need to preempt any cooling off. So keep printing.

Now, we’re not talking about wage inflation. Oh no. We have to keep wages down. We need cheap labor, or else we’d have to send these jobs to China—which we’re doing anyway. And not just to assemble iPhones. Heck, our lawyers in India are doing the same work as our local lawyers for one-tenth the pay. So, if our local lawyers want to be competitive…. Just think how much more profit we could make if wages collapsed!

Real wages have been declining for ten years and fell another 1.7% since July 2010. But that’s not enough. So get with it, Ben. Print more. And don’t worry about the wusses out there who say that choking the middle class like that will put us into a permanent recession. Just get the banks to loan them lots of money so they can buy our stuff, and when the loans blow up, you buy them from the banks at face value. Full circle, Ben.

The trillions you’ve printed and handed to us, well, we put them to work, and we created jobs in China and Mexico and Germany, and we bought assets, and it inflated prices, and now we’re even richer. We’re proud of you, Ben. Think of the influence you have. And not just here. Around the world, Ben! Look at the Middle East and North Africa. See the food riots, rebellions, and civil wars it caused? Thousands of people died and entire governments were toppled…. Oh, wait. That’s a bad example.

And then there is Congress. We invested in them through campaign contributions and other mechanisms to get them to spend trillions of dollars every year on our products and services, and they even started a few wars, and it made us richer—without taxing our companies or us. It’s a wonderful system.

But the deficits have become so huge that they exceed what the Treasury can borrow. So we’re glad, Ben, that you stepped up to the plate and printed enough money to monetize the deficit. But Ben, you can’t just stop now! You’ve got to keep at it. Or else, the whole system will blow up. Well, it’ll blow up anyway, but we don’t want it to blow up now. So, Ben, you don’t have a choice. Otherwise, we’d lose a lot of money in our schemes, and nobody wants that.

Federal Reserve policy mixed with extreme weather has put the world on a fast track to revolution and war

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by David DeGraw
of AmpedStatus
Posted August 25, 2011

THERE ARE MANY FACTORS THAT CLEARLY DEMONSTRATE WHY IT WOULD BE DISASTROUS for the Federal Reserve to repeat their vicious Quantitative Easing (QE) policy. If you want to know a significant reason why they cannot get away with another round of QE, here is an equation for you:

(Quantitative Easing + Extreme Weather = Revolution + World War III)

From the very beginning we knew that the Federal Reserve’s QE program was going to cause the cost of food to rise and the dollar to decline in value, and that these intended results would lead to an increase in poverty and civil unrest.

Are food prices approaching a violent tipping point?

A provocative new study suggests the timing of the Arab uprisings is linked to global food price spikes, and that prices will soon permanently be above the level which sparks conflicts. There is a specific food price level above which riots and unrest become far more likely. That figure is 210 on the UN FAO’s price index: the index is currently at 234, due to the most recent spike in prices which started in the middle of 2010 [coinciding with QE2].

Lastly, the researchers argue that current underlying food price trends – excluding the spikes – mean the index will be permanently over the 210 threshold within a year or two. The paper concludes: “The current [food price] problem transcends the specific national political crises to represent a global concern about vulnerable populations and social order.” Big trouble, in other words. The next part of the study identifies that the serious unrest in North Africa and the Middle East also correlates very closely with [the QE2] food price spike. Bar-Yam also notes: “Several of the initial riots in North Africa were identified in news stories as food riots.” From there, the researchers make their prediction of permanently passing the 210 threshold in 12-24 months.

In other words, if the Fed engages in another round of QE, the global unrest that they have already ignited will go hyperbolic. Before getting into the details on how the Fed deliberately made these food prices spike, let’s look at another new study, which also helps demonstrate the obvious, extreme weather is linked to war:

Climate cycles linked to civil war, analysis shows

Changes in the global climate that cut food production triggered one-fifth of civil conflicts between 1950 and 2004. Cyclical climatic changes double the risk of civil wars, with analysis showing that 50 of 250 conflicts between 1950 and 2004 were triggered by the El Niño cycle, according to scientists. El Niño brings hot and dry conditions to tropical nations and cuts food production, to outbreaks of violence in countries from southern Sudan to Indonesia and Peru.

Solomon Hsiang, who led the research at Columbia University, New York, said: “We can speculate that a long-ago Egyptian dynasty was overthrown during a drought. This study shows a systematic pattern of global climate affecting conflict right now. We are still dependent on climate to a very large extent.” Mark Cane, a member of the team, said global warming would have greater climatic impacts than El Niño, making it “hard to imagine” it would not provoke conflicts. [read full report]

Put all these factors together and you have, “The Road Through 2012: Revolution [and/or] World War III.”

In summation, Ben Bernanke and the Fed’s economic central planners were clearly aware of the hostile climate and weather patterns when they engaged in QE2. The Fed’s infamous policy, as I said before, “deliberately threw gasoline all over those brush fires. QE2 was another economic napalm bomb from the global banking cartel.” They knew that they were deliberately attacking (sacrificing) tens of millions of people, but that was secondary to keeping their global Ponzi scheme going by pumping another $2.1 trillion into their fraudulent, insolvent banking system through both QE programs. This is why Ben Bernanke is guilty of crimes against humanity. Now, let’s revisit what I’ve been reporting on for the past year:

Centrally Planned Economic Repression

The IMF has a well-worn strategy that they use to conquer national economies. As I warned four months ago, we have now progressed into Step 3.5: World Wide IMF Riots. Back in October, in a TV interview with Max Keiser, we discussed leaked World Bank documents that revealed the IMF’s strategy. I stated the following:

“They have a four-step strategy for destroying national economies. We are about to enter what they would call Step Three. Step Three is when you’ve looted the economy and now food and basic necessities all of a sudden become more expensive, harder to get to. And then, Step 3.5 is when you get the riots. We are headed to, as the IMF said, and as they plan, Step 3.5: IMF Riots. That’s what’s coming…”

Fast-forward four months to today, and now we see country after country rebelling against high food prices. Since our October interview, food prices have spiked 15%. According to new World Bank data, since June 2010, “Rising food have pushed about 44 million people into poverty in developing countries.”

As Federal Reserve Chairman Ben Bernanke announced another round of Quantitative Easing (QE2), those of us paying attention knew that the trigger had been pulled and Step Three had been executed. It was a declaration of economic war, an economic death sentence for tens of millions of people – deliberately devaluing the dollar and sparking inflation in commodities/basic necessities. It was a vicious policy that would impact people from Boston to Cairo.

When QE2 was announced, I warned: “Food and Gas Prices Will Skyrocket, The Federal Reserve Just Dropped An Economic Nuclear Bomb On Us.” I also wrote: “The Federal Reserve is deliberately devaluing the dollar to enrich a small group of a global bankers, which will cause significant harm to the people of the United States and severe ramifications throughout the world. The Federal Reserve’s actions are already causing the price of food and gas to increase and will cause hyperinflation on most basic necessities.”

To be clear, there are several significant factors contributing to rising food prices, such as extreme weather conditions, biofuel production and Wall Street speculation; but the Federal Reserve’s policies deliberately threw gasoline all over those brush fires. QE2 was another economic napalm bomb from the global banking cartel.

In a recent McClathy news article entitled, “Egypt’s unrest may have roots in food prices, US Fed policy”, Kevin Hall reports:

“‘The truth of the matter is that when the Federal Reserve moved on the quantitative easing, it did export inflation to a lot of these emerging markets. There’s no doubt that one of the side effects of the weak dollar and quantitative easing has been rising commodity prices. It helped create this bullish environment for commodities. This is a very delicate balancing act.’

It’s a view shared by Ed Yardeni, a veteran financial market analyst, who reached a similar conclusion in a research note to investors. He joked that Fed Chairman Ben Bernanke should be added to a list of revolutionaries, since his quantitative easing policy, unveiled last year in Wyoming, has provoked unrest and change in the developing world

‘Since he first indicated his support for such a revolutionary monetary change, the prices of corn, soybeans and wheat have risen 53 percent, 37 percent and 24.4 percent through Friday’s close,’ Yardeni noted. ‘The price of crude oil rose 19.8 percent over this period from $75.17 to $90.09 this (Monday) morning. Soaring food and fuel prices are compounding anger attributable to widespread unemployment in the countries currently experiencing riots.’”

The people throughout the Middle East and Northern Africa, on the fringe of the Neo-Liberal economic empire and most vulnerable to the Fed’s inflationary policies, are the first to rebel. The conclusion that we reach, the unfortunate reality of our current crisis: the Federal Reserve and global economic central planners have declared war on us. We are under attack. We must remove Ben Bernanke from power and hold him and the rest of the global banking cartel accountable. We must also break up the “too big to fail” banks. This a message I, along with many others who have analyzed our economic situation, have been repeating over and over for the past three years.

Hopefully, a critical mass of people will soon understand this reality and back it up with non-violent civil disobedience before riots and violence rip our society apart. For these reasons, let’s all go to Wall Street on September 17th and show these tyrants that we’ve had enough.

Keep calm and carry on as financial crisis looms

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by Matthew Norman
Posted August 5, 2011

The ominous rumbling of an impending economic meltdown has echoes of the ‘phoney war’ of 1939-40.

As I settle down in my west London shed to write whatever arrant rot will ensue, the sun is out, the air is autumnally crisp and a lawnmower chugs away a few gardens along. This suburban languor reminds me of the opening scene of Hope And Glory, John Boorman’s enchanting filmic memoir of his Second World War childhood, in which the mowers fell silent for a few minutes one late summer Sunday morn in 1939 while Neville Chamberlain spoke to Britain through the old crystal set.

Those of you who were children then will, like my parents, remember it from life rather than cinema, and probably recall verbatim the Prime Minister’s words. “I have to tell you now that no such undertaking has been received,” said Chamberlain, “and that consequently this country is at war with Germany.” Then the dads returned to their mowers, mums to preparing the Sunday roast, little girls to their dolls, and small boys, who would soon enough be collecting hot shrapnel from bomb sites, to their cricket.

Life for the Boorman character went on, little changed, after the PM’s doleful address, as it would through the following months of misleading tranquillity until the bombs began to fall. But in the chasm between Chamberlain’s portentous speech and its surreal background of suburban normality lay such ominous dread that even a seven-year-old instinctively grasped that horror was approaching.

This is a little how the mounting economic turmoil feels to me now. That lawn is being mown, a neighbour is vacuuming her sitting room, and somewhere within earshot a toddler is squealing expectantly at the first notes of the ice-cream van. The urban symphony comes no more soothingly mellifluous than this. But even to someone like me, who might as well be seven for all he comprehends of macroeconomics, a distant air-raid siren pierces the serenity.

Exactly what manner of blitzkrieg is coming no one can confidently predict, but whatever it is now seems driven by an internal dynamic that renders it unstoppable. Terrible things are happening on money markets here and in far-away stock exchanges of which we know little.

A few weeks after smug European leaders grinned their “peace in our time” grins after supposedly rescuing Greece, the Panzer divisions of the eurozone sovereign debt crisis are closing in on Spain and Italy. Even brave little Belgium is threatened, and whatever passes for the European Central Bank’s version of a last line of defence proves a Maginot Line against the contagion. We cannot turn to America this time. America, which started it with a little help from us, is as broke as we are, and possibly about to double-dip her toes in the icy waters of recession.

Everyone agrees that none of this is good, but without agreeing on quite how hideous it is or will become. If it isn’t quite September 1, 1939, is it 1931, when a second banking crisis in the US began the great Depression that laid the ground for the global war to come? Is it pre-credit-crunch 1997, when the catastrophe threatened by insolvent banks was narrowly averted? Is it 1940, with Keynesians ousted by (Corporal) Jonesians, whose notion of preparing for the invasion of financial mayhem from across the Channel is to charge around cutting spending while yelling “Don’t panic”? Or is it, in fact, 2011 – a cataclysm without any precedents from the age before globalised markets rendered all forms of national self-protection useless against a financial tsunami?

Different economists have their different views, of course, and it is at moments such as these (not that there have been any quite like this in the lifetime of anyone under 80) that I wish I’d studied economics rather than classics… for precisely two seconds. Then I remember the only law of economics worth knowing: if 79 economists offer their opinions on anything, that equates to 340 wrong opinions.

Ignorance may not be bliss, but just look at the results of its polar opposite. Who knew more about economics than Alan Greenspan, that goliath of the US Federal Reserve, and our own beloved slayer of boom ’n’ bust, Gordon Brown? If Anthea Turner had run our Treasury, and Joey from Friends had been seconded to take control of the Fed, could things be any worse?

They could, of course – and barring a miracle, they will be. So I also remember the advice of Horace: “carpe diem, quam minimum credula postero”. Which translates, according to the Pseudo-Loeb edition of his Odes, as follows: “Seize the day, because with what minimum interest rates and surging inflation will do to your savings – not to mention where crashing stock markets will leave whatever remains of your pension pot – you won’t want to touch tomorrow with a 50ft titanium pole.”

The problem with hedonism, for all its diversionary appeal, is that it requires courage and commitment. While there is the faintest chance that the crisis will blow over, living quietly for tomorrow is easier than living riotously for today. So the lawnmower throbs away and the mother tells her toddler to stop nagging for an ice cream, while political leaders and the international money markets do their impression of the face in Munch’s The Scream.

We will, so it seems, be needing that old Blitz spirit again before long. For now, the phoney war endures.

Five things you need to know about the economy

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by David Galland of Casey Research
Posted  August 3, 2011

AT ANY POINT DURING THE RECENT NEGOTIATIONS IN WASHINGTON over the debt, did you seriously think for even a second that the U.S. was about to default?

Of course, in time the U.S. government (along with many others) will default. However, they are highly unlikely to do so by decree or even through the sort of legislative inaction recently on display. Rather, it will come about through the time-honored tradition of screwing debtors via the slow-roasting method of monetary inflation.

Yet most people still bought into the latest drama put on by the Congressional Players – a troupe of actors whose skills at pretense and artifice might very well qualify them for gilded trophies at awards banquets. Instead, rather than glittering statuettes, these masters of the thespian arts settle for undeserved honorifics and the pole position at the public trough. Followed by lifelong pensions.

But to the heart of the current matter, do I think that the latest antics out of Washington will have any more lasting effect on the trajectory of the economy than what I had for breakfast this morning (raw oats with a dab of maple syrup, milk, a sprinkling of strawberries, and half of a banana, sliced)?

Absolutely not. Sorry to say, but the trajectory of the economy at this point is well established, and closely resembles that of a meteor streaking through the night sky. What’s left of the solid matter of the nation’s accumulated private wealth is fast being burned off by an unstoppable inferno of government spending, inevitably leading to an earth-shaking crash.

I make this dire prediction not out of an aberrant psychology (I hope), or in an outburst of self-promotion for Casey Research because the big-picture scenario we have so long warned of is unfolding according to script, but rather due to certain fundamental truths about our current situation. And that brings me to the five things you need to know about the U.S. economy (much of which also applies to the other large developed nations)…

1. The U.S. remains in the grip of a debt-induced depression.

While personal levels of debt have eased somewhat since the crash, most of the improvements have come at the expense of debt repudiation, and are offset by the steep decline in housing prices that have left something like 50% of mortgages underwater. Meanwhile the debt on the balance sheets of the U.S. government and the country’s largest financial institutions remain at record highs – and much of that debt is toxic. So, what’s the one thing that the heavily indebted – individual or institution – most fears? Answer: Rising interest rates.

2. Interest rates can’t stay low.

Despite the debt, interest rates remain near historic lows – which is to say, well below the norm. At some point they have to at least revert to the mean, which would push the 10-year treasury rate north of 5% from current rates below 3%. But in reality, the levels of monetary inflation, the nature of the debt, and mind-numbing scale of the government’s other financial obligations – in total upwards of $70 trillion – all but guarantee that interest rates must go much higher than 5%. That in turn torpedoes the half-sunk real estate market and risks kicking off a debt death spiral as higher interest payments suck the financial juice out of the economy and causes debtors to demand even higher rates. Say hello to Doug Casey’s Great Depression.

The last time the U.S. economy found itself in such dire straits was back in the 1970s, when the problem was raging price inflation. Back then, though, the debt levels were considerably lower than they are now. Then, Fed Chairman Paul Volcker had the latitude to raise rates and by so doing helped to choke out inflation. By contrast, today the Fed is virtually helpless. Rates certainly can’t be pushed lower by any appreciable amount, and the Fed sure as hell doesn’t want them to go up. While the Fed has been a primary factor in controlling interest rates up to this point in the crisis, in the near future the direction of interest rates – particularly long-term rates – will increasingly be determined by skittish market participants. Specifically, the sovereign and institutional buyers whom the U.S. Treasury so desperately needs to keep showing up at their auctions.

To use a metaphor, the situation today is akin to a bunch of gunfighters facing off in a dusty street, hands poised over their six-shooters, eyes nervously shifting this way and that – to the eurozone, to the housing markets, to the situation in Japan, to the U.S. government spending, to the crumbling balance sheets of the banks, to the Fed. Everyone is anxiously watching, waiting for someone else to start making the first move. The standoff can’t last – and when the lead starts flying, there will be few places to hide.

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Important Debt Ceiling Update

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From The National Inflation Association
Posted July 30, 2011

PRESIDENT OBAMA JUST ANNOUNCED LATE THIS EVENING THAT A DEAL has been reached to cut government spending and raise the debt ceiling in order to avoid a debt default. If the deal is approved on Monday, it will raise the debt ceiling by between $2.1 and $2.4 trillion in three installments: $400 billion immediately, $500 billion this fall subject to a disapproval vote by Congress, and $1.2 to $1.5 trillion more after a special committee agrees on a matching amount of spending cuts that will be in addition to $900 billion in spending cuts proposed in the bill. With no tax increases included in this plan, all of this additional debt will eventually be monetized and paid for through monetary inflation.

Although the deal is supposed to cut as much as $2.4 trillion in spending over the next decade, Obama said that none of the spending cuts will occur anytime soon so that not to derail the phony economic recovery. That’s right, none of the cuts will come until early 2013 and by then we will need to once again raise the debt ceiling to north of $20 trillion. If our elected representatives were serious about cutting spending, they would have the bulk of the spending cuts now and not in the future when many of them will be out of office.

This deal is a complete and total sham, and will do nothing to prevent hyperinflation. In no way will these spending cuts be mandated and nothing will force future Congresses to abide by them. Even with these cuts, government spending is going to increase every single year for the next decade. As price inflation spirals out of control in the years ahead causing the purchasing power of the dollar to plummet, all government employees will demand higher salaries and it will cost more to run all parts of the government. Future Congresses will raise spending and make the spending cuts proposed in this deal meaningless.

NIA believes that all of the events that took place in Washington this weekend were scripted in advance. It is likely that both parties knew from the beginning what deal they would ultimately agree to, but came out with these other proposed bills in order to satisfy tea party supporters and make them think that their efforts are making a difference. The reality is, although the tea party movement helped Republicans take over the House of Representatives so that Democrats didn’t have free rein in Washington, most of the new Republicans elected to Congress haven’t followed through with their promises and have failed to make any kind of a positive difference.

Everybody in Washington assumes that interest rates will remain at artificially low levels for the rest of this decade. The interest rate that the U.S. paid on its total marketable debt in the month of June was only 2.38%. Exactly one decade earlier, in June of 2001, we paid 6.162% interest on our total marketable debt or 159% higher than current average interest rates. On August 15th we owe our next interest payment of approximately $30 billion. Imagine if that payment rises 159% higher to $77.7 billion or $932.4 billion annualized. Later this decade, interest rates will not only rise back to normal levels like we had in 2001, but will likely rise to artificially high levels to balance out the damage being created today from artificially low interest rates.

If this bill is approved by Congress and the President on Monday, it will avoid a short-term honest debt default but just about guarantee a default by inflation later this decade. There is about a 1 in 1,000 chance that future Congresses will stick with the spending cuts in this bill, but even if they do, rising interest payments will not only wipe out the $2.4 trillion in spending cuts, but they will add trillions more to future deficits and the national debt. A new Gallup Poll shows that 53% of Americans oppose raising the debt ceiling compared to only 37% who favor an increase. We pray that millions of Americans march to Washington tomorrow in protest of this bill and that millions more call, email, and fax their elected representatives in the morning demanding that they vote no.

It is important to spread the word about NIA to as many people as possible, as quickly as possible, if you want America to survive hyperinflation. Please tell everybody you know to become members of NIA for free immediately at: http://inflation.us

A thousand pictures is worth one word

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by Jeff Clark, Big Gold
Posted July 15, 2011

IN SPITE OF CONSTANT HEADLINES ABOUT DEBTS AND DEFICITS, most Americans don’t really believe the U.S. dollar will collapse. From knowledgeable investors who study the markets to those seemingly too busy to worry about such things, most dismiss the idea of the dollar actually going to zero.

History has a message for us: No fiat currency has lasted forever. Eventually, they all fail.

BMG BullionBars recently published a poster featuring pictures of numerous currencies that have gone bust. Some got there quickly, while others took a century or more. Regardless of how long it took, though, the seductive temptations allowed under a fiat monetary system eventually caught up with these governments, and their currencies went poof!

As you scroll through the 23 banknotes (fiat currencies) below, you’ll see some long-ago casualties. What’s shocking, though, is how many have occurred in our lifetime. You might count how many currencies have failed since you’ve been born. You might suspect this happened only to third world countries. You’d be wrong. There was no discrimination as to the size or perceived stability of a nation’s economy; if the leaders abused their currency, the country paid the price.

So what’s the one word for the “thousand pictures” below? Worthless.

Yugoslavia – 10 billion dinar, 1993

Zaire – 5 million zaires, 1992

Venezuela – 10,000 bolívares, 2002

Ukraine – 10,000 karbovantsiv, 1995

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