Friday, March 11, 2011
China this week reported a $7.3 billion trade deficit for the month of February, its largest trade deficit in seven years, which surprised many global economists. NIA believes China's trade deficit is temporary and that China will quickly return to having a trade surplus. The Federal Reserve's QE2 along with China's destructive monetary policies, which artificially devalue the yuan, have led to a massive rise in China's raw material costs this year. NIA believes that in the upcoming months, Chinese manufacturers will raise the prices of their products that get exported to the U.S., to counteract rising commodity prices. With most products used by Americans today having been manufactured in China, this will mean Americans will soon see massive price inflation in just about all consumer goods they use. NIA projects that by the end of 2011, we will begin to see the U.S. CPI increase by 4.9% or higher on a year-over-year basis, with real U.S. price inflation rising north of 10%.
The mainstream media is proclaiming that China's trade deficit will silence calls for the Chinese to allow their currency to strengthen against the U.S. dollar. The fact is, China's government has for long been making the major mistake of printing too many yuan in order to artificially prop up the U.S. dollar. Their fear was, if the U.S. dollar was allowed to decline too rapidly, prices of Chinese goods would rise in terms of U.S. dollars and Americans would no longer afford to import them.
The truth is, if China allowed the yuan to strengthen, the Chinese would have enjoyed a much higher standard of living. Sure, prices would rise in dollars and Americans would import less, but the Chinese would have the ability to consume more of their own products. Now, as a result of China expanding its own money supply in order to keep the yuan pegged to the U.S. dollar, Americans will be forced to pay a much higher price for Chinese goods anyway. The same higher prices Americans were going to pay as a result of exchange rate appreciation, Americans will now pay as a result of inflation. For the Chinese, the exchange rate appreciation route would have been a much better route to take than the inflation route, because now the Chinese will also be forced to pay higher prices. In the very short-term, China might actually suffer more than the U.S. because they lack the social safety nets that have been implemented here in America.
The U.S. government has been successful at temporarily paying off Americans into not rioting in the streets like in Arab nations. It was just announced a few days ago that the number of Americans on food stamps in the month of December of 2010 was a record 44,082,324, up 13.1% from one year earlier and 1.1% from one month earlier. That is more than 14% of the total U.S. population! Combined with President Obama extending unemployment benefits up to 99 weeks, American citizens are too busy and distracted playing with their iPad 2s and gossiping on Twitter about Charlie Sheen, to have any time to protest in Washington, DC.
NIA believes the U.S. government's entitlement spending is currently having the unintended consequence of making Americans dependent on government. It is like when you take wild animals into captivity and you feed them, teach them to do tricks and take care of them for a period of many years; if you just dump them one day back into the wild, it will be very difficult for them to survive. Americans who have become dependent on unemployment checks and food stamps will likely soon abruptly find out that they must begin to fend for themselves without any help from the government. The result will be many Americans turning into wild animals and becoming so desperate that they will have to rob and burglarize their fellow neighbors who were smart enough to prepare, or else they will risk starving to death.
As a result of QE2, the Federal Reserve is now buying 70% of U.S. treasuries, up from previously only buying 10% of treasury bonds. Foreign central banks are now buying just 30% of U.S. treasuries, compared to previously buying 50% of treasury bonds. The U.S. budget deficit in the month of February reached a record $222.5 billion or $2.67 trillion on an annualized basis. With the Federal Reserve now monetizing our debt in full swing, a complete and total loss of confidence in the U.S. dollar could be imminent.
Just like how nobody in the mainstream media was calling for the collapse of Egypt's government a few months ago, almost nobody in the media believes a collapse of the U.S. dollar could possibly take place anytime soon. NIA members are educated enough to see that the writing is on the wall. The Federal Reserve can deny all it wants that the U.S. is experiencing inflation, but with the cost to print a single U.S. dollar paper note rising by 50% since 2008, massive inflation is here right under Federal Reserve Chairman Ben Bernanke's nose. Every day that goes by, China is quietly implementing more and more steps that expand the yuan's use in cross border trade, in order to position the yuan as the world's next reserve currency.
So few Americans are presently preparing for hyperinflation that if hyperinflation broke out today, approximately 90% of Americans won't have the means to put food on the table or put fuel in their automobiles. During the upcoming hyperinflationary crisis, food stamps will no longer have any value at all and all U.S. entitlement programs will come to a complete halt. Americans will take to the streets like the world has never seen before.
The biggest question NIA has today is, will the U.S. government resort to firing at its own citizens, if major riots take place in Washington, DC. On Thursday, police in Saudi Arabia shot and wounded three protesters. The price of oil rose by a few dollars per barrel as soon as this news hit the wire, which shows just how nervous the world's financial markets have become in recent weeks. The fact that the Dow Jones has declined significantly in recent days, in our opinion means that the odds of QE3 being launched as soon as QE2 is over, are now much higher than they were several weeks ago.
The other big question NIA has today is, if in the unlikely event there is no QE3, who will fill in for the artificial buying demand currently coming from the Federal Reserve. After all, with no QE3, the Federal Reserve will go from buying 70% of treasury bonds to being a seller of U.S. treasuries. NIA is 100% sure that foreign central banks aren't itching to jump back in to fill the hole. While in the past, the private sector may have picked up the slack, we believe individual investors will now be more reluctant to jump into government bonds, especially with bond king Bill Gross reducing the government bond holdings in his Pimco Total Return Fund down to zero. The bottom line is, no QE3 means interest rates will fly sky high and destroy the phony so-called "economic recovery".
From April to August of 2010, the last time the Federal Reserve allowed its balance sheet to shrink, the Dow Jones fell by over 1,000 points. If Bernanke doesn't soon begin to leak out the strong likelihood of QE3, we could see the stock market decline by 1,000 points or more, which will force Bernanke into launching QE3. If we see a major sell off in stocks, NIA doesn't necessarily think that precious metals prices will follow. In fact, we could see gold and silver rise along with the Dow Jones falling. NIA projects the Dow Jones to gold ratio to decline to 6.5 in 2011. This means even if the Dow Jones fell to below 11,000, we still believe gold is likely to rise to around $1,600 to $1,700 per ounce this year, with silver soaring to around $42 to $44 per ounce. NIA believes the worst decision any American can make is to sell their gold and silver and go long U.S. dollars, hoping to buy their precious metals back at a lower price in the future.
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
Friday, March 4, 2011
It just seems inconceivable that anyone can claim that the economy is improving when the number of Americans on food stamps continues to set a brand new record every single month. But the food stamp program is not the only indicator that the economy is still having massive problems. The following are 10 more reasons why the U.S. economy is simply not getting any better....
#1 Some recent statistics actually indicate that the number of unemployed Americans is still going up. According to Gallup, unemployment in the United States rose to 10.3% at the end of February. That is the highest number Gallup has reported since early last year.
#2 The housing industry is still a complete and total disaster. In fact, new home sales in the U.S. in January were 11.2% lower than they were in December. Not only that, the number of new home sales in January was 18.6% lower than the number of new home sales in January 2010. That is not a sign of improvement.
#3 There wouldn't even be much of a housing industry at all at this point if it was not for the U.S. government. Right now the U.S. government is either writing or guaranteeing well over 90 percent of all mortgages in the United States. So what would the housing market look like in 2011 if the government was not in the picture?
#4 In 2010, more than a million U.S. families lost their homes to foreclosure for the first time ever, and that number is expected to go even higher in 2011.
#5 Due to rampant economic decay and record numbers of foreclosures there are areas in most of our major cities that now look like "war zones". For example, the Huffington Post is reporting that there are now approximately 15,000 vacant buildings in the city of Chicago and there are approximately 60,000 vacant houses and apartments in the city of Las Vegas.
#6 According to the Oil Price Information Service, U.S. drivers spent an average of $347 on gasoline during the month of February, which was 30 percent more than a year earlier. This represented 8.5% of median monthly income. So what is going to happen when gas prices go even higher? Sadly, the average price of gasoline in the U.S. has risen another 4 cents since yesterday and it is likely to go much higher from here.
#7 The U.S. trade deficit continues to grow. The trade deficit was about 33 percent larger in 2010 than it was in 2009, and the 2011 trade deficit is expected to be even bigger.
#8 The CredAbility Consumer Distress Index, which measures the average financial condition of U.S. households, declined in every single quarter in 2010.
#9 The number of Americans that have become so discouraged that they have given up searching for work completely now stands at an all-time high.
#10 The U.S. national debt is growing faster than ever. The Obama administration is projecting that the federal budget deficit for this fiscal year will be a new all-time record 1.65 trillion dollars. It is hard to even imagine how much money that is. If you went out today and started spending one dollar every single second, it would take you over 31,000 years to spend one trillion dollars. Long ago the U.S. government should have been getting these deficits under control, but instead they are just getting even larger.
So in light of the statistics above, can anyone really claim that we are in the middle of an economic recovery?
The truth is that there is no sign that any of the long-term trends that are destroying the U.S. economy are even slowing down.
Millions of jobs continue to be shipped overseas.
The U.S. dollar continues to be devalued.
The federal government continues to go into more debt.
State and local governments continue to go into more debt.
Our trade deficit continues to grow.
Our cities continue to be transformed into wastelands as they are being systematically deindustrialized.
The number of Americans that are dependent on the government continues to soar.
The U.S. middle class continues to shrink.
I know that I harp on these themes over and over, but it is vitally important that everyone understands that the mainstream media is lying to us.
The U.S. economy is dying a very painful death and there is no hope on the horizon.
Things are not going to be getting better. Well, they may get a bit better for the boys down on Wall Street, but for the rest of us our standards of living are going to continue to decline.
The best days for the U.S. economy are already behind us. What lies ahead is a whole lot of pain.
We are going to pay the price for decades of corruption and incompetence.
An economic collapse is coming and you had better get ready.
Friday, February 11, 2011
For those of you not familiar with the 'Confiscation Letter' here is a link to it for your cultural enlightenment=>>Confiscation Letter
For those of you who think that when your parents assets were confiscated was due to an anomaly and because of a few bad apples within the system, and that some new legislature in the works will solve your problem so that it will not happen to you, I hate to be the bearer of bad news, but your assets are being confiscated right now as we speak.
Allow me to explain: last summer in June 2010 you could buy an ounce of silver for under $18 dollars today it would take $29.00 of your devalued dollars to buy that same ounce of silver, likewise it would take $8.63 to buy a bushel of wheat, roughly twice what it cost last summer, when I get letters like these from my highly regarded Capital Research Companies, it triggers alarms bells and I feel compelled to pass the warning on to those of you who will listen:
I've said before that the US Dollar was in BIG trouble... but as of
tonight, it's on DEFCON 1 RED ALERT TROUBLE.As the below chart shows, the greenback needs to rally and rally hard if we're not going to head into a SERIOUS collapse shortly.
What you're looking at is the US Dollar right on its multi-year trendline. If we take this out now, then we are heading into an inflationary death spiral in very short order.
Indeed, once we take out this line, we're just a few ticks away from triggering the MASSIVE Head and Shoulders pattern the greenback has formed over the last 20 years.
In case you're wondering, this pattern has an ultimate target of 40...
a full 50% lower than where the US Dollar is today.
We're talking about hyper-inflation on an order that would make
Weimar Germany proud. And if we break the green line above, we're THAT much closer to this becoming a reality.
As you can see, we're literally on the ledge of a cliff. Do not, I repeat DO NOT put off preparing for this now. I've long thought the US Dollar had one last rally in it, but looking at the charts
tonight I could very likely be wrong.
Indeed, inflation is already exploding worldwide, which means paper
money in general is going to be worth less and less on its way to worthless.
If you think the US is immune to this situation, you're in for a very RUDE
surprise in the coming months. Indeed, the Fed just announced it might even implement QE 3!!! And this came from one of its supposedly ANTI-QE members!?!?
Let's be blunt... the end game is fast approaching if not already here.Smart folks are already preparing their families and portfolios for what's to come, which is why I've recently published four reports designed to help folks cover all the bases in terms of protecting their loved ones,
savings, and portfolios for what's coming.
To find out more about Capital Research's work click here=>>Capital Research
Point being that even under normal circumstances "Inflation has now been institutionalized at a fairly constant 5 percent per year. This has been determined to be the optimum level for generating the most revenue without causing public alarm. A 5 percent 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 percent, leaving its worth at 90 cents, and so on. By the time a person has worked 20 years, the government will have confiscated 64 percent of every dollar he saved over those years. By the time he has worked 45 years, the hidden tax will be 90 percent. The government will take virtually everything a person saves over a lifetime."
Let me put it to you another way, Janet Phelan's mother had meant for the fruits of her sweat,blood and tears, a lifetime of savings, to be passed on to Janet as her lawful legacy before it was confiscated! Likewise Dr.A.J and Clara Fernandez also had a legacy to pass on to their heirs before it was confiscated, only myself having lived through prior confiscations (Communist Cuba 1959)I was able to wise up a lot quicker than a lot of you will and left the country before the totality of the Estate could be confiscated, others like Bonnie Reiter and too many to mention all here weren't so lucky.
However I have no doubt had I NOT stayed one step ahead of the guardians and dissolved my mother's trust and transferred the 'Trust' overseas where is now earning 40% annual interest , in order to be sure that my mother Clara now 94 is well taken care of! that there would be nothing left as the guardians was openly gunning for the 'Trust' after he exhausted all others liquid assets and allowed others like Real Estate to be lost by being auctioned off on their courthouse steps by the "Guardian" of my mother's assets, yeah what a joke, right! to be sold off by their failure to maintain and pay Real Estate Taxes on a timely basis... Real Estate Auction happens after three years of nonpayment of real estate taxes, my mother Guardianship battle lasted 5 years.
Ok, my point is this, had Janet Phelan's mother moved her assets overseas on a timely basis, (Before, she became incapacitated) do you have any doubt that Janet would be in complete control of her legacy, as it should be, out of reach from the greedy Guardianship Cartel that knows no bounds and knows of no decency and is inhumane to human suffering?Even going to the point of prematurely ending the elder's life after the money is gone? As documented here,here and here :
For those who have already experienced asset confiscation , either subtly or not so subtly , those like Tom Fields whose legacy was subverted and opportunists struck while his father lay in bed on a morphine drip , See his Facebook Page=>>here
To those who have eyes to see and those who have ears to listen here is a letter from Simon Black that you will all do well to heed, if you wish to say NO Thanks and leave the lemmings pack before they jump off the cliff..........
Date: February 10, 2011
Reporting From: Santiago, Chile
In the late 1920s, the economy of the Weimar Republic was beset by numerous fiscal troubles. The global depression spread quickly to Germany, undermining the government's ability to make its reparation payments from the Great War.
Fearing a return to hyperinflation, many Germans who had spent the last decade building up a small fortune during the Weimar Republic's own 'Roaring 20s' decided to pack up and leave; they remembered the days when banknotes were used as wallpaper and had no desire to repeat the experience.
In 1931, Chancellor Heinrich Bruning imposed a 'flight tax', which levied a 25% tax on the value of all property and capital for Germans leaving the country.
Total revenue collected from this tax amounted to roughly 1 million Reichsmarks (RM) in its earliest days ($56 million today). By the late 1930s under Hitler's rule, flight tax revenue soared to RM 342 million ($21.5 billion today) as more people headed toward the exits.
This flight tax constitutes one of the earliest modern examples of capital controls. They've evolved substantially since the days of Hitler, but the end goal is the same-- governments controlling the flow of capital across borders.
Governments impose these for a variety of reasons-- rapidly developing nations may want to restrict the flow of capital into their country, preventing 'hot money' from pumping up prices and affecting local markets. We see this today in places like Brazil and Thailand.
In other instances, bankrupt governments seek to trap capital within their borders, maximizing the amount available for subsequent taxation or other forms of confiscation. This tactic is usually employed when lost confidence has impaired the government's capability to borrow.
We're seeing strong indications of both examples today, though the latter is the most alarming. As I scan the headlines and hear from colleagues in the US and Europe, it's clear to me that the march towards stricter capital controls is quickening its pace.
The British government, for example, just announced an increase to its bank levy that taxes UK-domiciled banks on their worldwide balance sheets. In response, HSBC has indicated that it may move its headquarters elsewhere.
I suspect the British government will enact legislation to discourage or prevent this from happening, likely with a modern day corporate flight tax (albeit with a more patriotic sounding name).
Capital controls can take a variety of other forms-- including taxation on outward remittances, restrictions on the movement of financial instruments, bureaucratic approval processes for foreign transactions, reporting requirements for foreign assets, and government control over banks.
This last is important-- when politicians and bankers are in bed with each other, banks can be compelled to loan a portion of their deposits to the treasury at unrealistic terms, sticking bank customers with sub-optimal yields below the rate of inflation.
In the US, I think retirement accounts will be the first to go. They're the easiest to grab because most people hold their retirement accounts domestically with a large financial institution that will happily sell every customer down the river when the government comes calling.
The way they'll do this is simple-- the next time there's a market meltdown (bear in mind that insiders are selling like crazy right now...), the government will step in with new legislation that requires these institutions to invest a portion of their accounts in the 'safety' of government securities.
Insider politiconomists like Teresa Ghilarducci have already strongly advocated for government managed retirement accounts in the US, and we've seen numerous examples of other bankrupt nations from Argentina to Hungary moving to seize their citizens' pensions.
The next step would be against retail bank accounts, specifically setting up provisions that discourage moving money overseas... and eventually restrict it altogether.
This would happen through new approval processes at the banking level, additional reporting requirements for foreign accounts, and disincentives for foreign banks to accept US customers.
Curiously, all of these have started to happen.
For example, while there are still a multitude of banks around the world who happily accept US customers, Americans are unwelcome at most foreign financial institutions thanks to continuous threats and pressure from the IRS. As one banker in Hong Kong told me recently, 'they are very scaaaaary'...
Also, the new HIRE Act legislation imposes additional reporting requirements and restrictions for foreign accounts that gradually phase in over the next two years.
This certainly jives with the timeline of the US government's ticking debt bomb; at a minimum, the market will require higher yields, and politicians will need cheap sources of capital to continue financing their waste.
I've said before-- it's imperative that everyone establish a foreign bank account, even with a small deposit. There are several banks like Caye Bank in Belize where you can open an account through the mail with just a nominal deposit.
This way, if you ever need to move the bulk of your funds in a hurry, you'll at least have the established infrastructure to do it.
For US taxpayers, I think the more immediate threat is to your retirement account. If you have an IRA, you can set up an Open Opportunity structure, take back control over your own savings, and be free to move your funds overseas.
(I think this is a no-brainer; you can read more about how to protect yourself with an Open Opportunity structure from my friend Terry Coxon's book Unleash your IRA, which he's now offering at a steep discount for Sovereign Man readers.)
Government playbooks are limited-- when confidence falters, new taxes fail to produce substantial revenue, and inflation causes a loss of popular support, capital controls are the answer. Problem is, we live in a world where legislation passed late at night can take immediate effect while we all sleep.
I know it's easy to kick the can down the road, but as the political and economic support for capital controls is spreading around the globe, I would urge you to take action immediately.
Senior Editor, SovereignMan.com
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And this is not factoring in the probate courts or guardianship program.......in case there is anything left over.....
Friday, February 4, 2011
What started out a few weeks ago as protests in Algeria with citizens chanting "Bring Us Sugar!" and five citizens being killed, quickly spread to civil unrest in Tunisia which saw 14 more civilian deaths, and has now spread to riots in Egypt where 300 Egyptian citizens have been killed. Food inflation in Egypt has reached 20% and citizens in the nation already spend about 40% of their monthly expenditures on food. Americans for decades have been blessed with cheap food, spending only 13% of their expenditures on food, but this is about to change.
NIA was the first to predict the recent explosion in agricultural commodity prices in our October 30th, 2009, article entitled, "U.S. Inflation to Appear Next in Food and Agriculture", which said we have a "perfect storm for an explosion in agriculture prices". A couple of months later in 'NIA's Top 10 Predictions for 2010' we predicted "Major Food Shortages" and said, "Inventories of agricultural products are the lowest they have been in decades yet the prices of many agricultural commodities are down 70% to 80% from their all time highs adjusted for real inflation". Over the past year, agricultural commodities as a whole have outperformed almost every other type of asset, with silver being one of only a few other assets keeping pace with agriculture. (On December 11th, 2009, NIA declared silver the best investment for the next decade at $17.40 per ounce and it has so far risen 64% to its current price of $28.39 per ounce).
The world is at the beginning stages of an all out inflationary panic. Wheat, which NIA previously called on 'NIAnswers' its favorite investment besides gold and silver, is now up to a new 30-month high of $8.63 per bushel and has doubled in price since June of last year. Algeria bought 800,000 tonnes of wheat this past week, bringing their total purchases for the month of January up to 1.8 million tonnes, which was quadruple expectations. Saudi Arabia is also beginning to stockpile their inventories of wheat. Rice futures have gained 8% during the past few days with Bangladesh and Indonesia placing extraordinary large orders. Indonesia's latest rice order was quadruple its normal allotment and Bangladesh plans to double rice purchases this year. Meanwhile, the U.S., which is the world's third largest exporter of rice, is expected to cut production by 25% in 2011.
NIA considers rice to be one of the world's most undervalued agricultural commodities at its current price of $15.96 per 100 pounds and forecasts a move back to its 2008 high of $24 per 100 pounds as soon as the end of 2011. NIA believes cotton, at its current price of $1.80 per pound, may have gotten a bit ahead of itself in the short-term. In NIA's first ever article about agriculture on February 17th, 2009, we said that cotton's "upside potential is astronomical" at its then price of $0.44 per pound. NIA pointed to increasing sales to textile companies in China and the fact that cotton was down 70% from its all time high as reasons to be very bullish on cotton at $0.44 per pound. Early NIA members could have made 309% on cotton, but today we see much bigger potential in rice. The recent spike in cotton reminds us of the 2008 spike in oil. Although we believe cotton will ultimately rise above $3 per pound later this decade, we could possibly see a dip to below $1.40 per pound first.
Many people in the mainstream media have been criticizing NIA's recent food inflation report, claiming that agricultural commodity prices have very little to do with prices of food in the supermarket. CNBC's Steve Liesman, in particular, claims that "rising commodity prices won't cause inflation". Liesman has it backwards. NIA has never claimed that rising commodity prices cause inflation. Soaring budget deficits that the U.S. government can't possibly pay for through taxation causes inflation when the Fed is forced to monetize the debt by printing money.
Rising commodity prices are only a symptom of inflation. The reason NIA was so bullish on agricultural commodities going back two years ago when we produced our first documentary 'Hyperinflation Nation', is because while gold is the best gauge of inflation and is often the best tool for predicting future money printing, agriculture is where the majority of the monetary inflation ends up going after the Fed's newly printed money trickles down to the middle-class and poor. With gold prices already surging two years ago when we produced 'Hyperinflation Nation', NIA said in the documentary "food prices have the potential to surge most during hyperinflation".
One thing NIA is almost 100% sure of is that come year 2015, middle-class Americans will be spending at least 30% to 40% of their income on food, similar to Egyptians today. As NIA warned in its latest documentary 'End of Liberty', if you don't have enough money to accumulate physical gold and silver, it is important to begin establishing your own food storage, and store enough food to feed you and your family for at least six months during hyperinflation. Many store shelves in Egypt are now empty after recent panic buying, with shortages of nearly all major staple items throughout the country.
The U.S. Treasury is getting ready to sell $72 billion in new long-term bonds next week, as the U.S. rapidly approaches its $14.29 trillion debt limit. The debt limit is now expected to be reached by April 5th and Treasury Secretary Geithner warned the U.S. will see "catastrophic damage" if it isn't raised. With the Federal Reserve now surpassing China and Japan as the largest holder of U.S. treasuries, the real "catastrophic damage" ahead will be hyperinflation as a result of the U.S. government doing absolutely nothing to dramatically reduce spending. It is an absolute joke that Obama during his State of the Union address announced $400 billion in spending cuts over the next 10 years, but then the very next day, the Congressional Budget Office increased its 2011 budget deficit projection by $400 billion to $1.48 trillion.
Not raising the debt limit would be a good thing, as it would force Washington to live within its means. Sure, the stock market would collapse and the U.S. economy would enter into its next Great Depression, but at least it would save the U.S. dollar from losing all of its purchasing power. In fact, the standard of living for middle class Americans might actually improve if the government allowed the free market to put our economy into a depression, because goods and services would get cheaper.
The U.S. economy has become a drug addict that is dependent on cheap and easy money from the Federal Reserve. While Wall Street bankers took home a record $135 billion in total compensation in 2010, up 5.7% from $128 billion in 2009, this money was stolen from middle-class and poor Americans through inflation. The more monetary inflation (heroin) the Federal Reserve creates in order to satisfy the (in the words of Gerald Celente) "money junkies" on Wall Street, the more middle-class and poor Americans become dependent on unemployment checks and food stamps just to survive. Millions of American students are graduating college with hundreds of thousands of dollars in debt but no jobs. Luckily for them (but not holders of U.S. dollars), NIA is hearing reports from both unemployed and underemployed college graduates with student loans that the government is reducing their required monthly payments by sometimes 90% or more based on their current incomes.
China and Japan recently saw their credit ratings downgraded, while the U.S. credit rating remains at "AAA". NIA believes it would make far more sense for the world's largest debtor nation to be downgraded instead of the world's two largest creditor nations. The Federal Reserve's second round of quantitative easing has yet to even reach the halfway point and the Fed already holds about $1.11 trillion in U.S. treasuries. By the time QE2 is over at the end of June, the Fed will own $1.6 trillion in U.S. treasuries, about what China and Japan own combined. Shockingly, Kansas City Fed President Thomas Hoenig is already dropping hints about QE3. According to Hoenig, the Fed may consider extending treasury purchases beyond June 30th, 2010, (the scheduled completion date for QE2) if U.S. economic data looks disappointing.
With the Fed taking over as the largest holder of U.S. treasuries, China is beginning to rapidly move away from the U.S. dollar and into gold. In just the first 10 months of 2010, China imported 209 metric tons of gold compared to 45 metric tons in all of 2009, a stunning five-fold increase. While the western world is downplaying the threat of inflation as much as possible, Asian countries understand that hyperinflation is the most devastating thing that can possibly happen to any economy. The demand for gold in Asia right now is the most intense it has ever been, as they look to tackle rising inflation before it becomes hyperinflation.
The Chinese are so smart that families are now giving each other gold bullion as gifts instead of traditional red envelopes filled with cash. China is now on track to soon surpass India as the world's largest consumer of gold. The China Securities Regulatory Commission recently gave Beijing-based Lion Fund Management Co. approval to create a fund that will invest into foreign gold ETFs.
U.S. stock mutual funds saw $6.7 billion in net inflows during the past two weeks, the most in any two week period since May of 2009. The rioting, looting, and civil unrest in Egypt is now making the U.S. look like the safe haven of the world, even though it should be considered the riskiest place to invest. From the Dow's low in August until now, about $38 billion was actually removed from U.S. stock mutual funds, despite the stock market rising 20%. The Dow Jones has been rising from September until now solely due to the Federal Reserve printing around $350 billion out of thin air. When central banks print money, stock markets often act as a relief valve due to there being too much inflation going into the hands of financial institutions.
The U.S. M2 money supply surged by $46.6 billion during the week ending January 17th to a record $8.8623 trillion, following a rise during the previous week of $7.6 billion. The rise in the M2 money supply over the past two weeks of $54.2 billion equals an annualized increase of 16%. The M2 multiplier now stands at 4.218 compared to a long-term average of 10. When QE2 is complete, the Fed's monetary base will likely stand at $2.59 trillion. A return to the long-term average M2 multiplier of 10 means we are due to see a 192% increase in the M2 money supply and that is not even including a possible QE3 and QE4.
The U.S. economic ponzi scheme could unravel very quickly in the years ahead, with the velocity of money increasing much faster than anybody expects. As more Americans learn about NIA and become educated to the truth about the U.S. economy and inflation, a complete loss of confidence in the U.S. dollar could occur very suddenly. It is important for all Americans to prepare as if hyperinflation will be here tomorrow. At least in Egypt, their currency still has purchasing power and their citizens are trying to implement a regime change before it is too late. By 2015 in America, it will already be too late and the civil unrest here has the potential to be many times worse.
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
Wednesday, January 19, 2011
Posted: 18 Jan 2011 04:50 AM PST