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Wednesday, December 30, 2009
Tuesday, December 29, 2009
Four reasons hyperinflation hasn't hit the U.S. economy yet
Everything we know about classic economic theory suggests the U.S. economy should be experiencing Zimbabwe-like hyperinflation right now, thanks to the nearly $2.2 trillion the U.S. Federal Reserve has pumped into the system.
But we’re not…yet.
Classic economic theory says that money supply can be used to stimulate the economy and our central bankers seem to agree. That’s why they’ve pumped more than $1 trillion dollars into the economy, engineered countless bailout bonanzas for zombie institutions, put Detroit on life support, and delivered a bunch of financial Band-Aids to the trauma ward — all in a desperate bid to make Americans feel better about the global financial crisis.
To their way of thinking, the trillions of dollars have been a success. That’s why any meeting of the Group of Eight (G8) nations looks more like a mutual affection society with central bankers anxious to claim credit and backslap each other in congratulations for having avoided the “Great Depression II.”
But by taking the Federal balance sheet to more than $2 trillion from $928 billion 2008, they’ve created a situation that should have resulted in an epic inflationary spike to accompany the 137% increase in liabilities.
Yet that hasn’t quite happened.
Core inflation — which denotes consumer prices without food and energy costs — has actually decreased from 2.5% in 2008 to 1.5% presently. And that has many investors who have heard the siren call of the doom, gloom and boom crowd wondering if they’re worried about nothing.
So what gives?
Well, there are four reasons we haven’t yet seen hyperinflation:
Banks are hoarding cash. Despite having received trillions of dollars in taxpayer funded bailouts and lived through a litany of shotgun weddings designed to reinvigorate the shattered lending markets, most banks are actually hoarding cash. So instead of lending money to consumers and businesses like they’re supposed to, banks have used taxpayer dollars to boost their reserves by nearly 20-fold according to the Federal Reserve. The money the bailout was supposed to make available to the system is actually not passing “Go,” but rather getting stopped by the very institutions that are supposed to be lending it out. Three-year average annualized loan growth rates were 9.6% before the crisis; now they are shrinking by 1.8%, according to Money Magazine.
The United States exports inflation to China, which remains only too happy to continue to absorb it. What this means is that low priced products from China help keep prices down here. And this is critical to something that many in the “China-is-manipulating-their-currency” crowd fail to grasp. If China were to un-peg the yuan and let it rise by the 60% or more it’s supposedly undervalued by, we’d see jump in prices here in everything from jeans to tennis shoes, toys, medical equipment, medicines, and anything else we import in bulk from China. Chances are, the shift would not be dollar-for-dollar or even dollar-for-yuan, but there’s no doubt it would be significant. Many economists I’ve talked to privately think 25%-35% is probable. So the next time you hear a “Buy American” extremist, you might want to share this little inconvenient truth.
Consumers are still cutting back. Therefore, the spending that normally helps pull demand through the system is simply not there. I don’t how things are in your neighborhood, but where I live, people are still cutting back. Indeed, data from the U.S. Department of Commerce and the Federal Reserve Board shows that consumer spending growth averaged 1.4% a year prior to the crisis and is now shrinking at a rate of 0.7%. What this means is that people have figured out that it’s more important to save money than it is to spend it. And, given that consumer spending makes up 70% or more of the U.S. economy, this is a monumental change in behavior that all but banishes the last vestiges of the “greed is good” philosophy espoused by Michael Douglas as Wall Street pirate Gordon Gekko in 1987.
Businesses continue to cut back rather than hire new workers. Therefore, wages and wage inflation figures are lower than they would be if the economy was truly healthy and the stimulus was working. This is especially tough to stomach because it means people are still being marginalized, laid off and “part-timed” instead of being hired. And that means that most of the earnings growth we’ve seen this season has come from expense reductions rather than top line sales growth — and those are two very different things. But while this is tough, it’s also helped keep inflation lower than it would otherwise be. Prior to the financial meltdown, job growth averaged about 1% a year over the last three years whereas now it’s falling by 4.2%.
The upshot?
Any one of these factors could change at any time. And that means investors who are relying on the Fed’s version that everything is okay and that the government is managing inflation may be in for a rude awakening.
The only thing the Fed is doing is managing to manipulate is the data, and even then, not very well.
But we’re not…yet.
Classic economic theory says that money supply can be used to stimulate the economy and our central bankers seem to agree. That’s why they’ve pumped more than $1 trillion dollars into the economy, engineered countless bailout bonanzas for zombie institutions, put Detroit on life support, and delivered a bunch of financial Band-Aids to the trauma ward — all in a desperate bid to make Americans feel better about the global financial crisis.
To their way of thinking, the trillions of dollars have been a success. That’s why any meeting of the Group of Eight (G8) nations looks more like a mutual affection society with central bankers anxious to claim credit and backslap each other in congratulations for having avoided the “Great Depression II.”
But by taking the Federal balance sheet to more than $2 trillion from $928 billion 2008, they’ve created a situation that should have resulted in an epic inflationary spike to accompany the 137% increase in liabilities.
Yet that hasn’t quite happened.
Core inflation — which denotes consumer prices without food and energy costs — has actually decreased from 2.5% in 2008 to 1.5% presently. And that has many investors who have heard the siren call of the doom, gloom and boom crowd wondering if they’re worried about nothing.
So what gives?
Well, there are four reasons we haven’t yet seen hyperinflation:
Banks are hoarding cash. Despite having received trillions of dollars in taxpayer funded bailouts and lived through a litany of shotgun weddings designed to reinvigorate the shattered lending markets, most banks are actually hoarding cash. So instead of lending money to consumers and businesses like they’re supposed to, banks have used taxpayer dollars to boost their reserves by nearly 20-fold according to the Federal Reserve. The money the bailout was supposed to make available to the system is actually not passing “Go,” but rather getting stopped by the very institutions that are supposed to be lending it out. Three-year average annualized loan growth rates were 9.6% before the crisis; now they are shrinking by 1.8%, according to Money Magazine.
The United States exports inflation to China, which remains only too happy to continue to absorb it. What this means is that low priced products from China help keep prices down here. And this is critical to something that many in the “China-is-manipulating-their-currency” crowd fail to grasp. If China were to un-peg the yuan and let it rise by the 60% or more it’s supposedly undervalued by, we’d see jump in prices here in everything from jeans to tennis shoes, toys, medical equipment, medicines, and anything else we import in bulk from China. Chances are, the shift would not be dollar-for-dollar or even dollar-for-yuan, but there’s no doubt it would be significant. Many economists I’ve talked to privately think 25%-35% is probable. So the next time you hear a “Buy American” extremist, you might want to share this little inconvenient truth.
Consumers are still cutting back. Therefore, the spending that normally helps pull demand through the system is simply not there. I don’t how things are in your neighborhood, but where I live, people are still cutting back. Indeed, data from the U.S. Department of Commerce and the Federal Reserve Board shows that consumer spending growth averaged 1.4% a year prior to the crisis and is now shrinking at a rate of 0.7%. What this means is that people have figured out that it’s more important to save money than it is to spend it. And, given that consumer spending makes up 70% or more of the U.S. economy, this is a monumental change in behavior that all but banishes the last vestiges of the “greed is good” philosophy espoused by Michael Douglas as Wall Street pirate Gordon Gekko in 1987.
Businesses continue to cut back rather than hire new workers. Therefore, wages and wage inflation figures are lower than they would be if the economy was truly healthy and the stimulus was working. This is especially tough to stomach because it means people are still being marginalized, laid off and “part-timed” instead of being hired. And that means that most of the earnings growth we’ve seen this season has come from expense reductions rather than top line sales growth — and those are two very different things. But while this is tough, it’s also helped keep inflation lower than it would otherwise be. Prior to the financial meltdown, job growth averaged about 1% a year over the last three years whereas now it’s falling by 4.2%.
The upshot?
Any one of these factors could change at any time. And that means investors who are relying on the Fed’s version that everything is okay and that the government is managing inflation may be in for a rude awakening.
The only thing the Fed is doing is managing to manipulate is the data, and even then, not very well.
GOLD cannot be
Gold cannot be…
Printed (ask a miner how long it takes to find it and dig it up)
Counterfeited (you can try, but a scale will catch it every time)
Deflated or inflated (it can’t be reproduced)
Gold cannot be destroyed by…
Fire (it takes 1945.4 degrees F to melt it)
Water (won’t rust or tarnish)
Time (a gold coin remains recognizable after a thousand years)
Gold doesn’t need…
Feeding (like cattle)
Fertilizer (like corn)
Maintenance (like printing presses)
Gold has no…
Time limit (most gold mined is still in existence)
Counterparty risk (remember Bear Stearns?)
Shelf life (it never expires)
Gold as metal is…
Malleable (spreads instead of crushes)
Ductile (stretches without breaking)
Beautiful (just ask an Indian bride)
Gold as money is…
Liquid (easily convertible to cash)
Portable (you can hold $50,000 in one hand)
Private (no mandatory reporting here)
Gold is internationally accepted, lasts for thousands of years, and best of all, they aren’t making any more of it.
Printed (ask a miner how long it takes to find it and dig it up)
Counterfeited (you can try, but a scale will catch it every time)
Deflated or inflated (it can’t be reproduced)
Gold cannot be destroyed by…
Fire (it takes 1945.4 degrees F to melt it)
Water (won’t rust or tarnish)
Time (a gold coin remains recognizable after a thousand years)
Gold doesn’t need…
Feeding (like cattle)
Fertilizer (like corn)
Maintenance (like printing presses)
Gold has no…
Time limit (most gold mined is still in existence)
Counterparty risk (remember Bear Stearns?)
Shelf life (it never expires)
Gold as metal is…
Malleable (spreads instead of crushes)
Ductile (stretches without breaking)
Beautiful (just ask an Indian bride)
Gold as money is…
Liquid (easily convertible to cash)
Portable (you can hold $50,000 in one hand)
Private (no mandatory reporting here)
Gold is internationally accepted, lasts for thousands of years, and best of all, they aren’t making any more of it.
Monday, December 28, 2009
GOLD is the money of kings !
Gold is the money of kings, silver is the money of gentlemen and barter is the money of peasants; but debt is the money of slaves.
Just like the British in the late 1700s, mother England wanted to maintain control. Americans protested a tea tax. But the Boston Tea Party, throwing the tea into Boston harbor, wasn’t enough to rally Americans against the British. George Washington falteringly opposed the British with a small force against more than 30,000 British troops.
It wasn’t till the British burnt down American homes that homeless American women sewed uniforms for their husbands and sons and presented a standing army to General Washington to oppose the British. This strategic error by the British eventually led to their demise.
What the federal government/bankster alliance doesn’t realize today is that it has made the same mistake as the British. By accepting bribes from the banksters, politicians have sided with a mob that teased naive Americans into low introductory home mortgage interest rates, which as resulted in 18 million vacant homes, having the same effect as burning them down as the British did. This has now begun to polarize the people against the banker/politician mafia that now runs the country.
I hope you get the gist of my message here, that unbeknownst to Americans, they may be participating in a huge revolutionary overthrow of their own amoral government as they elect to purchase and utilize gold.
Government knows it is losing its grip. Government can threaten to take away your guns and bullets as it is currently doing. It can falsely characterize any opposition as being pro-terrorist. It can impart fear with the development of internment camps. It can intimidate with the future recruitment of a 1-million man police force. It can release propaganda via its gofers in the news media. But the people can strike back by abandoning use of their counterfeit money and replacing it with gold. It’s a strike at the very center of their ongoing fraud that is now impoverishing every American.
Americans, it’s time to load your proverbial muskets. Forget the ineffectual street tea parties which only serve to churn up more frustration. Fire your first shot in this revolution
Just like the British in the late 1700s, mother England wanted to maintain control. Americans protested a tea tax. But the Boston Tea Party, throwing the tea into Boston harbor, wasn’t enough to rally Americans against the British. George Washington falteringly opposed the British with a small force against more than 30,000 British troops.
It wasn’t till the British burnt down American homes that homeless American women sewed uniforms for their husbands and sons and presented a standing army to General Washington to oppose the British. This strategic error by the British eventually led to their demise.
What the federal government/bankster alliance doesn’t realize today is that it has made the same mistake as the British. By accepting bribes from the banksters, politicians have sided with a mob that teased naive Americans into low introductory home mortgage interest rates, which as resulted in 18 million vacant homes, having the same effect as burning them down as the British did. This has now begun to polarize the people against the banker/politician mafia that now runs the country.
I hope you get the gist of my message here, that unbeknownst to Americans, they may be participating in a huge revolutionary overthrow of their own amoral government as they elect to purchase and utilize gold.
Government knows it is losing its grip. Government can threaten to take away your guns and bullets as it is currently doing. It can falsely characterize any opposition as being pro-terrorist. It can impart fear with the development of internment camps. It can intimidate with the future recruitment of a 1-million man police force. It can release propaganda via its gofers in the news media. But the people can strike back by abandoning use of their counterfeit money and replacing it with gold. It’s a strike at the very center of their ongoing fraud that is now impoverishing every American.
Americans, it’s time to load your proverbial muskets. Forget the ineffectual street tea parties which only serve to churn up more frustration. Fire your first shot in this revolution
Sunday, December 27, 2009
Tuesday, December 15, 2009
Turn on your TV, read the front page of any newspaper
You cant turn on your TV or read the front page of any newspaper without someone talking about buying gold to hedge against inflation. Unlike some well known stocks, gold has never gone to zero. As our Federal Reserve prints more money, our U.S. dollar is worth less and less. So why wouldn't you buy gold and silver to hedge yourself?
Friday, December 4, 2009
Solomons GOLD leaves a legacy for loved ones
For aging baby boomers who want to leave something for loved ones that are not eligible to purchase life insurance for age or health reasons, Solomon GOLD maybe an alternative. With concerns about inflation, as governments print more money to try and get the world out of recession, the gold markets show no signs of cooling. Baby boomers can buy physical gold directly from gold mines. A Solomon gold delivery contract, which is assignable, is the physical delivery of gold in 12 months in the form of gold poured into Dore bars. The bars are poured into predetermined sizes consisting of ninety three percent (93%) or higher content of gold and the balance silver/platinum. This is a common method of holding gold prior to it being refined to .9995% fine. Until gold is refined to .9995% fine there are no tax consequences. The bars are individually assayed, stamped and serialized.
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