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Posts tagged ‘Inflation’

The Hitch-Hiker’s Guide to Markets, Inflation and Deflation Over the Next 8 Years

I could not go without writing a serious  parody of the above original comedy series, so be prepared to enter this guide,  which will hopefully offer a fraction of information in “the standard  repository for all knowledge and wisdom”.

This planet has a problem – and has had  this problem repeated throughout history – a problem that made most people  living through it unhappy for pretty much all of the time…and this involved  periods of inflation and deflation.

The objective of this article is to provide  what I think is an accurate version of inflation/deflation and what to expect  over the course of the next 8 years, based upon the Contracting Fibonacci  Cycle. Time points will be identified, followed by charts illustrating Elliott  Wave Analysis indicating why we are on the cusp of a major breakout in the  broad stock market indices and commodities. This analysis runs counter to many  deflationist views, which ties into the proposed definition that will be  described. This guide will be subdivided into sections that are based upon  names present within the 6 novels of the Hitch-Hiker’s Guide series.

As Per the Above Title

There are some deflationists who think we  are in a period of deflation…one noted definition of inflation is “a net  expansion of money supply and credit, with credit marked to market” and the  opposite for deflation.

A problem with the above definitions is  that they provide very broad definitions and often, these outcomes do not occur  until a “Tipping Point” has been reached. Malcolm GladWell wrote a book titled  “The Tipping Point” which I would strongly recommend everyone read. In a  nutshell, different systems, problems etc. do not follow linear relationships but  rather, a “tipping point” unique to a given system under study occurs. This  unique “tipping point” changes the balance of things, causing an accelerated  shifted shift to the upside or downside of a trend, based upon the unit of  measure under study.

Applying this thought to deflation, many  things happening in the news such as job layoffs, bankruptcies etc can  overwhelm senses to provide an empirical conclusion that deflation is just  around the corner.

The definition of inflation or deflation I  propose is a scalar model that comprises the integral of all components  (summation of the slope all components chosen to include in broad economic  sectors and measures) based upon the derivative of their measurements (rate of  change, as an example car speed (km/h, m/s) or money velocity). The derivative  components of each part of the equation represent the rate of change for each  chosen item by graphical representation to form a slope ($/month positive or  negative) that has an assigned probability (R2). Each item added up  can provide the integral, or summation as to whether or not inflation or  deflation is evident as a whole across the economy. Examination of individual  components offers visualized trending to determine whether or not a given  sector or defined measure is entering deflation or inflation.

full article at source: http://www.marketoracle.co.uk/Article36061.html

Valun mutual money plan

                              Valun mutal money plan as conceived by E.C.Riegel

Christopher
M. Quigley

B.Sc.,
M.M.I.I., M.A.

To establish a sound money unit with a constant purchasing power and a money
system that will prevent booms and depressions, inflations and deflations, and
assure constant prosperity and universal circulation, the following plan is
proposed.

Name of the Unit

The proposed name of the new money unit is valun, a word compounded from VALue
UNit. It will appear in all desired denominations of bills and coins, and
checking accounts will operate like the present.

Valun Exchange

The central clearing house through which checks are to be cleared and from
which the currency bills and coins will be obtained will be called the Valun
Exchange.

How It Will Start

The ideal institutions to start the system are department stores because their lines of
merchandise are so inclusive; and they are well known to the public. They would
not sponsor anything that is not sound and in the public interest, and with
their endorsement the people would have confidence in the new money.

Forming the Exchange

The firms that desired to initiate the system would form themselves into a Valun Exchange
and adopt rules governing the operation thereof.

Mutual Credit

The members of the Exchange would agree on the line of credit for each (probably a
percentage of their previous year’s business). This means that each member
would be allowed to draw checks in valuns up to the stated credit limit. Checks
would be convertible into currency.

Dollar Pool

To quickly establish public confidence in the new currency, the members would agree to pay into a pool, one dollar for each valun issued. This pool would be used to
guarantee to any holder of valuns that he could get dollars in exchange, unit
for unit.

General Acceptance

All the members would announce to the public that they would accept valuns the same as
dollars in their business, or would exchange dollars for valuns. The effect of
this would be to make valuns acceptable to other tradesmen who are not members
of the Exchange. The currency bills would carry the legend: This bill will be
accepted in exchange for goods and services or for a dollar bill of the same
denomination by the firms whose names are printed on the back hereof.

Issue

Issue of valuns would, of course, be confined to members who had agreed to the dollar
pool. They would write checks for their purchases, and would cash checks in the
regular way for payrolls.

Pool Cages

The dollar pool would set up cages in the department stores where dollars would be
available to all on demand, in exchange for valuns.

Spread of the System

Because of the dollar pool guarantee, any merchant and employee would accept valuns and thus there would be many merchants besides the sponsors who would trade in
valuns. No one would, of course, be obliged to do so, except for competitive
reasons. Such dealers could open checking accounts in the Exchange but would
not have credit, and, of course, would not pay into the dollar pool.

End of First Phase

The first phase is intended merely to demonstrate the feasibility of the plan and to win
public confidence and to lead to the accomplishment of the ultimate purpose of
the plan, which is to completely separate the valun from the dollar and all
political money units. The time when this can be accomplished will be
automatically determined by public reaction.

Parting of the Ways

It should be noted that the dollar pool will buy Valuns with dollars but not dollars with
valuns. In other words, the valun will be guaranteed to not fall below the
dollar, but there is nothing to guarantee the dollar from falling. In fact, the
dollar is sure to fall, and that is the main reason for starting the valun
system – to protect valun users against inflation and to maintain a constant
price level.

Example
At the outset all goods will be priced the same in dollars and valuns. For
instance, a pair of shoes will be priced $10 and V10. In due course the
inflationary factor in the dollar will cause the dollar price to rise to say $10.50
but the valun price will remain V10. Thus the public will discover that the
valun is worth $1.05 and will refuse to exchange one valun for one dollar. From
then on the disparity will increase and therefore, the dollar pool will have
served its purpose and may be dissolved and the dollars and valuns contained
therein, returned to the sponsor depositors.

Thereafter the valun and dollar will each be on their own.
The valun will become the storm center to escape the inflation storm and people
will turn to it in self defense.

Why Price Disparity

That prices should rise in one unit and not in another, or more in one than another,
may seem puzzling, but that is going on all over the world. The dollar is the
most nearly stable unit in the world. Therefore, prices are rising in terms of
other units more than in dollar terms.

When the valun is launched, it will be more stable than the dollar, and will in
fact be the only stable unit in the world. The stability of a unit is
determined by its issue policy. The issue policy of the valun is that its
issuers are solely private enterprisers who issue it only for purchases of
actual values under competitive conditions. The issue policy of a political
unit is that it may be issued for any purpose by the government including all
kinds of non-productive projects. There are billions of dollars issued against
no production – hence the inevitable inflation. Every valun issued will be
against actual value received by the issuer. Thus there will be many more
dollars than valuns bidding for the same goods, with the result that dollars
will decline in power while valuns will remain stable.

The Permanent Set Up

The permanent organization of the Valun Exchange should include any person or
organization. Membership should be of two classes: the A members, those who are
allowed credit, which means the power to overdraw the checking account and thus
create valuns; the B members, those who will have the depositing and checking
right without the overdraft right. It is proposed that the territory of each
Exchange be the state in which it is located. Any person or company in the
world should be eligible for class B membership in any Exchange but will
naturally choose the nearest, and as membership in any locale justifies, a
local Exchange will be opened. Exchanges would be mutually owned by their
members without capital, acting essentially as central bookkeepers and clearing
houses.

Governments National, state and local governments should be admitted as members of any Exchange but should qualify only as class B members without the power to create valuns. So far as valuns are concerned, governments should be obliged to balance their-budgets by denying them the over-draft power.

International Exchange

There should be one Exchange devoted to international trade to enable any trader
anywhere to draw a check in favor of any trader anywhere else. This Exchange
should be confined to class B membership. Any credit that an international
trader is entitled to would be secured through some other Exchange and
transferred to the International Exchanges to be drawn against.

International Governing Board

Each Exchange would have a representative on an International Governing Board that
would determine matters of universal interest and regulation. Effort should be
made to permit each exchange to have autonomy within proper limits.

The most important question upon which men differ is credit policy. The Governing Board could set what is deemed to be the most conservative policy and provide therefore a
minimum percentage to be charged for loss insurance, and from there up
graduations of more liberal policies, with appropriate percentages for loss
insurance for each. Each Exchange could then choose its own credit policy. The
appropriate loss insurance percentage would then be added to the check clearing
charge. Thus members of the various Exchanges would pay more or less as their
policy was more or less conservative.

The insurance fund thus set up against defaults would be held by the Governing Board subject to draft by any Exchange to cover any loss from credit default.

Members’ Charges

It is contemplated that the expenses of the Exchanges would be borne by the members
through a per check charge for all checks cleared, thus each would pay in ratio
to service received. No interest charge is contemplated for debit balances and
there would be no loans in the present banking sense, and of course no notes
issued.

Currency

The currency bills and coins should be printed and minted by the Governing Board
and supplied to Valun Exchanges, so that they would be uniform the world over.

Accomplishments

The project of course encompasses an economic world revolution and it is difficult
to forecast all the consequences. The following is a catalogue of obvious
accomplishments:

Provide a stable price level.

End the debt-money system. Credit would be extended solely upon the ability to
deliver goods and services.

Abolish interest within the system.

Take the money-creating power out of the hands of government and banks and
place it in the hands of private enterprisers.

Make government
operate on a cash basis; prevent deferred and delusive taxes through inflation.

Assure distribution of goods by distributing money power.

Prevent inflation and deflation; boom and depression

Defeat bureaucracy, fascism, and communism by taking the money power from
government.

Defeat hidden money control from any quarter.

Assure full employment and a high standard of living. Give the people the veto
power over war and government extravagances.

Supply the perfecting element in democracy and private enterprise.

Unify commerce in one world of business, in spite of the separatism of
politics.

Copied From The
Papers Of E.C. Riegel Which Are Freely Available On The Web.

Permission Granted
By Spencer Heath MacCallum 25th. August 2009

 

 

Central Statistics Office (CSO) has released its inflation figures

 

By Namawinelake

This morning Ireland’s Central Statistics Office (CSO) has released its inflation figures for July 2011. The headline Consumer Price Index (CPI) was flat month-on-month but up 2.7% year-on-year (same as the annual figure last month, in July 2010 the CPI also remained flat). The biggest driver of inflation in the past 12 months continues to be the CSO category of housing-related costs, and within that, the most significant component is mortgage interest* which has risen a staggering 25.2% in the past 12 months and indeed a significant 2.3% in the past month alone as ECB and domestic bank-driven interest rate rises take effect. Mortgage interest comprises nearly 7% of the CPI so the effect is significant.

full article here at source:http://namawinelake.wordpress.com/2011/08/11/irish-residential-rents-continue-to-stabilise-with-0-5-drop-year-on-year-mortgage-interest-costs-up-a-staggering-25-2-year-on-year/

Bernanke Plots Further Stimulus

Ben Bernanke stumbles from one public relations disaster to another. Fresh off his ludicrous statement to Congressman Ron Paul(left) that gold is not money, he has indicated that he’s ready to buy more of America‘s junk bonds using currency printed from nothing.

Will it help restore America’s “greatness?” Nope. Essentially this is just another tax on the American people achieved by the roundabout method of price inflation. It may push prices of gold and silver through the roof, but it’s not going to change anything about America’s failing economy. In fact, it will make things worse. And perhaps that’s just the point.

It’s seems to us that it’s Bernanke’s job to make things worse. The Anglosphere power elites that apparently run much of the world want to run the rest of it and they are making an aggressive push early in the 21st century. Take a step back and the patterns seem increasingly apparent. A lot of it has to do with austerity.

In Europe, austerity is a big issue. People are very upset about losing pensions and benefits, not to mention that they are facing higher taxes and the prospect of having many resources “privatized.” In America, the push for austerity is being provided via the Tea Party movement – and thus, to some degree, is being inflicted by the electorate itself.

Austerity – which will reduce the resources that people have available to them in the short run – is being accompanied in other parts of the world by food and water scarcity. Large parts of Africa face drought and starvation currently. In China – and throughout the BRICS – price inflation threatens economic stability. China itself is already suffering social insurrection, though few incidents are reported.

full article here at source:http://www.thedailybell.com/2687/Bernanke-Plots-Further-Stimulus.

Comment:

If the Fed does introduce a new stimulus what is this likely
to mean for the dollar? For one thing we should have a dramatic drop in its
value and the Chinese can’t be too happy about this prospect. America must at
some stage address its own debts and if the truth was known Greece would be
bailing out the USA 14.5 Trillion in debts and now another 2.5 Trillion about
to be put on top who are they kidding America is bankrupt and should be in the Junk
members club !

Ref:Core inflation in the USA

A map of the 12 districts of the United States...

Image via Wikipedia

THOMAS,

I have a note on core inflation which might be of interest to your readers.

Imagine that the measure of inflation used by the Federal Reserve excludes ENERGY and FOOD because they are TOO Volatile. We truly live in a FIXED world.

Kind regards:

Core inflation is a measure of inflation which excludes certain items that face volatile price movements, notably food and energy.

The preferred measure by the Federal Reserve of core inflation in the United States is the core Personal consumption expenditures price index (PCE). This is based on chained dollars.

Since February 2000, the Federal Reserve Board’s semiannual monetary policy reports to Congress have described the Board’s outlook for inflation in terms of the PCE. Prior to that, the inflation outlook was presented in terms of the CPI. In explaining its preference for the PCE, the Board stated: The chain-type price index for PCE draws extensively on data from the consumer price index but, while not entirely free of measurement problems, has several advantages relative to the CPI. The PCE chain-type index is constructed from a formula that reflects the changing composition of spending and thereby avoids some of the upward bias associated with the fixed-weight nature of the CPI. In addition, the weights are based on a more comprehensive measure of expenditures. Finally, historical data used in the PCE price index can be revised to account for newly available information and for improvements in measurement techniques, including those that affect source data from the CPI; the result is a more consistent series over time. —Monetary Policy Report to the Congress, Federal Reserve Board of Governors, Feb. 17, 2000

Previously the Federal Reserve had used the US Consumer Price Index as its preferred measure of inflation. The CPI is still used for many purposes, for example, for indexing social security. The equivalent of the CPI is also commonly used by central banks of other countries when measuring inflation. The CPI is presented monthly in the US by the Bureau of Labor Statistics. This index tends to change more on a month to month basis than does “core inflation”. This is because core inflation eliminates products that can have temporary price shocks (i.e. energy, food products). Core inflation is thus intended to be an indicator and predictor of underlying long-term inflation.”

www.wealthbuilder/ie

European inflation accelerated to the fastest pace in two and a half years

European inflation accelerated to the fastest pace in two and a half years and confidence in the economic outlook declined as surging energy prices threatened to undermine growth.

Inflation in the 17-nation euro region quickened to 2.8 percent in April from 2.7 percent, the European Union’s statistics office in Luxembourg said today in an initial estimate. Economists had expected inflation to remain unchanged, according to the median of 34 forecasts in a Bloomberg News survey. An index of executive and consumer sentiment slipped to 106.2 from 107.3 in March, the sharpest drop since May 2010, and unemployment held at 9.9 percent, separate reports showed.

Crude-oil prices have soared 38 percent in the past six months, pushing inflation above the European Central Bank’s 2 percent limit and prompting policy makers to raise interest rates this month for the first time in almost three years. At the same time, higher raw-material costs are weighing on consumption and company profits, just as governments across the region cut spending to narrow budget deficits.

“The inflation numbers support the view that the ECB will deliver another interest rate hike before long,” said Aline Schuiling, senior economist at ABN Amro Bank NV in Amsterdam. “Growth was exceptionally strong in the first quarter, but will slow from here. The labor market is still very sluggish and paired with inflation that’s not good for purchasing power.”

German Output

The euro was little changed after the data were released, trading at $1.4867 at 11:31 a.m. in Brussels, up 0.2%.

European services and manufacturing growth unexpectedly accelerated in April, driven by higher output in Germany and France, the region’s largest economies. Still, European investor confidence declined as faster inflation and higher interest rates may hurt the recovery. Euro-region growth will slow to 1.6 percent this year from 1.8 percent in 2010, the European Commission forecast last month.

To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Deepening Economic Crisis: Inflation, Rising Interest Rates, Surge in the Price of Gold and Silver

By: Bob_Chapman

Economic recovery does not seem to be taking effect in spite of more massive expenditures by Congress and the Fed. The IMF says financial stability has improved, but then again their vision is almost always clouded. US tax revenues are not increasing in a meaningful way, manufacturing struggles to expand and Wall Street flourishes in a cascade of mega salaries and bonuses. In another six months the US will be three years what the government, the media and Wall Street call a deep recession. We call it an inflationary depression, which has existed for 26 months. After eight years of increasing money and credit, and the creation of a real estate bubble, the Fed has been fighting off asset destruction with ever more money and credit accompanied by debt deflation. Part of the Fed’s policy has been zero interest rates, which has helped Wall Street and banking and to a limited extent real estate, but has destroyed the purchasing power of retirees and has driven funds into speculation, which in many cases has ended in ever more losses and less buying power. The policy left conservative investors no place to turn to other than to join Wall Street and bankers in speculation, something they were not prepared for nor could they compete with. Borrowers have had a field day with virtually free money for which the result has been higher inflation and really major unemployment. You might call this the true Keynesian corporatist fascist model. This has left us with ongoing malinvestment, ridiculous illusions, which have led to the de-capitalizing of the US economy. In that process these interest free loans have given the big hitters the opportunity to enhance their fortunes at the expense of everyone else.

These rates and QE2 at least for the moment have been so powerful that deflation is nowhere in sight, except perhaps in job creation. In fact net inflation has moved up to 9-1/2% and we believe this year it will attain 14%, as government eventually admits to 5-1/2%, as we saw three years ago. If you think we are wrong look at producer prices that are up almost 11% over the past six months. Government and mainline economists are not paying attention. Either the higher costs are passed on or the profits will disappear. Just like in years past, over and over again, the excessive expansionism of monetary and fiscal policy will produce excessive inflation, more inflation than the so-called experts are anticipating.

The bailout of financial institutions by American taxpayers, both in the US, UK and Europe, won’t be allowed to happen again. In the next go-around they will go bankrupt. Those in the US and other stock markets with the exception of gold and silver shares, those in bonds, derivatives and hedge funds, will be wiped out as well. Few will be spared.

A year from this June inflation should be near 20% and that is where panic will set in. The 10-year T-note should be yielding 5-1/4% to 5-1/2% and the 30-year fixed rate mortgage should be 6-1/2% to 6-3/4%. After that interest rates and inflation will more than double, as they did in the late 1970s.

An example that is easily understood is that due to foreclosure and lack of job creation, rents should increase 10% over the next 1-1/2 years. That is known as Homeowner’s Equivalent Rent, which is 23% of total inflation. We believe that is a conservative figure. We won’t deal with core inflation, because it is just a method of obscuring real inflation. That 10% increase would add 4% to net inflation, which is currently about 9-1/2%, not 1.9%, as your faithless government would have you believe. That would put real inflation at 5-1/2%, not to mention increased prices for fuel and food. That is why our estimates are 14% to 25% over that time frame. Don’t forget interest rates will be rising as well. This only includes QE and stimulus 1 & 2. If QE3, by that or some other euphemism occurs, which we believe has too, then 50% inflation and hyperinflation is attainable. Readers have to remember that even if oil prices stopped increasing at $120.00, and food prices stayed at 10% higher levels, it would still rob consumers of $300 billion in purchasing power. That would drop consumers as a part of GDP from 71% to 69% easily. That means GDP growth even with the Fed adding $2.5 trillion to the economy, would at best stay even and may reflect as low as a minus 6%. You have to get the feel of the dynamics of this. Raging inflation, plus perhaps hyperinflation, a falling economy and 30% to 40% unemployment, U6 was 37.6% at the top of the great depression and the birth/death ratio didn’t exist at that time. Presently wages are stagnant, and they have been so for three years. Wages will finally start to rise so you can add rising wages to the inflationary explosion.

As this transpires we have the Middle East and North Africa, which are now a frightening further calamity waiting to happen. Any further violence there could take oil to $150.00 or higher. Will there be war with Iran? Perhaps and if that develops oil could escalate to $200 to $300 a barrel. Such developments would knock the foundation out from under the entire world, except for those fortunately producing oil.

Another factor is the plight of municipalities and states in the US. We have seen a small reduction in employment in these sectors, but the biggest layoffs are yet to come, as well as more than 100 municipal bankruptcies. We will also see debt default by states in relation to their bonds and other debts. Some states, such as Illinois, New York and California could cease functioning. This is not a pretty picture.

Then we have the woeful situation in the UK and Europe, all beset with rising inflation as well. A sovereign debt crisis has been prevalent for months with Greece, Ireland, Portugal, Spain, Belgium and Italy. All are at different stages of failure and nothing has really been resolved. As we wrote months ago the cost of bailout assistance would be $4 trillion, and it was just recently that the Germans and other lenders realized that the bailout cost is insurmountable. The cost will easily bankrupt the solvent lenders. Then there are the banks, all of which are close to insolvency already, which are facing massive bond losses, which will put them out of business. These are the loans they made that they should have never made, from funds created out of thin air.

Iceland has rejected paying off British and Dutch depositors, who had funds in Icelandic banks, which went bankrupt. The depositors do not have a leg to stand on and the citizens of Iceland are correct in their refusal. It was the Icelandic bankers who screwed the depositors.

Recently Finland’s voters rejected the bailout of Greece, Ireland and Portugal and who can blame them.

Wait until Greece goes into default, then things will get real interesting.

We normally do not editorialize regarding silver and gold. As you know we have recommended being long gold and silver shares, coins and bullion since June of 2000. Now that story is getting even better. Not only has gold and silver been a safe haven asset all those years, but is finally again becoming a shelter from inflation. The US, UK and Europe are in serious financial and economic trouble. Over the past 11 years, nine major country’s currencies on average have fallen more than 20% each year versus gold and silver. That is quite an extraordinary return and from our mail our subscribers are quite happy they followed our advice. Our run, including our market shorts, has simply been unbelievable.

Silver prices are on a tear and as we write they have risen to $46.30. In spite of these price levels the mining industry is not increasing production in any meaningful way. About 70% of production comes as a by-product of other types of mining, such as copper. There are no new sizeable projects in the works, and thus it is expected that production could fall 5% annually for the next ten years. The easy finds have already been exploited and new large projects are harder to find. In fact, current mines have only been able to increase production by a paltry 2.5% or so. In 2009 Argentina was the only outstanding exception and that could be a one off occurrence.

As we write gold has broken out to $1,509.30 even as the “Plunge Protection Team” fights viciously to suppress both gold and silver prices. Despite the mantra on Wall Street and in government there is 9-1/2% inflation affecting the US economy and the professionals and the public are finally catching on. In spite of the greatest bull market in gold and silver history, they still do not get it. Less than 1% of Americans own gold and silver related assets.

The QE1 and 2 and stimulus 1 and 2 have done their damage. The inflationary results are in the pipeline. QE and stimulus being reflected this year and the results of QE2 and stimulus 2 next year. We believe we’ll see the results of QE3 the following year, 2013, but it will be called something else. A falling dollar and few buyers of US debt has again set the stage for the Fed taking down 80% or more of Treasury and Agency debt. If they do not do that the whole system will collapse. These programs are like booster rockets aiding an underlying positive fundamental condition for gold and silver. The flip side is the debasement and denigration of the US dollar. As an aside even though the ECB has just raised interest rates they and the UK will continue their own versions of QE, because if they don’t their economies will collapse. That will put even more inflation into the world financial system.

As the possibility of QE3, or its equivalent, lurks in the wings the very solvency of America hangs in the balance. Those who have studied financial and economic history know that the course that is being followed is unworkable, and that certainly includes the staff at the Fed and the Treasury Department. In fact, Mr. Bernanke pointed out that in his and Mr. Baskins’ writings in 1988 after the market collapses of 1987.

At the heart of America’s problems are the insolvency of many financial institutions and the failure of either the Fed or the Treasury to have them liquidated. What the banks have in mind is the liquidation of bad debt held in suspension over the next 50 years. Supposedly as conditions and profits increase part of those profits will be used to lower debt. The problem is that these corporations are bankrupt. There access in the creation of inside information allows them to produce illegal outsized profits, such as 90 days of propriety trading without a loss. We were traders for 25 years and know under normal legal circumstances that that is impossible.

The, of course, there are the giant profits, really theft from other investors, that are used in part to offset previous losses and provide outsized salaries and bonuses to the crooks that run these banks and brokerage firms. These results are aided by the creation of money and credit and zero interest rates. The ability to borrow money created out of thin air at almost no cost. As a result the Fed now has a balance sheet of some $3 trillion loaded with Treasuries, Agencies, toxic waste and if they decide to create more money and credit to keep the government and the economy functioning for another year that figure will become $5.5 to $6 trillion. That is some monetization. There is unfortunately no other way for the Fed to do it, when at best they can only expect 20% to 30% of buyers for Treasuries, as the dollar falls in value. The situation is dire as the US dollar has just fallen 5% versus the Mexican peso, as the Mexican economy grows 4.5% a year, inflation is 3.7% and unemployment is 5%, and they haven’t used stimulus.

What are we missing here? Nothing except the Fed and Treasury, as well as Congress and the President are out of their minds as were their predecessors. How bad is it when the largest bond fund in the world, PIMCO, not only sells all its US Treasuries and Agencies, because they see no value and then they proceed to short them? It’s certainly a sad day for the solvency of America. Who can blame PIMCO when government is projecting $1.6 trillion deficits as far as the eye can see. In addition, all the funds paid by Americans for Social Security and Medicare have been squandered by government. Now there is no way to pay the promised benefits. That is $100 trillion that has been stolen, or should we say misappropriated. It is so bad that the US government credit rating may soon be lowered. It was just 1-1/2 years ago we picked August 2011 as the possible time for a downgrading of that AAA credit rating.

The number of states in serious financial trouble has now risen to 40 and unfortunately that number is still climbing.

Theinternationalforcaster.com

Global Research Articles by Bob Chapman

© Copyright Bob Chapman , Global Research, 2011

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.

source:http://www.marketoracle.co.uk/Article27737.html

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