Matters can not, and will not, get better…the country is gone, it is no longer alterable…Past Fed actions have already released the inflation genie into the system. When he decides to explode no one can predict, but an explosion is inevitable…[and then we will have] rioting in the streets. [Let me explain our cuurent situation, what is developing and what will eventually unfold.] Words: 1075
So says ”Monty Pelerin” (a pseudonym derived from The Monty Pelerin Society) in edited excerpts from his original article* as posted at www.economicnoise.com.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.)
Pelerin goes on to say, in part:
Courses of Action to Alleviate Economic Situation
The U.S. government has reached the point where it cannot pay for its level of spending via tax revenues or market-based Treasury sales. There are only three courses of action available to the Federal Government.
- Raise Taxes – This option cannot raise enough money to close the gap. Attempting to raise taxes could exacerbate the deficit by dampening economic activity. US corporate income tax rates are now the highest in the world. If anything, taxes should be lowered.
- Cut Spending – This is the proper solution. Government has grown past the point where the productive sector will or can support it. Spending should be cut back to the point where deficits are eliminated.
- Print Money – This is the political solution and exactly why the Federal Reserve bought 61% of Treasury Bonds last year. It is not a real solution and it is highly dangerous. Each purchase of Treasury Bonds by the Federal Reserve increases the base money supply. Any time the Fed expands its balance sheet it adds an asset and creates money/credit. Since 2008 the Federal Reserve has almost quadrupled its balance sheet. That puts into the system the potential for 300% price inflation.
The Current Reality
Politicians never want to cut spending [#2 above] and almost never want to increase taxes [#1 above] unless it can be done as class warfare aimed at punishing the few to get the votes of the many. It is exactly this type of behavior, with special emphasis on the spending part [#3 above], that has put the country into the impossible situation it is in.
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What is Developing
We have reached the point where government can no longer meet its obligations with traditional financing. The U.S. government became a real Blanche du Bois, “living off the kindness of strangers.” Now the strangers are no longer interested in supporting Blanche’s profligate spending. Furthermore, they have incredible needs themselves and are busy with their own printing presses.
Credit markets are closing. Past Fed actions have already released the inflation genie into the system. When he decides to explode no one can predict, but an explosion is inevitable unless government spending is cut by almost 1/3 and the Fed begins to reverse the excess money in the system. Neither one will happen until it is too late.
What Will Unfold
#1 According to one new survey, approximately one-third of all Americans are not paying their bills on time at this point.
#2 The U.S. housing industry is bracing for another huge wave of foreclosures in 2012…
#3 The Citigroup Economic Surprise Index, a key indicator watched by many economists, is on the verge of heading into negative territory.
#4 We are supposed to be in the middle of an economic recovery in the United States, but bad news just keeps pouring in from major companies. For example, Yahoo is firing thousands of workers and Best Buy is closing dozens of stores.
#5 Richard Russell says that the “big money” is starting to quietly exit from the financial markets….
#6 Goldman Sachs is projecting that the S&P 500 will fall by about 11 percent by the end of 2012.
#7 All over the country, local governments are going into default and we have not even entered the next recession yet.
#8 The U.S. government will add more to the national debt in 2012 than it did from the time that George Washington became president to the time that Ronald Reagan became president.
#9 The Federal Reserve is desperately trying to control interest rates. The Fed purchased approximately 61 percent of all government debt issued by the U.S. Treasury Department in 2011. This is the only thing that is keeping interest rates in the United States from soaring dramatically…
#10 Researchers at MIT are projecting a “global economic collapse” by the year 2030 if current trends continue.
In my opinion, number 10 is the height of optimistic folly.
Editor’s Note: The above article has been has edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
Even if the economy improves (it won’t in any real sense), the changes coming to this country border on the unimaginable for both the enlightened and unenlightened. Economic events similar to what occurred during the Great Depression are not far from happening. Some outcomes will be worse than what occurred 80 years ago. [Let me explain.] Words: 563
Whether our current economic crisis will end with massive inflation or in a deflationary spiral (ultimately, either one results in a Depression) is more than an academic one. It is the single most important variable for near and intermediate term investing success. It is also important in regard to taking actions which can prepare and protect you and your family. [Here is my assessment of what the future outcome will likely be and why.] Words: 1441
Daniel Thornton, an economist at the Federal Reserve Bank of St. Louis, argues that the Fed’s policy of providing liquidity has “enormous potential to increase the money supply,” resulting in what The Wall Street Journal’s Real Time Economics blog calls “an inflation inferno.” [Personally,] I think it’s too soon to make significant changes to a portfolio based on inflation fears. Here’s why. Words: 550
The developed economies of the world have opened the money spigots…[and this] massive money and credit creation is sitting in the banking system like dry tinder just waiting for a spark to set it ablaze. How quickly it happens is anyone’s guess, but once it does we are likely to be enveloped in a worldwide inflation unlike anything before ever witnessed. [Let me explain further.] Words: 625
Evidence shows that the U.S. money supply trend is in the early stages of hyperbolic growth coupled with a similar move in the price of gold. All sign point to a further escalation of money-printing in 2012…followed by unexpected and accelerating price inflation, followed by a rise in nominal interest rates that will bring a sovereign debt crisis for the U. S. dollar with it as the cost of borrowing for the government escalates…[Let me show you the evidence.] Words: 660
The U.S. economic and systemic-solvency crises of the last four years only have been precursors to the coming Great Collapse: a hyperinflationary great depression. Outside timing on the hyperinflation remains 2014, but there is strong risk of a currency catastrophe beginning to unfold in the months ahead…moving into a full blown hyperinflation [in a few] months to a year… depending on the developing global view of the dollar and reactions of the U.S. government and the Federal Reserve. [Let me go into more detail.] Words: 2726
The economic condition of the country continues to decline toward its rendezvous with an, as yet, unknowable catastrophe. Here is… a look (not a prediction) at a series of not improbable events that could develop [and which] would change our economic world overnight. Words: 1550
The Federal Reserve is now trying to figure out ways to boost inflation expectations… so that Americans are encouraged to spend more before their money is worth less. Unfortunately, not only will their money soon be worth less, it will literally become worthless! Words: 904
The National Inflation Association (NIA) believes it is very unlikely that our representatives in Washington will have the political backbone and courage to implement any of the National Commission on Fiscal Responsibility and Reform’s proposed cuts in domestic and defense expenditures and increases in tax revenues. [Instead, as the NIA sees it,] the U.S. is on a path towards exploding budget deficits in the years ahead that could cause an outbreak of hyperinflation by the end of calendar year 2015. Words: 887
Boston University economist, Prof. Kotlikoff, maintains that the U.S. cannot end its fiscal crisis by doubling taxes, as the International Monetary Fund suggests, or further stimulus spending [as Bernanke is doing] because it will simply increase the debt. [Instead he has some radical proposals of his own.] Words: 704
If our assessment is correct, over the coming years, stocks, precious metals, commodities and real-estate will appreciate in value versus paper currencies. Furthermore, on a relative basis, we expect precious metals and commodities to outperform all other asset-classes. Conversely, we anticipate that cash and fixed income instruments will probably turn out to be the worst assets to own over the next decade. Words: 869
It is an old saying that the “road to hell is paved with good intentions”. Well, in recent years, that road has been changed to a super-highway! America was put on that super-highway a few years ago and right now we are traveling at break-neck speed toward the financial abyss. Words: 1132
While I believe that the US is heading towards a Weimar style hyperinflationary depression there are several developments that point to the possibility of another deflationary depression, similar to the 1930’s. Words: 858
Some people consider a rise in overall prices of 10 percent per month (which implies an annual rate of price increases of around 214 percent) as hyperinflation; others indentify hyperinflation as a monthly price rise of at least 20 percent (which implies an annual increase in prices of nearly 792 percent). Words: 1353
Mladjenovic explains his contention that we are in for a inflationary depression and, as such, investors should put their money in those things that will benefit from both inflation and strong demand and supply and stay away from where there is a deflationary impact, such as real estate. Words: 825