All commodity prices are running up as they are affected by inflation. If you doubt this, just check food prices next trip to the supermarket.
China reduced its U.S. Treasury bond holdings by $32 billion. There appears to be an upswing in foreign purchases and I suspect the reason for this is while our finances are a mess, foreign finances are much worse. Foreign investors see us as less of a mess.
Democrats, empowered by their Senate majority and President Obama, push for more deficit spending and House Republicans are almost powerless to stop it. Now, national debt exceeds gross domestic product (GDP).
This inflationary spiral will affect everyone because wages always fall way behind inflation. Consequently, Americans will spend more on fuel and commodities and have less disposable income to purchase hard goods.
Remember in November and vote Republican. The worst we Republicans have to offer is by far superior to the best the Democrats offer.
Just imagine you had $100,000 in personal debt. Your income only covers payment of $39,000 on that debt. Now, you write a check for $61,000 to cover the balance of debt. Now, imagine seeing the County Sheriff at your door with a warrant for your arrest.
“To preserve their independence, we must not let our rulers load us with perpetual debt.” – Thomas Jefferson
In our personal finances, we call this act ‘check kiting’ or ‘writing hot checks’.
Why is it we allow the federal government to do this under the label ‘quantitative easing’? When the Sheriff comes to your door, will he believe you’re just ‘borrowing’ $61,000?
According to a Wall Street Journal article,
“Last year the Fed purchased a stunning 61 percent of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis…This not only creates the false appearance of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.”— Lawrence Goodman, former Treasury official and current president of the Center for Financial Stability
Here in the City of Rockwall, we will be voting on a huge capital bond package in May. I personally like all the issues, with some misgivings around the Downtown components.
Reality is simple: national debt is OUR debt. True, we read and hear stories about economic woes in other states like Michigan and California, thinking that’s their problem.
Fed Chairman Ben Bernanke recently stated before Congress, “We risk going over a massive financial cliff.” As you well know, “we” is the first-person plural pronoun that includes Ben Bernanke, you and me.
Chairman Bernanke went on to say, “Under current law, on Jan. 1, 2013, there’s going to be a massive fiscal cliff of large spending cuts and tax increases.”
I strongly encourage City of Rockwall voters to vote ‘NO’ on all five propositions. Let’s allow Januray 1, 2013 to go by us before adding tens of millions of dollars of indebtedness to our property owners.
Gasoline pricing is the product of a complex factors, that include emotions (futures market), future supplies of oil and inflation. The first, the futures market, is “fueled” by the latter two factors.
For the moment, let’s agree that future oil supplies are a major component of gasoline prices – this is common sense, is it not?
A sad irony of the Obama Administration is the Keynesian economic theory driving policies actually causes gasoline price inflation.
This current inflationary process has been given a range of names to sound reasonable to the American public: “stimulus package”, “TARP”, “bail-outs” and “quantitative easing”.
What does it look like? How can I recognize it?
Inflation of the money supply does not affect prices of goods and services uniformly. One commodity may skyrocket, while others show little change. Lacking a formal education in economics, I leave the technical analysis to the appropriate “bean counters”.
From a lifetime of experience as a former business manager and as a business owner of 25 years, I see a pattern. Commodity dealers recognize inflationary forces at work long before the rest of us. Consequently, we small business owners simply adjust our prices as commodity prices go up. In other words, the fuel and food futures markets are the first to know.
Your president says we can’t drill our way out of high gasoline prices. I say yes, we can. The petroleum industry agrees with me – else I agree with them. Either way, we agree.
Let’s consider recent facts: President Obama has done all he can to stifle, suppress American petroleum industries. Meanwhile, he gives billion$ to Brazil to develop their offshore oil business. Why would he do that? As Rush Limbaugh says, just follow the money. Obama’s mentor and financial supporter, George Soros, holds substantial stake in Brazil’s oil business.
President Obama nabbers about “a clean environment” and “green technologies”, but I have come to believe, strongly suspect, he is engaged in a colossal scheme to enrich Soros at the expense of the American people.
Obama has stolen trillions from you and he goes free. Bernie Madoff only stole $50 billion and he went to prison.
The next great awakening of America will dramatically and forever change the spiritual character of our people. Unfortunately, we only respond to crisis, but such is the nature of man.
Most economists, especially those from the mainstream, will tell you that inflation is widely expected to remain benign for the foreseeable future. And for those who think it could climb higher, it’s usually because they think it should be higher. History has a message for them: be careful what you wish for.
There are plenty of examples in history showing that once inflation takes hold, it can quickly spiral out of control. That’s the danger we face now. Here’s what I mean…
A recent article about sudden inflation by Amity Shlaes, a senior fellow of economic history at the Council on Foreign Relations and a best-selling author, provides some examples from the past century of US inflation that was at first subdued but then abruptly rocketed to alarming levels. I put them into a chart so you could see how quickly inflation rose within just two years from “benign” levels. I then made some projections for us today based on these historical examples.
(Click on image to enlarge)
According to Shlaes, US inflation was 1% in 1915 (based on an earlier version of the CPI-U). Over just two years, it hit 17%. As she states, it happened because the Treasury “spent like crazy on the war, creating money to pay for it…”
Given the fact that our spending and money-printing is now out of control, I projected what our inflation rate would be if we matched the inflation rates of these time periods. The first striped bar to the right represents what the CPI would register if we matched the 1940s rise. Inflation would hit 19% by 2014. (Yes, the CPI has been tinkered with many times, but this is at least what “unofficial” or “authentic” inflation would register.)
In 1945, the official inflation rate was 2%. It accelerated to 14% in 24 months. If we matched this percent rise, we’d hit 15% by 2014 (middle striped bar)..
And the example that kicked off the greatest bull market in gold and silver, the early 1970s. The CPI stood at 3.2% in 1972, a level close to ours today. It soared to 11% just two years later. Mimicking this rise, the third striped bar shows we’d also be at 11% in 2014. (Shadow Stats says we’re already at 10% based on 1980 methodology, so from this level we’d hit 17% in 24 months.)
Could we really have inflation that high within two years? Consider the following:
Fox Business reported on March 7 that “wages grew much more quickly at the end of last year than originally estimated…” This is an important data point because most economists believe you can’t have higher inflation without rising wages.
Commercial and industrial loans have risen 14% year over year, and business and consumer spending are in an uptrend.
Home-building permits are at their highest point since October 2008. Existing home sales fell 0.9% last month, but that’s after January sales were up 4.6%.
Jobless claims are coming down, retail sales gained the most in five months, and auto sales were up 16% last month. One report I read stated that we’ve had 24 consecutive weeks of stronger US data.
If the economy continues to improve and more money is sloshing through the system, it’s easy to see how inflation could grab hold. Yet, if you understand Austrian economics, you’ll look beyond how the mainstream views inflation and to its root cause: monetary debasement.
The US monetary base stands at $2.72 trillion, a 168% increase since October 2008.
The national debt in the US has risen by a whopping $4.9 trillion just since Obama took office. It now stands at $15.5 trillion.
The US budget deficit this year is projected to be over $1.3 trillion, an obscene amount that exceeds the entire annual budget of just 20 years ago.
According to ISI Group, there have been an incredible 122 “stimulative policy initiatives” from central banks around the world over the past seven months.
Remember, in these historical examples, inflation was initially low and therefore off everyone’s radar. But government tinkering with the monetary system lit the spark that led to a sudden and rapid rise in inflation. It caught many off guard, just like I suspect it would now. Don’t think there are no consequences to our unwise fiscal and monetary course; a potentially ugly tipping point is more likely than not at some point.
Given the abuse most fiat currencies are undergoing around the world today, coupled with obscene amounts of deficit spending, I think gold should be viewed not just as a potential moneymaker but as protection against the rabid inflation that will invariably damage our economy and dilute our pocketbooks. If you think deflation is next, I’ll accept that argument – for a time – if you accept mine, that the Fed would almost certainly panic at another deflationary event and print to the max. This is why we’re convinced that inflation, à la currency dilution, is inevitable. (Harry Dent, best-selling author of The Great Crash Ahead, is convinced deflation poses our biggest economic threat, while Currency Wars author James Rickards believes inflation is the real danger. You can hear them debate the issue – and participate as a member of the audience – during the Inflation-Deflation Face-Off program at the upcoming Casey Research Recovery Reality Check Summit.)
To those of you who say gold hasn’t always kept up with inflation, don’t kid yourself about what it would do in a highly inflationary environment: it would surely climb like it did in the 1970s. And those “productive assets” Warren Buffett prefers over gold? They would have a difficult time raising the prices of their products quickly enough to keep up with a rapidly escalating CPI. Gold may not perfectly track inflation when it’s low, but it is precisely a high-inflation environment where it serves one of its core purposes.
You may think high inflation is further away than 2014, but don’t dismiss the fact that it can happen suddenly. And keep in mind the possibility that a sudden shift in inflation – especially inflation expectations – could be the spark for a mania in precious metals. I can easily see this being the catalyst that finally pushes the greater public into our sector, causing a paradigm shift that eventually sends it into a bubble.
Either way, I think we’re all best served to heed the words of John Paulson, the preeminent hedge fund manager who oversees $14 billion in assets: “By the time inflation becomes evident, gold will probably have moved, which implies that now is the time to build a position.”
We agree. As we stated in the February BIG GOLD, if 10% of your total investable assets (i.e., excluding equity in your primary residence) aren’t held in various forms of gold and silver, we think your portfolio is at risk. And as Doug Casey reminded us last week, “Anyone who thinks they have any measure of financial security without owning any gold – especially in the post-2008 world – is either ignorant, naïve, foolish, or all three.”
This is the time to accumulate, while gold and silver prices are below their peaks. Buy a little every month and store it in a safe place. And for even better bargains, look to the undervalued stocks, which I would argue offer better protection against inflation than most other equity investments since their cash flow will climb commensurate with gold and silver prices. We identified the two best stocks for new money right now in the current issue of BIG GOLD, and you can get the brand-new pick from International Speculator – an African company that has built its first gold mine and is already working on its second.
If we match the inflation rates seen several times in the recent past, what will your savings be worth in a few years? We’ll have lots to worry about in a high-inflation climate, but our purchasing power can be protected by owning gold.
*****
Editorial note:
According to Jim Rogers, investor and co-founder of the Quantum Fund, owning assets is a hedge against inflation. This morning on television he repeats what he said on his blog: owning assets is the best protection against inflation. Among his picks are commodities like foods.
I am putting my money on rental real estate – everyone has to have a place to live.
Venceremos el miedo y Demostraremos que somos mayoria – Maria Corina Machado
Hoy en día en el país de Venezuela, Hugo “El payaso” Chávez ha expropiado la propiedad privada, silenció a la prensa, restringió el movimiento de sus compatriotas y que prácticamente se ha esclavizado a los ciudadanos.
Los tecnócratas cubanos, esencialmente gobiernan el país. Chávez presta dinero a Castro, quien paga con sus exportaciones delos trabajadores sociales, técnicos y personal médico.
¿Qué pasa con la delincuencia? En promedio, hay un asesinato por hora. Escuchamos alrededor de 28.000 muertes en México debido de delitos relacionados con drogas. ¿Cómo afecta la tasa de homicidios de México comparado con la de Venezuela? Ha habido 43,792 homicidios en Venezuela durante el mismo período de tiempo.
Este es el fin del socialismo: una sociedad plagada por el crimen, el empobrecimiento, la pérdida de las libertades y el encarcelamientovirtual.
Dice Maria Corina Machado, “No trabajas donde quieres, no compras lo que quieres, tu propiedad no es tuya, no puedes hablar de lo que quieres: ¿no es una esclavitud?
María Corina Machado es un legislador venezolano, devoto católico y crítico abierto del régimen de Chávez. Síguela en Facebook y Twitter.
We will defeat fear and show that we are the majority – Maria Corina Machado
Nowadays in Venezuela Hugo “The Clown” Chavez has expropriated private property, silenced the press, restricted the movement of his countrymen and he has virtually enslaved citizens.
Cuban technocrats essentially run the country. Chavez lends money to Castro who repays with his exports of social workers, technicians and medical personnel.
What about crime? On average, there is a murder per hour. We hear about 28,000 deaths in Mexico due to drug-related crimes. How does the Mexican murder rate compare with that of Venezuela? There have been 43,792 homicides in Venezuela over the same time period.
This is the end of socialism: a society plagued by crime, impoverishment, loss of freedoms and virtual imprisonment.
Says Maria Corina Machado, “You can’t work where you want, you can’t buy what you want, your property isn’t yours: is this not slavery?”
Maria Corina Machado is a Venezuelan lawmaker, devout Catholic and outspoken critic of the Chavez regime.
Almost from ‘day one’, Rick Santorum has been running against Mitt Romney, styling himself as the “Anti-Romney” candidate, not the “Anti-Obama” candidate. Now that he sees his campaign in certain defeat, he desperately strikes out against fellow Republican Mitt Romney.
You folks who don’t know Santorum’s track record in the Senate or perhaps don’t want to know, his record is one of big government, deficit spending and pro-abortion (I know, I know, he was ‘miraculously’ converted.)
It was he, Rick Santorum, who supported Arlen Specter over Pat Toomey. Subsequently, Specter became the ‘swing vote’ that passed ObamaCare in the Senate. Do you understand? Santorum’s support of Specter gave us ObamaCare.
Furthermore, Santorum supported Davis-Bacon, a law that forces all government contractors to pay “prevailing wages” – code term for “union wages”. In right-to-work states like Texas, this onerous law drives up the cost of government projects and procurement. It’s just another big-government law that overrides the Tenth Amendment as it pushes union labor through the back door of our state’s economy.
ObamaCare represents the largest tax increases in the history of our nation. Under this dreadful law, we lose precious liberty and seniors will be at risk of “death panels”.
As hideous as legal abortion is in this country, ObamaCare will accelerate the murder rate of unborn and partially-born children AND Obama is forcing us to buy insurance AND forcing insurance companies to cover elective abortions.
Santorum is showing his true character, my friends. If you are one of his ardent supporters, I implore you: look at his track record. A politician’s track record will reveal more about future performance than campaign rhetoric.
Unlike RINO Santorum, I will be wholeheartedly supporting the Republican nominee for the office of President.
