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.