By SD Contributor AGXIIK:

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, necessarily, 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 dispirited at their plight, they have yet to complain, choosing 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 knowledgeable wealthy can work around inflation of 8% by investing in assets that beat  inflation (like gold and silver).

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, even lower than during the Great DepressionWhen the movement of the $5 trillion plus involved starts in earnest, the inflation will be undeniable and massive 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 increase 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 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 falling along with the availability of deductions we commonly used to reduce our taxes.
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.

The Alternative Minimum Tax is a classic  example. It was first used to capture the very wealthy high income earners and now,  with inflation, 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, and thus to buy more votes, give away more and 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 10% destroys the middle class.
But we already knew that.

    • @Marchas45:  The Sheeple DON’T care about taxes. Reason: THEY DONT PAY ANY TAXES.  Yes, they will be content with their handouts UNTIL they stop coming…AND THEY WILL….THEN they will come for yours and mine.  Hopefully you are ready.  I am.  Just finished  loading a batch of .40s for my Glocks.

    • I’m buying more silver on this pullback from the fast money selling after QE announcement.

      I was buying silver and simultaneously being short Japanese yen which was the equivalent of buying silver in yen, not dollars. 

      I will be acquiring a full silver position if we pullback to $31.50 and this time I will be buying in the declining dollar. 

      I will have twice as much long silver in yen than US dollars because I think the Yen could fall 5-10% in next 3-6 months boosting my 2013 performance.

      I predict silver to reach $42 in 2013 or 30% higher than today’s prices.

    • People wouldn’t need those handouts if congress would fix the issue of job off-shoring. Penalize companies that offshore jobs after taking government handouts. Full payback of any grant, loan, bailout plus a 10% tax hike hit for that year. And I hate to break it to you Silverrr but people making $25k a year get taxed about 30%. The working poor often get taxed at a higher rate than someone making $50k a year.

    • The problem with this metric.  If you keep expanding the denominator (money supply) then the velocity seems like it is dropping.  Which it is according to the formula.  Velocity=Transactions/Money Supply.  Therefore they have to keep printing money to increase the money supply to keep the velocity low as a percentage of the supply of money.

    • The sheople only care about their latest gadgets, fashions, electronics, etc. and then, they are more brainwashed by these. So because of that, they are unaware about the current real financial situation.

    • Silver’s price will sure continue to go up in terms of dollars because inflation is destroying the dollar’s value, the silver’s ore grades are declining and there are more demands rising in silver because gold is more expensive than silver.

  1. While the paper PM Dog & Pony Show gets all the headlines and chatter from the Bloomberg Bobbleheads, the ‘lesser metals’ are all up today. There’s more than meets the eye here, This could well be receding tide before the tsunami crashes down. Grab all the shells you can, then quick look for high ground before that huge wave rises up on the horizon. By then, it’ll be too late to run.

  2. You lost me early in this article. Obama chiefly responsible for our economic codition? Really? Can you quote Rush Limbaugh and Glen Beck verbatum? It sounds like you can.

    This country is in a deep hole, and there are plenty of guilty parties standing around leaning on shovels. All ready to dig the hole deeper, but none ready to fill it in. 

    Abandon the notion that either the republicans or the democrats can fix this mess, They can`t.

    Blaming Obama for this mess is akin to returning home some evening, finding your home a smoldering, smoking pile caved into the basement, and chewing the firemans ass who showed up as your home collapsed. It just aint his fault.    

  3. The latest example is Southwest Airlines  just raised fares by 16% accross the board.

    In addition they raised other fees like for extra bags, early check in etc.   

    This is real inflation, they did it not because business was good but because operating costs are going UP.   Mainly the cost of jet fuel.   Jet fuel is going up because refineries are shutting down.

    So we have a declining economy with rising costs = stagflation.

  4. The official inflation rate which is about 2% is way not the current inflation rate that the USA is actually facing when foods go up about 10% every year. Hyperinflation will arrive in the USA thanks to QE infinity when the Federal Reserve reintroduce the 500$ bill or the 1000$ bill in circulation if the cash transaction still exist by then.

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