Cost for Saving System in 2008 Will Be Complete Debasement of US Dollar By 2014

Submitted by Deepcaster:

“With an inevitable day of reckoning, the U.S. financial and banking systems came literally to the brink of collapse in September 2008. To prevent the unthinkable, the Federal Reserve and the U.S. government created, spent, loaned, guaranteed, and gave away whatever money was necessary, and otherwise bailed out or acquired a number of failing large corporations

“Those actions forestalled a systemic collapse, but they did not resolve the fundamental underlying difficulties. Contrary to official GDP reporting, there has been no subsequent economic recovery.
The ultimate costs for saving the system in 2008 and beyond, comes down to inflation, which will be reflected eventually in the complete debasement of the U.S. dollar. Accordingly, actions taken during the crisis-containment of 2008, and later, brought the outside timing for the hyperinflation forecast of 2018, into 2014.
“…the U.S. dollar, as we know it, is not likely to survive until the next congressional election in 2014.


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“Set by Uncontained Fiscal Malfeasance, and Exacerbated by Still-Unfolding Effects of the 2008 Systemic Panic and Near-Collapse, U.S. Hyperinflation Looms by End of 2014. After decades of U.S. government fiscal mismanagement, by 2004, the U.S. budget deficit was so out of control that it had become both unsustainable and uncontainable. Using generally accepted accounting principles (GAAP-accounting), the deficit for just the fiscal-year 2004 exploded to $11.0 trillion…

“Adjusted for distortions from one-time accounting changes, the actual, or GAAP-based, federal deficit has run roughly $5 trillion per year since 2004, and it likely topped $7 trillion in 2012, with total federal debt and the net present value of federal-government obligations approaching $90 trillion (see Table I in Section III). No amount of spending cuts, outside of the politically-untouchable social programs, and no amount of tax increases, can bring the GAAP-based annual U.S. budget deficit into balance.

“Faced with structural impairments to individual income growth, the Federal Reserve (under Chairman Alan Greenspan) actively encouraged the excessive growth of consumer debt as a way to support economic activity, continuously borrowing economic growth from the future.

“With an inevitable day of reckoning, the U.S. financial and banking systems came literally to the brink of collapse in September 2008. To prevent the unthinkable, the Federal Reserve and the U.S. government created, spent, loaned, guaranteed, and gave away whatever money was necessary, and otherwise bailed out or acquired a number of failing large corporations…

“Those actions forestalled a systemic collapse, but they did not resolve the fundamental underlying difficulties. Contrary to official GDP reporting, there has been no subsequent economic recovery.

“The ultimate costs for saving the system in 2008 and beyond, comes down to inflation, which will be reflected eventually in the complete debasement of the U.S. dollar. Accordingly, actions taken during the crisis-containment of 2008, and later, brought the outside timing for the hyperinflation forecast of 2018, into 2014.

“…the U.S. dollar, as we know it, is not likely to survive until the next congressional election in 2014…”

“Special Commentary: Review of Economic, Systemic-Solvency, Inflation, U.S. Dollar and Gold Circumstances, #485”
John Williams, shadowstats.com, 11/27/2012

Official Data Purveyors would have you believe that U.S. inflation is “contained,” GDP is growing healthily, and Sovereign Debt is sustainable. Not true! The U.S. for example is already Threshold Hyperinflationary at 9.82% and GDP growth is a negative 2.10% and the net present value of downstream Federal government obligations is nearly $90 trillion.

And other major nations are similarly afflicted with the Bogus Statistics Disease – see quote regarding China’s fake GDP below.

But investors who know the Real Numbers and can distinguish them from the Lies have Substantial Advantages, key ones which we identify here.

“A fake Libor rate, the scandal involving global benchmark interest rates that has raised the level of distrust in major banks and markets, is nothing compared to the damage that could be done if China’s true economic growth figures were revealed, according to Larry McDonald’s newsletter.

“Is Chinese GDP the new Libor? …More and more investors are starting to question the Chinese math on GDP.

“Annual gross domestic product came in at 7.6 percent in the second quarter, according to China’s government on July 13th. The report was better than investors expected…

“But slowing imports and industrial production, as well as harder-to-fudge electricity usage data, points to much slower growth, according to McDonald and other investors. Barclays believes the number should have been more like 7.15 percent.

“What worries McDonald… is that lying by governments and banks — be it Libor rates or GDP statistics — raises the systemic risk to the markets, which is much worse than just economic risk.”

“Lying Libor Is Nothing Compared to China’s Fake GDP: Report”
John Melloy, CNBC, 7/22/2012

Indeed, if one considers all the salient Chinese data together, one concludes that the Barclays estimate of Chinese GDP at 7.15% is still high.

In order to obtain a realistic view of economic performance it is necessary to look beyond the Official Data to data that are more difficult to manipulate. For China, for example, consider:

China’s shipbuilding industry has suffered a 60% decline in gross tonnage of orders; some builders may go bankrupt. China has vast stockpiles of as-of-yet-unused coal, iron ore, and copper. In the first half of 2012, Shanghai land sales fell close to 60%. The June 2012 Chinese electrical grid usage was flat. Prices in some Asian sectors sank an incredible 25% in June because of collapsing demand. China’s neighbor Singapore reported that its GDP growth fell 1.1% during the second quarter of 2012 following a 9.4% gain during the first quarter.

Similarly in the Eurozone, the Spanish and Greeks for example are suffering with 25% unemployment rates.

Switching focus back to the U.S. we recently see that some Mainstream Media are claiming that the Housing Market has bottomed and is recovering. It is not.

“The headline 3.6% monthly gain in October 2012 housing starts was not statistically-significant and was in the context of downside revisions to August and September reporting. As shown in the accompanying graphs, October activity was at the highest level since July 2008, when the market was in free-fall, but it still was 61% off the 2006 peak in housing starts.

“Hurricane Sandy appears to have had minimal impact on October’s activity, but disruptions from the storm should have meaningful impact on November reporting, with subsequent rebuilding certain to provide a temporary boost to building-permit and housing-starts activity in December and into first-quarter 2013. Nonetheless, given the underlying economic fundamentals, there is no longer-term recovery or relief in sight, and the relatively strong reports of September and October likely will revise sharply lower or be balanced in later reporting by offsetting seasonal adjustments.”

“Preview of Special Commentary, Housing Starts, #484”
John Williams, shadowstats.com, 11/20/2012

Yet Real U.S. Inflation is (already!) Threshold Hyperinflationary and reflects the effects of excessive Fed and ECB Fiat Money and Credit Creation. Indeed, Bogus Official Statistics mask a wide variety of Negative Effects of ongoing Q.E. and related Actions. Shadowstats.com calculates Key Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider:

Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)

Annual U.S. Consumer Price Inflation reported November 15, 2012
2.16% / 9.82%

U.S. Unemployment reported November 2, 2012
7.9% / 22.9%

U.S. GDP Annual Growth/Decline reported November 29, 2012
2.49% / -2.10%

U.S. M3 reported November 17, 2012 (Month of October, Y.O.Y.)
No Official Report / 3.56%

Shadowstats Forecast of Impending Hyperinflation beginning no later than the end of 2014, is quite significant.

Of Great Significance also is the fact that the consequent degradation of the U.S. Dollar’s status as World Reserve Currency (and the ascending of a Gold-backed Chinese Yuan as the World’s Reserve Currency) is already well under way.

China has already entered into bilateral Currency Deals with several nations including Russia, Iran, Brazil, and (soon to be former) financial allies Japan and Australia. Consequently the Purchasing Power of the $US will suffer a huge hit in the next very few years.

Given the Real Numbers (per Shadowstats and Deepcaster, et al.) it is no wonder Economist Nouriel Roubini characterizes U.S. Recovery as a “Fairy Tale.”

“…the first-half growth rate looks set to come in closer to 1.5 percent at best, even below 2011’s dismal 1.7 percent. And now, after getting the first half of 2012 wrong, many are repeating the fairy tale that a combination of lower oil prices, rising auto sales, recovering house prices and a resurgence of U.S. manufacturing will boost growth in the second half of the year and fuel above-potential growth by 2013.

“…the gravity of weaker growth will most likely overcome the levitational effect on equity prices from more quantitative easing, particularly given that equity valuations today are not as depressed as they were in 2009 or 2010. Indeed, growth in earnings and profits is now running out of steam…”

“We’re Not Even Close to a Robust Recovery”
Nouriel Roubini, Project Syndicate, 7/22/2012

And it is not just Doctor Doom Roubini who sees beyond the Bogus Official Data. Former Reagan Budget Director, David Stockman sees the Real Data, the Consequences, and the Challenges clearly.

“I don’t think we are at the beginning of the recovery. I think we are at the end of a disastrous debt supercycle that has gone on for the last thirty or forty years, really. It started when Nixon defaulted on our obligations under Bretton Woods and closed the gold window. Incrementally, year after year since then, we have been going in a direction of extremely unsound money, of massive borrowing in both the private and the public sector. We now have an economy that is saturated with debt: $54 trillion or $53 trillion – 3.5 times the GDP – way off the charts from where it was for a hundred years prior to the beginning of this. The idea that somehow all of that debt is irrelevant, as the Keynesians would tell us, is fundamentally wrong – and the reason why the economy can’t get up off the mat.

“We’re doing all the wrong things. We’re adding to the problem, not subtracting. We are not allowing the debt to be worked down and liquidated. We’re not asking people to save more and consume less, which is what we really need to do. And so therefore I think policy is just making it worse, and any day now we will have another recurrence of the kind of economic crisis we had a few years ago.”

“Austerity Is Not Discretionary,” Interviewed by Alex Daley, Casey Research
David Stockman, Congressman and former Reagan Budget Director, 7/20/2012

Official data sources have Powerful Interests to protect and Truth is often sacrificed. Thus it is essential to rely on other entities and persons such as Shadowstats, Deepcaster, Stockman, and Roubini for Genuine Data and Honest Analyses, prior to making Investment Decisions.

Nonetheless, amid all the uncertainty in the Markets and Economy there are three “Fortress Asset” Sectors which will likely return profits regardless of Boom or Bust, Inflation or Deflation. To understand why we select just these three Sectors first consider:

“The Bureau of Labor statistics reported the increase/decrease in non-farm payrolls and the unemployment rate for June 2012 on Friday, July 6th. Stocks plunged on the news. Why? The BLS reported that non-farm payrolls increased by 80,000 new jobs in June. Isn’t that good? Well first of all, it is a false figure. The true figure is there was a net loss of 44,000 jobs in June. The BLS decided in their infinite wisdom that they think, they guess, they pretended that new businesses that started up in June created 126,000 new jobs. They have no idea what new businesses started, nor did they count new jobs in these phantom new businesses. This 126,000 phony figure was added to the loss of 44,000 jobs to fudge a positive number for the release of the June jobs report. This phony figure is called the CESBD adjustment, or the Birth/Death adjustment. Birth/Death refers to businesses, not people. The truth is the economy lost 44,000 jobs in June. This is abysmal. This is recession. This is an indictment of government fiscal policy, of Fed monetary policy, of tax policy and regulation of businesses. We need a true increase of 150,000 new jobs each month just to break even with population growth, and need millions more to put displaced workers back in a job.

“The truth is, the economy is falling off a cliff, housing transactions are essentially non-existent, jobs are declining, growth is shrinking.”

“Current Weekend Report”
Robert McHugh, Ph.D., Main Line Investors, 7/7/12

There is a War going on between the forces of Inflation (e.g. Central Bank Money Printing) and the forces of Deflation (e.g. several contracting Economies around the world resulting in increasing Unemployment and a slowing Velocity of Money). That war is disguised by Bogus Official Numbers which conceal, for example, the USA’s 9.82% Real Inflation rate and 22.9% Unemployment rate.

The Central banks will ultimately “Win” via QE-to-Infinity but that “Win” will be a Pyrrhic victory because it will bring full-blown Hyperinflation. In sum, the Real Numbers are being Masked by the Bogus Official Ones.

Consider Adrian Douglas’ point:

“There are frequent claims that the U.S. economy has entered a period of “deflation.” These claims are totally unfounded and are false. Deflation can only be a persistent state of general price decline. In fact, in examining price trends, the U.S. is experiencing shocking price increases of over 15% per annum. To illustrate this, …the Continuous Commodities Index, CCI over the past ten years.”

“Deflation – Nowhere to be Seen”
Adrian Douglas, Market Force Analysis, 7/7/12

Fortunately three “Fortress Profit Sectors” should suffice to Protect and Profit. We identify these, including a Mini-Sector with Spectacular Profit Potential in our recent Letters and Alerts.

For Deepcaster’s specific recommendations (in the three Fortress Profit Sectors) aimed at Profit and Protection despite Bogus Official data and Impending Hyperinflation see Notes 1, 2, 3, and 4 below.

Necessary also, is having Courage to see the Truth, because the Truth is not always Pretty; but seeing it is essential for Profit and Protection.

Finally, important to note is the fact that, absent manipulation, Gold and Silver would be the monetary “Canaries” of the Financial World, whose prices would warn of Excessive Monetary and Credit Creation even more than they have in the past decade.

Indeed, in the past decade their price appreciation (well in excess of any other Asset classes) certainly has “warned” of that, but not in the past few months. Gold and Silver prices are subject of ongoing Price Suppression by a Fed-led Cartel as described in Note 5 below. But with the Physical Supply situation increasingly tightening, Gold and Silver Price Suppression cannot last forever.

Best regards,

Deepcaster
December 7, 2012

Note 1: Crises beget Opportunities.

Refusal to confront, or worse, Denial of, the consequences of Inevitable Coming Crises in an understandable response, but neither constructive nor profit-generating.

Indeed, a much more constructive response is to Profit from those Crises which one cannot ameliorate. Given the Crises which are surely coming, Profit Opportunities abound. And we have identified several in our December letter just posted in ‘Latest Letter & Archives’ at www.deepcaster.com.

And the Markets have provided one such Superb Opportunity recently. We issued a Buy Recommendation in that December letter.

Note 2: It is lurking out there. It is The Big One. And its resolution will be the Major Determinant various Major Markets performance over the next few months. It marks a Major Turning Point and it is impending.

And one Major harbinger of the Turning Point, which we warned about recently, now has already occurred.

For Deepcaster forecasts regarding the Outcome of the Turning Point Challenge, read our most recent Alert “Critical Turning Point Impending; Forecasts: U.S. Dollar/Euro, U.S. T-Notes, T- Bonds, & Interest Rates, Gold, Silver, Crude Oil, & Equities” posted in ‘Alerts Cache’ at www.deepcaster.com.

Note 3: The world’s population increases by over 200,000/day. That’s net births over deaths. That’s one heck of a large potential market increase for Goods and Services, provided that the increasing population has the Purchasing Power to acquire the goods and services they need and want.

Since not all desired goods and services can be acquired, people have to prioritize. Thus some goods and services get bought and others not.

Our High Yield stock recommendation last week is for a company that makes a product essential to a Sector which is the very Top Priority when it comes to consumer purchasing decisions. And its recent yield is 8.8% to boot.

And perhaps best of all it is very well situated to be profitable regardless of general economic and financial conditions, including Hyperinflation.

[And for those very sophisticated Investors who like to sell covered calls or naked puts, the high option premiums on this High Yield Recommendation could make that very lucrative as well.]

And we issued a Markets Warning recently regarding a substantial impending Market Risk for Traders and Investors.

To see our High Yield Recommendation and Market Warning read our recent Alert “8.8% Yield in Top Sector Reco; & Markets Warning! & Forecasts: U.S. Dollar/Euro, U.S. T-Notes, T- Bonds, & Interest Rates, Gold, Silver, Crude Oil, & Equities” posted in ‘Alerts Cache’ at www.deepcaster.com.

Note 4: There are Magnificent Opportunities in the Ongoing Crises of Debt Saturation, Rising Unemployment, Negative Real GDP growth, over 9.0% Real U.S. Inflation (per Shadowstats.com) and prospective Sovereign and other Defaults.

One Sector full of Opportunities is the High-Yield Sector. Deepcaster’s High Yield Portfolio is aimed at generating Total Return (Gain + Yield) well in excess of Real Consumer Price Inflation (9.82% per year in the U.S. per Shadowstats.com).

To consider our High-Yield Stocks Portfolio with Recent Yields of 10.6%, 18.5%, 26%, 15.6%, 8%, 6.7%, 8.6%, 10%, 14.9%, 8.8%, 10.4%, 15.4%, and 10.7% when added to the portfolio; go to www.deepcaster.com and click on ‘High Yield Portfolio’.

Note 5: We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions – III” and Deepcaster’s July, 2010 Letter entitled “Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds” in the ‘Alerts Cache’ and ‘Latest Letter’ Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including testimony before the CFTC, for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.” Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.

Comments

  1. Just when you thought it was safe to get up Sunday, we have all these fun statistics.  This makes me think of the novel, Misery, when Annie Bates nurses Paul Sheldon back to health only to break his legs to keep him under her care. 
    Instead of Annie, we have Bernanke with Intentional Reverse Munchausening of the Paul Sheldon US Economy.
     Every time we start to get better Ben hits us with another dose of QE, sending us back to our sick bed.

  2. Food, water, energy of every kind and Ag more more and more! It no longer matters what energy. If your engery is wood save every tree you see fall. Energy in the short term is really important. I like those LP cans. People will sell those empty ones for 50 cents or less in yard sales. Trade them in for a full can for 20 Bucks. Buying the LP gas without an empty can to swap and it’s 50 bucks! Gasoline goes bad, LP doesn’t. Another of course are those expensive solar panals w/ batteries. They are made of Ag which means as expensive as they are, when the hyperinflation hits and silver shyrockets they will be out of reach. Unless you buy them with Ag. Buy them now with paper $ while the price is suppressed by TPTB! Buy Water filters. One doesn’t need the whole Big Berky or Pur unit. Just the filters! Make your own storage device. Everyone who is awake has been working so hard to get ready for the Event. It’s must be getting close. Give up second thoughts, second guessing ourselves. The Event is coming and we know it. Time to double down. The needfull things, the time to get them is now, if we can.

    • My sentiments exactly. Everyone knows its coming, few people are prepared. Even the most rudimentary prep is better than none. Dried beans, rice, water…….all cheap, healthy and store well. Keep a full tank in the car/truck, that could come in handy. I hope it doesn’t happen but I fear it likely will.

    • Energy is very important in Canada because it will allow the Canadians to survive the cold winter. Canadians will have to move in the North for more resources if the US dollar collapse also affects Canada and I’m sure that it will.

  3. QE will never cause inflation (they are not printing money), unless the debt gets transformed into real money. At this moment in time, the QE money is being used to buy up Old Toxic Debt packages (written off) that have been transformed into bonds, basically transforming bad debt into good debt backed by the Government. QE is wrong in so many ways, but it will not cause inflation, unless the newly created good Debt (bonds) package is transformed and used yet again as a form of money that can be used to create more money through fractional banking, then it will create more real money. At the moment I can not see this as being the case. The Fed is buying the bonds instantly when they go to market, buying them from Goldman Sachs, so they never actually hit the open market and the Fed will not sell this Bonds on. The money is Government debt which does increase the national debt, but that is at such a laughable figure that it has become irrelevant. The national Debt will never be paid off, but that is the nature of FIAT currency, perpetual debt and incremental inflation.

    The dollar will not explode or implode and I am sick and tired of the usual scare mongering that I see. The dollar will be less and less important over the years and will eventually loose its status as THE reserve currency. But it certainly isn’t going to implode or explode, this is just childish.

    The Dollar is going the way of the British old Pound, Shilling and Pence. It will get get less and less important. The difference being that when the Pound was at its hay day pre world war one, the currency was intrinsically valuable by being based on 92.5% silver coinage or 22ct gold, then after world one it went to 50% silver, after world war two, the currency was intrinsically worthless. Before the pound went worthless, the world was exchanging on silver.

    The gold standard was created by the British Empire because of its trade with China caused all silver to be drained out of the system by the Chinese (Sounds familiar?).  The Chinese were an export only country, and required little if anything from abroad, only silver and forced Opium. This caused the British Empire to make more and more notes as there was a shortage of silver, but as insurance backed the notes with Gold.

    The Dollar is a FIAT currency, but unlike other currencies of the world, up until this moment in time, because oil was valued in dollars, it acted on the Oil Standard which no one talks about, as opposed to the Gold standard. Now that you can buy Oil in currencies other than Dollars, this has changed the picture big time. 

    The dollars value lost some relevance after the Nixon Shock of the 70′s and it has been manipulated ever since using oil as basically its backing. If you got an Oil standard, then you just have to use military might to control the supply and demand of oil and change the value of the dollar exported. Unless America can reinstate its dictators in the countries that have been disposed then Americas’ control on the oil markets have all but gone. If you think that this is a wrong interpretation, next time you got to the pumps check how much gas has gone up. This is not your usual inflation scenario, this is all about loosing power. America these days is using its country reserves of oil, more and more, but by doing so its losing the nature of trade as the export of Dollars for Oil has gone in decline.
     
    America needs another War with an oil rich country, not so much for the actual oil, more do to with controlling the supply and demand of the Dollar, based on oil prices. If you can corner the market then you control one side of the bet, basically creating arbitrage scenarios that can increase the worth of the dollar. 

    If you actually think that a system that can be manipulated and cohered so easily by such base characters who constantly look out for themselves, can go into default then I think you have been reading more comic books than me. There is no Lex Luthor, there is no Superman, there is Helicopter Ben.

    Keep stacking, this game is long not short. If it does implode then I think we have more problems than you can shake a stick at. I don’ t think that the scenario is ever going to come about where I will be wearing my gun and getting my daily bread with a lump of silver, however romantic it may be.

    • Watering down of the dollar, whether actual paper or digits on a screen, will certainly devalue the dollar. Real inflation right now is at about 10%. When a stock splits, so does the price. Likewise, when the currency splits again and again, inflation is certain.

    • @WaitingForSilver You make a lot of sense. How do you see this panning out in terms of hard assets, like precious metals? Same result? I’m intrigued as to what you mean by this game being ‘long’. Surely the nature of an exponential curve is that it eventually goes vertical? To all intents and purposes, we’re there.

      We’re already seeing about 10% real inflation here in the UK. I put that down to our QE programs. And just recently we heard that the BofE is already writing off our government debt. ‘Interest’ earned on government debt is being paid back into the treasury for various spending programs. If that’s not monetizing the debt, what is?  :O/

    • @SilverSlicker

      They are not watering down the Dollar with QE. Inflation is occurring because America can not export goods,service or money faster than they can import. The trade imbalance causes inflation. Inflation does not occur through internal markets because all prices are under control through policy. As America and most of the world uses FIAT, there will always be a form of inflation, its built into the system, its how central banks operate and make money. usually governments set a target for this, most western worlds agree on 2% inflation year on year. Central banks would love inflation to go mental, they make more money through inflation literally and figuratively.

      At the moment the Fed is fighting a deflationary Dollar. Americas economy is a mess, but the rest of the world they trade with are even worse. This makes imports for America cheaper, but the Fed does not like Deflation as it doesn’t make them any money. Deflation is a good thing for the people, but the Fed and the American Government will always say that deflation is bad. Apparently deflation is bad for the economy. This makes me laugh. The only thing bad about deflation is that Fiat currency doesn’t operate the way it was designed and banks loose money. Wahhh! like I care about Banks and the Fed. 

      QE is not printing money and will not cause inflation. QE is stupid beyond compare for reasons of democracy and the free market. But it is not inflationary. By god I wish it was, as my stack of gold and silver would make me a heap of cash. QE’s purpose is to grease the wheels, to free up the lending markets by getting rid of the toxic debts and exchange them for the money that they represent. Paper over the cracks and pretend it never happened. QE infinity is the last time the Fed will try this technique, it isn’t working. Banks are not taking the bate. If QE doesn’t work then the dollar will deflate not inflate as jobs will not be created or maintained, people will start defaulting on loans and mortgages, banks will loose money.

      Will the Dollar go the route of Hyperinflation. No. Germany went through Hyperinflation, because they purposely did it, to pay off war repatriations to the French and British. The French and Americans caused the world to come off the gold standard, because no one would sell their gold.

      America was left holding the baby after the British threw their toys out the pram and said no, not playing this game any more we have no Gold, its not fair. So we went to the Bretton Wood system. Until America threw their toys out of their pram in 1971 when other countries invoked the 35 Dollar for 1 oz Gold exchange because America had lost so much money through war and the rest of the world called in their bets. And here we are, no one holding the baby and a system based on the Dollar exchangeable for Oil instead of Gold.

      Common sense suggests that if a product in someone’s eyes is too expensive, then it won’t sell. So the price goes down until it reaches the point where the goods are deemed what they are worth. How is this a bad thing? Its called the Free Market. Not according to the Fed, this is bad!….House prices falling to acceptable figures is not acceptable, even though its the reason why we are in this mess in the first place, a over priced housing market. If the market can not operate freely then the system will break. Artificial intervention is the worst thing for a Capitalist System, its unnatural. either you go all out Free Markets or you don’t. Half way houses don’t not work.

       Are Goldman Sachs Shorting Silver for the Fed. Yes. Why? To keep the Dollar looking good for as long as possible. Its obviously a policy. As Goldman Sachs is a big part of the Fed and most western Governments the world over, it is in the interest of Goldman Sachs and the Fed to keep the Dollars purchasing power looking good. Hence the sudden sell off in the markets when triggers are met. If everyone started to exchange dollars for Gold and Silver and store this wealth outside the system in bars and coins for many years, then this would deflate the dollars purchasing power. The Fed et al. do not want this, they want the dollars to flow freely.

      FIAT currency is evil. Its a Ponzi scheme, I hate it. I like hard currency. I like paper currency backed by hard currency for convenience.  

      Unless America and the rest of the Western World can sort out the trade imbalance with countries with large Exports and small Imports, then yes, we are all going to see inflation. But it will not be because of the Fed. Its because Western Governments are stupid and selfish, looking at short term goals instead of the long ones. China plans using 10 years as a minimum figure. The west looks at Yearly charts!

    • @TawnYard

      Gold and Silver will go up in value, but not as fast and hard as people are predicting. There might even be a small slope downwards, all politically motivated to say that the US economy is looking better. I am looking at Gold and Silver long term, I think the fast and hard money has gone, its all back to 10 year plans for me. :)

      As for the Boe giving the Treasury the interest. When Fiat currency operates at that level, all normal rules do not apply. Its like some sort of Physics experiment. The money they give to the Treasury never really existed, but the money was originally created on behalf of the Government by the Boe. So is it real money? I don’t know. Apparently its going to be used to pay off the national debt. But we all know that national debts mean absolutely nothing. They are just catch me all places that will never ever get paid off. Still, looks good doesn’t it. Makes the Boe and the Conservatives look good politically. if the £35 Billion is going towards the National Debt then this money will never see the light of day again. Because the money is writing off national debit, its like cancelling it out from the British Fiat system. Like an army that marches on paper. I think the Conservatives wanted to do this as a moral issue.  I think the current UK national debt is running over one Trillion pounds. £35 Billion won’t even touch the sides. :)

    • “Deflation is a good thing for the people…”

      Yes, it is… IF you have money.  If not, then it is not such a good thing as your earnings may decline at a faster rate than your expenses.  If you own or are buying a home, it too drops quickly in value.  If you have things (assets) to sell, then deflation is bad for you.  If prices fall precipitously, internal and external trade will grind to a halt as inventory becomes worth less than it cost.

      During the early 1930s, gold and silver were circulated as money.  Anyone who had money in those days did OK, even though the economy was deflating rapidly.  Those without money, however, had a very hard time.  I had some of each in my family and have heard MANY depression era stories about what they could and could not do at the time. 

    • @ED_B

      I feel for your family, sad to hear those stories. The great depression was caused by a run on the banks, due to loans not being able to be created,  because the stock market was in a massive bubble that burst, and secondly the supply of gold backed loans stopped through lack of supply. The Fed as you know was created to be the lender of last resort, so that the run on banks would never happen again. The great depressions deflation was created through lack of loans. Jobs couldn’t be created, companies went bust. Also you have to keep in mind that back in the great depression, money was still hard currency, coinage in America was 90% silver. Notes were backed by gold. The situation we are in now is completely different, yes there are lack of loans, but this deflation is artificially created by the toxic debt and banks holding on to money not wanting to lend. The Feds job originally was to stop deflation ever happening again. Doing a good job ain’t they, then again they didn’t expect currency to turn Fiat. To be honest, the scenario we have now is  based on greed and not through stupidity. yes your right about deflation affecting the poor, but to be honest, if any one of us really gave a damn about the poor we would not be part of a capitalist system. I don’t know about you Ed but we all saw this train wreck happening this time round, it was in slow motion. If you know that the bank is lending you more money that you can honestly back with you monthly income, then there has to be a scam. This scam turned out to be credit default swaps, or stinky high risk debt, wrapped up as low risk debt and sold to punters. So bearing this in mind, I knew that the train wreck was going to happen, I saved my money whilst making hay.  Now that winter has set in, well time to reap the reward. Deflation is great. But my gold and silver should if the free market is left well alone protect me from inflation. 

      As for the house values dropping too quickly, well that’s what you get for buying into a bubble market, it goes pop. This should have been regulated better on both sides of the pond. CDS’s should never have been allowed in the first place . They in my eyes are an abomination. They are going to cause grief for many more years .

      I would much prefer a scenario of deflation than the original authors bleak view of hyperinflation. Hyperinflation causes extreme behaviour and huge political shifts. Hilter was created out of a hyperinflation scenario . please, not again. 

    • Dang it!  Had a couple of paragraphs of response to WaitingForSilver and the web site ate it… trying again.  :-/

      Thanks for your concern about the hard times that my family endured.  The good news was that many of those stories were enlightening and encouraging.  Quite a few of them were about the successes they had learning to make do with what they had, working hard to get by, and of families and communities working together for the common benefit.  Much of what I learned shaped my own life, so from an early age I learned to: 1) work hard; 2) save religiously; 3) live below my means; 4) invest wisely; 5) to spend very carefully; and 6) to be VERY careful with debt.  We only ever borrowed money to buy a house and then we had substantial down payments.  We would laugh at Realtors who told us how much house we could afford but we knew better than to believe their rosy view of the world, spending no more than 20% of our income on housing and not the 40% they were pushing.

      “The great depression was caused by a run on the banks…”

      There are a number of scenarios that are used to explain the Great Depression and its causes.  The one that I prefer is that it was primarily caused by the big NY banks.  They opened the credit spigots and allowed easy money to flood the economy during the Roaring ’20s.  Once they had all of the loans made that they could, they began to close the credit spigots which caused the economy to deflate.  With fewer customers for their goods and services, many businesses either went bust or could not meet their loan payments.  A huge number of personal and business properties collapsed and were foreclosed upon.  During this process, the banks not only collected a very large amount of property but they also hoarded a lot of gold.  They were the targets of Roosevelt’s gold confiscation in 1933 and not John and Jane Doe.  That confiscation was telegraphed by about 30 days so that those wealthy individuals who owned a lot of gold were able to move it to foreign banks and not have to turn it in for paper money.  There were no reporting requirements for foreign held assets in those days.  As the economy slowly recovered, properties that had been foreclosed upon rose in value and were sold for VERY handsome profits, netting the big banks billions of dollars.  This was not the 1st time that they had used this plan to reap huge profits.  The very same thing was done during the “panic” of 1907 and even earlier panics as well.  The 1907 panic also served as THE reason for the creation of the Federal Reserve, a misnamed underhanded organization if ever there was one.  They are no more “federal” than Federal Express and they have no reserves, so what was being covered up by such obfuscation?  Lastly, I disagree that the formation of the Fed was in any way constitutional, in that the US Constitution does not grant either the US Congress or the President the authority to create such a financial monstrosity, nor does it allow either the President or the Congress to hand their authority over to any 3rd party not specifically authorized by the US Constitution, which they did.

      “The situation we are in now is completely different, yes there are lack of loans, but this deflation is artificially created by the toxic debt and banks holding on to money not wanting to lend.”

      Yes, the situation is different these days and yet the results are quite similar.  A closed credit spigot is still closed, regardless of which hand was on the spigot.  From the viewpoint of American citizens, the result is so similar as to render the causes as irrelevant.  One substantial difference between today and the 1930s is that in those days debt was seen as debt and not as an asset as it is seen today.  Banks have found it MUCH easier and almost as profitable to engage in the US Treasury paper carry trade than to make loans to citizens.  Banks have a HUGE amount of money in their accounts but this is not being loaned out, as you say.  Instead, it is being saved to help preserve the banks against an uncertain future or it is being used to buy US Treasury paper of various kinds.  The loan pendulum has well and truly swung to the opposite side of its arc.  Liar loans are gone now and in their place is a credit system that is “tighter than a crab’s buttocks”.  Credit is now generally only available to those who can prove that they do not need it.  Those who do need it to start new businesses and grow existing businesses are begging for loans and many cannot get them.  Perhaps if so much bank money was not being used to fund government largess via US Treasury paper purchases, more would be available for loans?

      “Doing a good job ain’t they, then again they didn’t expect currency to turn Fiat.”

      No, not especially.  Historically, the Fed always waits too long to reduce interest rates, holds the rates too low for too long, and then opens the money spigots too far and too fast.  Because of this, I would prefer a system wherein the entire financial system set the interest and loan rates via a competitive bidding process for savers money.  I must respectfully disagree that the Fed did not know that the currency would turn fiat.  IMHO, they were a prime mover behind that transformation.

      “To be honest, the scenario we have now is  based on greed and not through stupidity.”

      I suggest that we have a generous portion of both at play here.

      “yes your right about deflation affecting the poor, but to be honest, if any one of us really gave a damn about the poor we would not be part of a capitalist system.”

      If we had a capitalist system at the moment, I would be all over this.  Unfortunately, we do not.  What we have is a crony system with some of capitalism’s features but not capitalism itself.  As for the poor, a great many Americans DO care about them, and rightfully so IMO.  We show that via good support for worthwhile charities that serve many of the needs of the poor.

      “I don’t know about you Ed but we all saw this train wreck happening this time round, it was in slow motion.”

      Indeed.  It has been quite visible in many of its manifestations for some time now. Only the sheeple and the truly brain-dead are as yet unaware of it.  Note that the velocity of this financial train wreck is increasing at a visible rate.

      “If you know that the bank is lending you more money that you can honestly back with you monthly income, then there has to be a scam.”

      Agreed.  While the US education system is abysmal, the financial education that many could use to avoid such problems is virtually non-existent, allowing many otherwise reasonably intelligent people to blunder into these financial mine fields.

       ”This scam turned out to be credit default swaps, or stinky high risk debt, wrapped up as low risk debt and sold to punters.”

      I’m not quite clear on what a “punter” is, unless it is one who rows a punt.  Be that as it may, however, you will be happy to know that not one penny of my wealth went into those financial fly-paper schemes.  I also beat a hasty retreat from US Gov bonds, exiting in 2007 with a tidy profit before the hammer came down in 2008.  I did temporarily lose some money in stocks but by holding fast and not selling on the way down, I incurred no net losses whatever.  It aggrieved me terribly that so many others did not do as well and lost a good share of their retirement savings.

      “Deflation is great. But my gold and silver should if the free market is left well alone protect me from inflation.”

      Even if gold and silver also deflate somewhat, it is likely that they will do so at a slower rate than many other assets.  We saw this in 2008, when “cash was king”.  That was a significant change from earlier in that same decade when people were saying “cash is trash” instead.  In an inflation scenario, gold and silver will, indeed, protect our purchasing power significantly better than holding depreciating fiat currency.

       ”As for the house values dropping too quickly, well that’s what you get for buying into a bubble market, it goes pop.”

      Indeed so… but only if inflated via a very easy money policy that allows this to happen.  Many of us recognized that US housing was in a bubble but very few had any idea WHEN it would pop.  While this was a huge issue for many people, it was not for my wife and me.  We bought our current house in 1994, had a very large equity against which we never borrowed a cent, and only have about $40k remaining on our mortgage, which we can pay off at any time.  We are holding off on that as we plan to sell this house and move out to the country next spring. It is a very nice house in a very nice neighborhood, we have maintained it carefully, and it should sell fairly easily.

      “CDS’s should never have been allowed in the first place .”

      Agreed.  I remain unconvinced that any derivative is truly necessary.  These are relatively new financial inventions, so one can only wonder at how we managed before they came along.  If derivatives MUST be continued, then let them be of lesser value than the net worth of the company or bank that is buying them.  When the derivatives bubble pops, as least the businesses that own them could be liquidated to cover those losses.  It is insane that a bank like JP Morgan, with a net worth of around $250B can be on the derivatives hook for over $75T!  That is 300 times their net worth!  If 1/300th of these things implode JPM will be wiped out.  Oh, wait!  I forgot that they get any profits that are made while the tax-payers get the bills for their stupidity.  :-(

      “They are going to cause grief for many more years .”

      I disagree with this.  IMHO, the current house-of-cards economy cannot last that long before reality brings it crashing back to Earth in a spectacular financial blow-up.  The likes of this will be unprecedented and will make the 1930s look like the good old days.  THIS is my primary reason for stacking while my secondary reason is as a shield against inflation.

      “Hyperinflation causes extreme behaviour and huge political shifts.”

      Agreed… but… is not the leading edge of this what we are seeing today?  I think that it might be.

      “Hilter was created out of a hyperinflation scenario .”

      Yes, he was and he was funded by big banks in both the UK and the US until war broke out and both countries created laws against trading with the enemy.  By then, of course, Hitler was pretty well armed and set up for massive arms building.  At least Hitler did not have nukes or bio weapons.  He had war gas that he could have used but then so did the Brits and he knew what would happen to Germany if he used them on Allied troops or territory.

      I thank you for your comments.  There is MUCH to consider in what you say but I do apologize for the length of my answers.  Writing less would not do your comments justice, however.    :-)
       

    • All official currencies in this world are fiat so there are no other exit away from the US dollar as they will also collapse soon. Physical gold and silver will now be the alternative store of wealth because they are money for more than 5000 years.

  4. One heck of a long article and not much said. Lol @RocketsRedGlare you post reads better to me and more useful, never thought of the LP bottles, thanks. By the way I spent all day on youtube yesterday on the UCC-1 and ended up with Agenda 21. Lol

  5. Soros, Buffet, Obama, et al will TELL you when the dollar is no longer useful to them.  All you have to do is listen to them CAREFULLY!

    • And we know when politicians and bankers are telling the truth. Their lips are moving! :-)

    • I thought that it was that they were lying “when their lips were moving”.  lol

      “Soros, Buffet, Obama, et al will TELL you when the dollar is no longer useful to them.  All you have to do is listen to them CAREFULLY!”

      Sure.  But isn’t that a lot like panning for gold?  Lots of useless drek with a few tiny flakes of value hidden in it?  ;-)
       

  6. Exactly! Rocket!

  7. @WaitingForSilver: QE WILL NEVER CAUSE INFLATION “because it not printing” It is creating currency just the same! Why would a fiat paper be worth more that a fiat DOT? Why would it need to be “transformed ” into a form of money when it already is a form of money, Or a better word currency. Central banks have been creating digital currency for decades and the result has been inflation! Seems like 2012 just started and it’s almost over! In that time how much currency has been created, and exported. How much inflation? We have 10%-11% inflation now!
    “Inflation has now been institutionalized at a fairly constant 5% per year. This has been determined to be the optimum level for generating the most revenue without causing public alarm. A 5% devaluation applies, not only to the money earned this year, but to all that is left over from previous years. At the end of the first year, a dollar is worth 95 cents. At the end of the second year, the 95 cents is reduced again by 5%, leaving its worth at 90 cents, and so on. By the time a person has worked 20 years, the government will have confiscated 64% of every dollar he saved over those years. By the time he has worked 45 years, the hidden tax will be 90%. The government will take virtually everything a person saves over a lifetime. G.Edward Griffin                                                                                              If those that say don’t worry everything is ok and one doesn’t prepare and they are wrong what happens? Your wiped out and destitute, thats what happens. People should be prepared even if they were not facing a calamity. Even a squirrel saves food! OOps :-)

     

    • “Even a squarrel saves food!”

      I had the oddest image form in my mind when I read this.  I could just see a squirrel shaped as a square.  ;-)
       

    • RocketsRedGlare  QE is not the same as printing money, the money will never live in the real world, in the same way that the national debt will never get paid. Why on earth do you think the Fed is doing QE, you honestly believe that want hyper inflation, in effect destroying their own position of masters of money supply? It took the Rothschilds et al 200 years to get to this position, you reckon that the super rich clan are going to give this position up by being stupidly greedy? The Feds scam is a great ponzi scheme, why kill the cash cow? 
      And as for this 10% figure I keep seeing this is down to oil prices in America  normalizing after 60 years of artificial manipulation through foreign policy. The rest of the world have been paying your current price for oil for decades. Check the basket of goods, better still check you receipts to see where most of your hard earned cash is going. By the way, in the UK I am currently paying £1.48 for diesel per litre. Its why Europe is developing smaller more efficient engines. Cars are rubbish, but my little crap number
       does 68′mpg.

    • I just don’t get it how QE is not inflationary when in reality it is. For example on September 2012, QE3 was released which caused the price of silver to change its older low price which was 27$ per ounce to 33$ per ounce and the price of gold changed its older low price which was 1500$ per ounce to 1700$ per ounce.

  8. @Waiting for silver

    QE IS PRINTING MONEY!!!    If the govt wants to spend $3B, but they only have $2B in tax revenues, they print $1T and SPEND IT.    The bonds are issued and the currency is created.   When the govt SPENDS the money, it ends up in SOMEONE’S hands, trust me on this!!!   The extra trillions the govt spends is REALLY spent.   The recipients:  military contractors,  grocery stores (EBT), someone’s govt check…    The goods and services the govt buys (with the money it didn’t have) is purchased with DOLLARS.   Even the govt has to tender dollars to another party to make a transaction.   

    I also had to take issue with your statement that the Fed was “created to be the lender of last resort.”    The Fed was created to milk the nation dry and transfer all wealth and power to the govt and the elites who run it (while conveniently removing all the PMs from the hands of the people.)

    A central bank is part of the Communist Manifesto.    It’s an evil abomination.    It’s the opposite of a free market.   It is illegal.    It was designed for very nefarious purposes, has a FALSE veneer of respectability/legitimacy, and operates on a time scale that is so slow, the victim doesn’t realize what’s happened until it’s TOO LATE.   (Or thankfully in most of our cases here at Silver Doctors, almost before it’s too late.)
       

    • Slvrizgold 

      The Fed was created as the lender of last resort, initially the Fed could do nothing about the wealth in your pocket, silver and gold backed currencies are hard to control centrally. What the Fed has turned into I agree whole heartily, it is an abomination and does stop the free market from operating correctly. However, in a world of CDS, what can save you from this? Nothing. The Fed was not responsible for Fiat currency, blame World war One for that baby, and the American destruction of Bretton Wood, well if you do go and fight in another mans country, make sure you got deep pockets or are prepared for total war.

    • The central banks have ordered JP Morgan to manipulate gold and silver’s prices which means that we don’t have a free market anymore. The LIBOR rates were also manipulated which was one of the biggest scandal ever discovered.

  9. @WaitingForSilver: There is no difference in the financial sence in dot dollars and paper dollars. Assuming you bought a house was it digital currency or dots on a screan currency? Assuming you defaulted on that house and Golman Sachs now holds the morgage. That Asset is now worth less due to the drop in housing prices by 30%. Goldman continues to leverage the house @ 100% of the note, and does not mark to market. Now Goldman wants to get this toxic asset off their books. No one one wants to buy that house at 100% WITH EXISTING CURRENCY, & they want market price or better. Goldman can’t sell it for that price because they have already leveraged it @ 100%. So no existing currenccy is being offered. In steps the FED. “Prints on a computer” the 200000USD Goldman needs and buys that morgage from Goldman. Now there is still all the currency that was in existance before the Fed created the 200,000. The FED has the house. That 200000 is now on The Goldman balance sheet and the house is on the feds balance sheet. That was an expansion of the money supply by 200000! Goldman can do anything they want with it now, it’s liquid. They can even buy another toxic underwater morgage and sell that to the FED too! The USDs do not need to exist in physical form only to exist. That has been the case since the beginning of Fractional Reserve Baking! It is in cirulation and does have effect. That is the very reason the FED does it. It has effect. Yes I do honestly believe the FED wants hyperinflation. Because everything they are doing is inflationary! The government needs to inflate away it’s debt. The FED will do just that. What do they care, they still get the real asset on their books or the instrest off of what they ‘print”. It is always a win for them! I lose, you lose but government and bankers win.

    • Erm… What about the guy you initially bought the house off? I mean, you went to a mortgage provider (Goldman Sachs owned, in this example), got a mortgage for $200,000 and handed the cash over to the vendor. Well, Goldman created that money for you. It didn’t exist before you signed on the dotted line. Meanwhile, whether you default or not, $200,000 is now in the hands of the vendor.

      After he’s paid off the realtor, the vendor buys a new car and puts the rest in a high interest deposit account while he considers his options. He thinks house prices may keep falling, so he doesn’t buy a house. Maybe he buys some gold and silver. Maybe he squanders a whole load of cash partying.  The point is, that $200,000 has become real fiat money, in circulation.

    • The government doesn’t want hyperinflation. The government wants slow, sustained high inflation over a long period of time. Just 7% over a decade will effectively halve their debts. They win. The Fed wins. Wall Street wins.

      Slowly, slowly boily froggy.

    • @Tawnyard: As G Edward Griffin explained, 5% is optimal inflation as far as TPTB are concerned. That is assuming “normal” times. We are not in normal times. Sovereign Bond Markets are about to implode because their national debt load! National treasuries and banks are bankrupt. They want to hyperinflate their way out of it, because they don’t believe they can grow their way out.  There is a global currency war raging. TPTB don’t give a damn what it does to “the people”. I’s all about them. 

    • @RocketsRedGlare I know what you’re saying. I think our governments are hoping for inflation just shy of a technical hyperinflation (although there is no single definition of hyperinflation. Some say a monthly inflation rate of 50% is hyperinflation. The IASB defines it as around 100% over 3 years.)

      This is where Peter Schiff gets caught out. He keeps using the ‘hyperinflation’ buzzword. Now he’s having to backpedal. “Well, maybe not hyperinflation, but certainly very high inflation!”  (I’m quoting from memory, sorry if it’s not verbatim).

      Peter Schiff is right. He’s been right from the start. Let’s say we end up with 25% real inflation. It would do the job, wouldn’t it? And it wouldn’t technically be a hyperinflation. The government can continue to cook the books and lie with the statistics until it’s officially a less frightening 9.9%. Manage that for a few years and it’s job done. We’re all broke, government debt has shrunk and they’re still in power.

      I’ve got Currency Wars sitting on my bookshelf. Yes, the people are going to pay. But the people have also ‘benefited’ from the welfare system for all these years. Here in the UK, we have every benefit available you could think of. Government funded teeth extractions. Government funded cosmetic surgery. Government funded university education. We pay the government through our taxes, but it’s not nearly enough. Now it’s time to pay the piper. 

    • @Tawnyard: Here is our delima in a hyperinflation state. When the inflation hits, TPTB will have an opportunity to take our stacks if we don’t have the basic needfull things to survive for up a year or two or even three! Look at this chart from the hyperinflationary years of the Weimar Republic. You can see that those who sold in desparation in the first 3 years of hyperinflation were still destroyed! This is the Plan of TPTB today, to grind us down and get us to sell. They have the printing presses!

    • @Tawnyard: That means one of 2 things I suppose. 1 The Money the original buyer created through fractional reserve lending was retired when the Fed payed for the house and a new debt created & put on the public.  Yet the other deposits form the original sale are still out there multiplying. 2 The original currency created from the home loan is retired, the fractional lending is still out there circulating. The Money the Fed created will be fractionaly loaned out again by Goldman Sacks. It’s enough to give someone a headache! The criminaly insane really do run the world.  I’m no economist or banker just a hard knox education from fighting with crooks over money. I once argued with a car dealer for 2 days! God they hated me.

    • Exactly! We need to get rid of these banks with their toxic assets before it is too late. They are destroying our economies and this world.

  10. Slvrizgold 

    Yes that is the way the normal bond market operates, but this is not how QE is operated. The bonds according to the Fed speak will never be sold on the open market after the initial purchase. The only money released into the world is the low powered ordinary money that is basically the same amount as the value of the toxic debt, which had already been bought up by the Fed and written off, taking that money out of play. The Fed will make money out of this, but it won’t be the madness that would be if they did create high powered money. Once the bond had been paid off by the government, then the only money created is the nominal interest amount that the Fed received. I suspect that the Fed as the Boe has done will give the interest back to the government, killing off all the money completely. Another option to kill off the money is to sell the bond on the open market and then destroy the money received. Taking it out of the economy.

    • @WaitingForSilver: Once the banks have those FRN on their balance sheet the FED has no control what they do with them. Not that they would do anything about it regardless. The FED is owned by those very banks!

    • The banks will be making dollars while we suffer the most by paying for these damages, with debts, inflation and taxes. I can’t believe that people keep all their savings in these toxic assets and wealth especially when they are losing values over time.

  11. This is a more complete image. As you can see the hyperinflation began in 1919. But the metals didn’t go hyperbolic untill 1923. By that time most people had already sold off in desparation! We must learn from history or we may make that same mistakes! Ag topped 1 trillion DM per ounce!!! If one had had 1000 oz and been able to hold on he or she would have been a quadrillionaire!

    • @RocketsRedGlare Good point. I’m not selling anyway. I’m trying to work out a way of using my PMs as collateral for mortgages. Hence the big allocation towards gold. Lenders may look on gold more favourably. I won’t sell a thing until we’re nearing 10 oz silver = 1 share of the DOW. Or 300 to 500 oz of silver buys a house.

      I’ve got half an acre on which to grow food. And I have the knowledge and tools to hunt and forage. Clean drinking water and heating fuel are not a problem here in the countryside.  I’ll be building up my emergency supplies over the next year or two. I’m with you on that. Meanwhile, I live modestly, on a low wage. The less I’ve got, the less they can take.

    • “Ag topped 1 trillion DM per ounce!!! If one had had 1000 oz and been able to hold on he or she would have been a quadrillionaire!”

      One can still be a quadrillionaire today.  Just take a few dollars and go shopping at local coin or gun shows.  Someone there WILL sell you 10 Zimbabwe $100T bank notes for a reasonable price… and probably for less than the cost of an oz. of silver now.  In either case, that quadrillion marks or dollars would buy very little of anything that is even remotely useful.

       

    • Well said! This shows that gold and silver can skyrocket anytime during hyperinflation and hyperinflation can happen all in a sudden. A lot of people are selling right now their physical possessions for pieces of papers in which their values are created out of thin air. People need to look back the history.

  12. Inflation as we know it is well embedded in this country with annual increases for the last ten years of 8-10%.  The Fed will never reveal the truth, neccessarily, as the average person would revolt at that thought.   With 48 million people on food stamps, able to buy free food with SNAP and EBT cards, they won’t complain until the buying capacity of these cards is insufficient to buy even the basics. The middle class is so hammered and despirited at their plight, they have yet to complain, chosing instead  to reelect one of the people chiefly responsible for this problem.  They probably still think he will produce a miracle to stem inflation.  The wealth can work around inflation of 8% buy investing in assets that beat  inflation.
    The reason we have yet to see the really heavy foot of inflation is the velocity of money.  It is as low as it has been in the last century, lower that even the Great Depression.  When the movement of the $5 trillion plus involved starts in earnest, the inflation will be undeniable.  This is when the people and businesses begin to lose confidence in their stale and static accounts stuffed with FIAT and begin to spend it in an attempt to front run the inflationary effects they see.  ZIRP also forces people and companies to pursue risky assets, creating bubbles.  Bubbles create a perception of inflation that causes these same groups to spend their money in an attempt to gain yield in a ZIRP world. This never works to their benefits as bubbles are just the trap set by the smart money as they leave the room to count their gains at the expense of the average person.
    The best thing about inflation as far as the government is concerned, is inflation will debase the national debt. The Fed will inflate its way out of debt.   With interest rates offered at less than 1.8% for the standard 10 year note, inflation erodes the principal by 50% in less than 9 years.  The rule of 72 says that the value of monetary assets increases or decrease by the inflation rate divided into 72.  9% inflation reduces the value of principal by 50% in 10 years.  With the Fed,  10 years is a short time period.  Government thinks in decades so the erosionary effect of inflation works to its advantage.  Besides which, a good portion of that interest paid to the recipient is taxable, maybe as high as 35%, so the treasury receives as much as 1/3 of their funds back during the 10 years that is the life span of that 10 year note. During this time we are all forced into higher tax brackets, brackets that are rising along with the reduced of deductions we commonly used in our tax calculations.
    Another factor that many fail to see in inflation is the taxable income of people and companies rises in relation to inflation, pushing these two groups, people and companies, closer to that magic max tax bracket of 35-39%  This rotates more money to the government.  We seldom see the government adjust brackets in relation to real inflation, another tax gimmick that works against us.
    The Alternative Minimum Tax is a classic  example of this effect. It was first used to capture the very wealthy high income earners and now,  with inflation and 4 decades of income increases, even people of modest means find themselves in the AMT trap.  Income taxes within the AMT disallows many deductions thereby forcing a person making as little at $50,000 today to pay considerable higher taxes.  Inflation is the reason this trap has been  sprung decade over decade.
     The government has done nothing to mitigate this tax format.
    The government loves inflation as it debases debt, allows the government to spend more (to buy votes of those groups benefited by inflation) give away more, and the best effect of being able to  extract more taxes  from the people. 
    It is the most insidious TAX and even a mild, modest inflation rate of 8% makes government ecstatic.  It makes the people the government represents poorer by 8% a year. Hyperinflation may not be in the cards but inflation of 8% destroys the middle class. But we already knew that.

    • @AGXIIK: We have had a constant min. inflation @ 10% for years now. Lets say since 2008. Those that are branded as the wealthy all this time was the 250,000$ bracket. That 250,000$ income @ 10% inflation after four years now has 40% less purchasing power. Nearly half the income thay had. Yet the government pretends nothing has changed and wants to raise their taxes even after they have payed their 35% income tax and their 40% devaluation tax! Thats how the middle class is being destroyed! As V. Lenin said, grind them between the millstones of inflation and taxation. The middle class simply disappears!

    • Inflation won’t just debase the national debts, it will also debase all bills, fees and debts which will allow us to pay them a lot easily, faster and cheaply. It will be a good thing for people who have their wealth and savings in physical gold and silver as they can use the rest of their cash to pay the bills, the fees and the debts.

  13. Your math is accurate on that score Rockets.  I do as much shopping as my wife, scanning prices and comparing them to what we saw a month to a year before.  We have friends in the super market business who also make that 10% statement.
    Economics is not being taught in school  Monetary theory as a lesson plan?  Surely you jest.  The kids today get Greenie, the eco-snake, talking about how we can have clean energy if we give up cars and use solar to heat our homes.  What they fail to tell us is Greenie is a python who has us in a death grip called inflation.  The younger generations don’t know this.  All they feel is the tightening coils and can’t figure out what is going on.  The kids see their parents going without or going bankrupt.  The kids trying to form new families are debt burdened and are unable to get ahead.  The middle agers see this for what it is but can’t or won’t fight it, trying just to get through this time of strife.  Us older folks know what is going on and hope to stay one dollar ahead of the inflation tsunami.  Phyzz stackers have it figured out and are battened down for the coming storm.
    Sad to say, but this seems to be the fate of most of the western world. 
    Lenin continues to provide his lesson plans for the collectivists who study and apply his immutable lessons. He was an evil SOB but dumb he was not. With a little time and lack of education people can get themselves in a heck of a fix.
    Franklin said we get old to soon and wise to late.

    • Sadly, you are correct that today, kids aren’t learning economics and instead, they learn other propaganda lessons to distract them from the true problems. :( Although, there are still some teacher who gave their students economics lessons even when it is not part of their job which was the case for me. :)

  14. This is faster than I thought and I don’t think that I’ll be fully prepared before that happens. Canada will also be affected by the US dollar debasement because the USA won’t be able to purchase more goods from Canada and Canada does most of its trade with the USA.

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