Why is it important for the American people to understand that all these Federal stats are lies? It creates grounds to VOID all policy and legal ruling made during this period. If the system is corrupt then nothing these pols do is legitimate. As we take back our Democratic Party from Clinton neo-liberals and reinstate social Democracy---we will have tons of revenue to spend rebuilding our local, domestic economies and communities .
The FED had to pretend unemployment was low and inflation controlled and GDP showing a growing economy in order to install those FED policies of zero interest and QE to send trillions of dollars more to global corporations and the rich.
When they say inflation is near zero or 1%---they mean for the 1%---not main street.
Remember, social democracy has cost of living inflation figures that represent what is happening on main street so include health care, food, child care, home energy and water costs. That was how these GDP and inflation rates were figured all of last century until Reagan/Clinton installed market-based policy. Inflation on main street has been these several years 5% and higher and that is why communities are starved of cash and local economies stagnant....people not only have no money---they don't want to pay that much. Inflation is critical in a nation's economy---hyper-inflation makes goods and service rates soar. That is to where the FED policy is taking the US---to hyper-inflation because of the level of US Treasury bond debt, state and local bond debt combined with a crashing economy.
CLINTON NEO-LIBERALS AND BUSH NEO-CONS ARE WORKING WITH THE FED AND WALL STREET TO DELIBERATELY THROW THE US INTO A DEEP DEPRESSION JUST TO INSTALL GLOBAL CORPORATE GOVERNING STRUCTURES.
If we get rid of global pols and build a local, domestic economy that will reverse all this stagnation and ability of Wall Street to control our city and state economies. The pols in Maryland State Assembly and Baltimore City Hall are working for global pols installing bad policy and we need to get rid of them.
What Is The Real Inflation Rate?
October 8th, 2012 E Trade Financial
Michael Snyder:
Can we believe any of the economic numbers that the government is feeding us these days? Most of the focus recently has been on the bizarre jobs report that the government released last Friday, but the truth is that the inflation rate is a lie too. In fact, the way that the government calculates inflation has changed more than 20 times since 1978. The government is constantly looking for ways that it can make inflation appear to be even lower. According to John Williams of shadowstats.com, if inflation was measured the same way that it was back in 1990, the inflation rate would be about 5 percent right now. If inflation was measured the same way that it was back in 1980, the inflation rate would be about 9 percent right now. But instead, we are expected to believe that the inflation rate is hovering around 2 percent. Well, anyone that goes to the supermarket or fills up their vehicle with gasoline knows that prices are going up a lot faster than that. Just about everything that we buy on a regular basis is steadily becoming more expensive, and so most Americans are not buying it when government officials tell us that there is barely any inflation right now.
John Williams is not the only one doing research into these inflation numbers. According to the American Institute for Economic Research, the real rate of inflation was about 8 percent last year. The following is an excerpt from a story that was recently posted on the website of Pittsburgh’s NPR news station….
The federal government says that consumer prices rose moderately last year, but if you think the cost of everyday purchases increased more than that, then you’re probably right according to the American Institute for Economic Research (AIER).
Have you ever wondered how billionaires continue to get RICHER, while the rest of the world is struggling?
"I study billionaires for a living. To be more specific, I study how these investors generate such huge and consistent profits in the stock markets -- year-in and year-out."
The Bureau of Labor Statistics’ Consumer Price Index (CPI) was up 3.1% in 2011. However, AIER’s Everyday Price Index (EPI) indicates most Americans saw their day-to-day costs increase by 8%. That’s because the EPI excludes housing, automobiles, furniture, appliances and other items purchased occasionally.
So what are we supposed to believe?
Anyone that buys food on a regular basis knows that food prices have been going up significantly over the past couple of years, and because of the current drought things are about to get a whole lot worse.
In particular, the drought is expected to send meat prices much higher over the next 12 months. The following is from a recent Reuters article….
The worst drought to hit U.S. cropland in more than half a century could soon leave Americans reaching deeper into their pockets to fund a luxury that people in few other countries enjoy: affordable meat.
Drought-decimated fields have pushed grain prices sky high, and the rising feed costs have prompted some livestock producers to liquidate their herds. This is expected to shrink the long-term U.S. supply of meat and force up prices at the meat counter.
Some analysts are projecting that we could see food prices rise by 14 percent or more over the next year.
So you might want to start clipping more coupons, because a trip to the supermarket is about to become even more painful on the wallet.
Water bills have also been steadily rising all over the country. According to a study conducted by USA Today, some Americans have seen their water bills triple over the past 12 years….
While most Americans worry about gas and heating oil prices, water rates have surged in the past dozen years, according to a USA TODAY study of 100 municipalities. Prices at least doubled in more than a quarter of the locations and even tripled in a few.
So what is causing water prices to skyrocket?
The following are the reasons given by USA Today….
The trend toward higher bills is being driven by:
– The cost of paying off the debt on bonds municipalities issue to fund expensive repairs or upgrades on aging water systems.
– Increases in the cost of electricity, chemicals and fuel used to supply and treat water.
– Compliance with federal government clean-water mandates.
– Rising pension and health care costs for water agency workers.
– Increased security safeguards for water systems since the 9/11 terror attacks.
Unfortunately, one of the experts USA Today interviewed said that we can expect water bills to rise between 5 percent and 15 percent a year moving forward.
Of course the price of gasoline has also become absolutely outrageous. It has doubled since Barack Obama entered the White House, and the average American household spent more than $4000 on gas last year.
In California, temporary refinery problems have sent gasoline prices absolutely skyrocketing over the past week. The average price of a gallon of gasoline hit another brand new record high on Sunday. According to AAA, the average price of a gallon of regular unleaded gasoline in California is now $4.655, and at some stations it is well over $5.00 a gallon.
Sadly, some analysts are warning that the supply problems in California may last until November.
Hopefully this is a reminder to all of us of just how vulnerable our economic infrastructure can be. If temporary refinery problems can cause this kind of chaos, what would a major crisis do?
But despite all of the evidence to the contrary, Federal Reserve Chairman Ben Bernanke continues to insist that prices are very stable right now.
In fact, one of the reasons why he says that more money printing (“quantitative easing”) is okay is because we are in a “low inflation” environment at the moment.
Sadly, this is exactly the kind of delusional thinking that led to the horrible crisis in the Weimar Republic back in the 1920s. Quantitative easing did not work for the Weimar Republic, and it is not going to work for us either.
But it will cause the prices of the things that we buy on a regular basis to go up even more.
So what can we do about all of this?
Well, perhaps we can avoid paying higher prices for things by having the government give them to us for free.
That is what some Americans are doing.
There are some Americans out there that have absolutely no shame at all and will squeeze as much free stuff out of the government that they can. For example, one woman in Baltimore has actually accumulated 30 free “Obamaphones”. The video below explains how she has been able to get 30 free cell phones all paid for by the U.S. government….
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'There are some Americans out there that have absolutely no shame at all and will squeeze as much free stuff out of the government that they can. For example, one woman in Baltimore has actually accumulated 30 free “Obamaphones”. The video below explains how she has been able to get 30 free cell phones all paid for by the U.S. government….'
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As it says below, hyper-inflation comes when a nation's monetary unit is devalued. That is to where Bush and Obama has taken the dollar with tens of trillions of dollars in corporate fraud sucking all wealth out of the US economy tied to loading debt at the national, state, and local level. This is why Congress passed laws that allowed US Treasuries to be hawked worldwide like subprime mortage loans and it is why Maryland's Governor O'Malley and the Maryland Assembly loaded the state and City of Baltimore with debt----all to implode the US monetary unit----the dollar.
This coming economic crash is designed to be so deep and debt so high that they know inflation in the US will soar to never-seen levels. People will not be able to consume---ergo, they have no money or products to buy. That is how you kill an economy for a decade or more. At the same time Clinton neo-liberals and Bush neo-cons are pushing all these social non-profits that mirror the kinds of NGO operations in third world nations----the new idea of progressive becomes simply keeping people so impoverished with food, water, and shelter. That is where these global policies lead. Citizens in US cities are seeing this now as churches receive all social service funding and dole out basics of life.
THESE ARE ALL TRANS PACIFIC TRADE PACT STRUCTURES TAKING THE US TO THIRD WORLD STATUS.
Since the US Constitution does not allow all of this ------they juke the stats----and inflation is a great big JUKE.
If social democrats control city government next year 2016 when the economic crash is to come-----then those pols will stand firm with defaulting on illegal debt. If the same pols working for Wall Street are still in office---they will bring the economy down allowing all that fraud to yet again---stay with Wall Street. BALTIMORE IS GROUND ZERO FOR THIS AND WHAT THE CURRENT POLS HAVE IN STORE WILL MAKE POVERTY IN OUR COMMUNITIES LOOK LIKE CHILD'S PLAY. SEE WHY THEY ARE MILITARIZING COMMUNITY POLICING?
DEFINITION of 'Inflation'
Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.
'Inflation'
As a result of inflation, the purchasing power of a unit of currency falls. For example, if the inflation rate is 2%, then a pack of gum that costs $1 in a given year will cost $1.02 the next year. As goods and services require more money to purchase, the implicit value of that money falls.
Monetarism theorizes that inflation is related to the money supply of an economy. For example, following the Spanish conquest of the Aztec and Inca empires, massive amounts of gold and especially silver flowed into the Spanish and other European economies. Since the money supply had rapidly increased, prices spiked and the value of money fell, contributing to economic collapse.
Historical Examples of Inflation and Hyperinflation
Today, few currencies are fully backed by gold or silver. Since most world currencies are fiat money, the money supply could increase rapidly for political reasons, resulting in inflation. The most famous example is the hyperinflation that struck the German Weimar Republic in the early 1920s. The nations that had been victorious in World War I demanded reparations from Germany, which could not be paid in German paper currency, as this was of suspect value due to government borrowing. Germany attempted to print paper notes, buy foreign currency with them, and use that to pay their debts.
This policy led to the rapid devaluation of the German mark, and with it, hyperinflation.
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Keep in mind the person below is an investment analyst and speaks from Wall Street's vision, not main street. What Obama and Clinton neo-liberals did as soon as they came to office was set the stage for this coming economic crash and high debt JUST TO CREATE HYPER-INFLATION. This will kill Social Security and Medicare and all social programs under the guise of the government not having the money and costs of goods and services being too high. This is why Obama and Affordable Care Act end Medigap in Medicare in 2020====it is why Obama created myRA ---the privatized Social Security fund sent to the stock market-----and it is why Affordable Care Act is building a wellness preventative care for all. It will be the equivalent of health care dispensed in third world clinics. All of these economists and financial journalists KNEW IN 2009 when the FED and Congress moved to these financial policies what the goal was.....I said 5 years ago just what these journals are saying today......it was planned. They try to pretend all this had to be done but Obama came to office with Rule of Law requiring he recover the tens of trillions of dollars stolen in fraud which would have reversed all this debt. THAT WAS WHAT THE FED AND CONGRESS WERE SUPPOSED TO DO.
When you are creating a third world society where 90% are impoverished you must control the masses with just enough food, water, shelter while keeping their lives chaotic----that is what Baltimore City Hall has done for decades. Third world poverty is worse. Think about the move to privatize water and waste-----privatize public transportation----and hand most real estate to global investment firms who will act as slum landlords and you have the policies Maryland Assembly and Baltimore City Hall installed these several years. That is to where they are working.
From The Economist-------
Hyperinflation Fearing the worst
Mar 14th 2013, 20:33 by R.A. | WASHINGTON
'The full story in the event of a hyperinflationary catastrophe is far too complex to predict, but it's fun to think about how it might go. Here's my very rudimentary sense of things. Why would America, if "pressed for cash", start financing its spending through rapid inflation? Probably because the cost of issuing new debt (currently a relatively cheap option) had become too dear. But then the Treasury's credit rating would tank even further, and the cost of borrowing would become really prohibitive, forcing the government to finance new spending mainly through new revenue. But runaway inflation would quickly kill the real value of any taxes collected, no matter how high rates are jacked up. So, assuming Americans won't contemplate anything like selling the Grand Canyon to a consortium of sheiks (in euros, or gold-pressed latinum), it would become simply impossible to finance Social Security and Medicare at current real levels. There is, sorry to say, no legal entitlement to social-insurance transfers, so the government would violate no law by backing out of its promises. Should the hallowed institutions of the American state somehow manage to survive a hyperinflationary cataclysm, presumably Congress would simply scrap the inflation-indexing of Social Security, and/or continue to mail cheques that America's seniors and health-care providers will find good mainly for kindling, or a laugh. That's how the safety net unravels. There's no way to continue to pay for it, so it stops being paid for, and so it goes away.'
Make no mistake----this was all planned a few decades ago and it is meant to lead to the global corporate tribunal rule with a new currency that will be standardized through all nations tied to these Trans Atlantic/Trans Pacific Trade agreements. See why international justice activists call these trade deals less about trade and more about re-structuring government?
Apr 28, 2014 @ 06:43 PM 31,337 views
Is U.S. Hyperinflation Imminent?
Mike Patton ,
Contributor Forbes
I provide analysis on the economy, investing and financial planning.
Introduction
According to renowned economist Marc Faber, hyperinflation in the U.S. is a certainty within the next 10 years. Mr. Faber has correctly predicted some of the most important financial events in the modern era including, the stock market crash of 1987; the rise of oil, precious metals and other assets in the 2000′s; and on Fox News in February 2007, he said a U.S. stock market correction was imminent. The market peaked six months later. Is Mr. Faber correct this time? Is U.S. hyperinflation imminent in the next 10 years?
In this article, we will discuss the effects of inflation and hyperinflation, consider an example of hyperinflation and discuss the possibility of this occurring in the U.S. One thing is certain, if hyperinflation does materialize, it would be devastating to our economy. Let’s begin with inflation.
Inflation
The Fed is the primary catalyst for inflation. Moreover, it actually attempts to create a low to moderate level of inflation. Why does the Fed want inflation? Because inflation is a signal of a growing economy. Additionally, if inflation is too high, the economy will suffer. If it’s too low, deflation becomes a threat. Therefore, low to moderate inflation is the goal.
Inflation may be defined as “A general rise in prices” and occurs when demand outpaces supply..............
Hyperinflation
Hyperinflation is much less common than inflation. Unfortunately, there is no specific numerical definition for hyperinflation. However, there is some consensus. For example, a few economists suggest that an inflation rate of 50% per month would constitute hyperinflation. Using this rate, a junior cheeseburger deluxe at Wendy’s, which costs about one dollar today, would cost $130 a year from now and nearly $17,000 in 2 years. Needless to say, hyperinflation is a destructive force which is best avoided. Could we actually see hyperinflation in America? Has hyperinflation occurred frequently?
The Nineteenth century was the century of deflation, whereas the Twentieth century was the period of inflation. Hyperinflation occurred as many as 55 times over the past century. Notable countries include: China, Russia, Brazil, Germany, Argentina, Poland, Chile and others. Could it happen in America? Many experts say no.
Because the U.S. has a very proactive Fed, and there’s such a large amount of historical data from countries that have experienced hyperinflation, we should be able to learn from the past mistakes of others and avoid it. However, since inflation and hyperinflation are triggered by an excess of currency, which is not backed by gold or any other substance of value (i.e.; called “fiat” currency), there is no limit to the amount of dollars the U.S. can print (though we don’t print that much actual paper these days). Therefore, we need to briefly discuss the gold standard.
Gold Standard
There are a few different types of gold standards. However, in the interest of brevity, we’ll only skim the surface on this subject. Generally speaking, when a country adopts a gold standard, the amount of currency it may issue is limited by the amount of gold it holds in reserve. During times of war, a country’s need for capital increases, so abandoning the gold standard allows a country to expand its money supply to finance the war. This has been the typical path for countries during wartime. Today, there are no countries on the gold standard. In the absence of this, again there is no limit to amount of currency a country may print. This can be problematic, especially in smaller, developing nations. The absence of a gold standard was a key factor in one of the worst cases of hyperinflation in history. I’m referring to Germany following WWI.
Germany’s Hyperinflation After WWI
When WWI began, Germany abandoned its gold standard in order to print more currency to finance the war. When the war ended, Germany admitted they had started the war and agreed to pay reparations to various countries, with France being the major beneficiary. The details were included in the Treaty of Versailles, the document which formally ended the war. The amount Germany was required to pay was enormous. In fact, the total was close to 226 billion gold marks (approx $846 billion in current U.S. Dollars). After it became evident that Germany was unable to meet this demand, in 1921 the burden was reduced to 132 billion marks, the equivalent of $442 billion in today’s dollars.
Due to the war, Germany’s economy was in shambles. Moreover, with many of its factories in ruin, its production capacity was severely reduced. Hence, even the reduction to 132 billion marks was well beyond its ability to repay. However, to help assure compliance, France and Belgium deployed troops to Germany from 1923 to 1925. During this period, Germany’s central bank, the Reichsbank, issued a massive amounts of marks to repay its debt. However, because Germany had abandoned the gold standard, its currency was backed only by the full faith and credit of its government. Between this monetary explosion and the loss of confidence in its currency, the German mark experienced a massive decrease in value, which resulted in severe hyperinflation. To better grasp the situation at that time, prices doubled during the five years from 1914 to 1919. They doubled again in only five months in 1922. In 1914, the ratio between the mark and the U.S. Dollar was 4.2 German Marks to one dollar. By 1923, it took 4.2 trillion marks to equal one dollar. The German currency had totally collapsed. This also contributed to a brief, but sharp recession in the U.S. (August 1918 to March 1919).
Who Benefits And Who Suffers From Inflation And Hyperinflation?
The beneficiaries of high inflation include any individual or entity who has borrowed money at a fixed rate. High inflation also benefits investors who own commodities, and businesses that derive a significant portion of revenue from exports. Who loses with inflation? First, the overall economy suffers. Specifically, consumers lose purchasing power and their standard of living erodes. Lenders are also hurt as are those who need to borrow. The latter group suffers because lenders raise their interest rates to hedge against inflation. In short, money becomes much more expensive. Finally, import-oriented businesses struggle when inflation is high.
Hyperinflation, on the other hand, hurts almost everyone. It decimates the middle class. It can cause massive bank failures, especially banks with large amounts of outstanding fixed-rate loans. And, although borrowers who have a fixed rate loan do benefit, because prices on everything else are increasing so rapidly, any benefit from the loans is erased by the extreme cost of goods and services. There really are no winners with hyperinflation.
The Potential for Hyperinflation in the U.S. Today
Could the U.S. experience hyperinflation? If you look at the amount of the Feds monetary expansion since 2008, then you would likely conclude yes. For example, when the financial crisis began, the Fed’s balance sheet was around $800 billion. Today, it is over $4 trillion. That’s a tremendous increase. However, it’s important to note that the majority of this new money is sitting at the Federal Reserve and has not actually entered the economy. If this were not the case, if all this capital were allowed to enter the economy, inflation would be very high. Perhaps not hyperinflation, but I believe it would be much higher than it was during the late 1970s.
Why would the Fed flood the market with so much money if it wasn’t intended to enter the economy? Because during the 2008 crisis, not counting the banks that did go out of business, a large number of other banks nearly collapsed. The actions of the Fed were nothing short of brilliant. They created a glut of new money through T.A.R.P., QEII, Operation Twist and QEIII. Then they offered to pay interest to banks on their reserves, which from a financial standpoint made it profitable to banks to leave large amounts on reserve. Hence, with the majority of this new money in reserve, bank balance sheets have been greatly strengthened. It’s important to note that the financial sector must be strong if the economy is to thrive. The Feds challenge will come when it’s time to unwind it all.
With over $4.2 trillion on the Fed’s balance sheet ($3.8 trillion more than at the beginning of the crisis), when demand finally increases and lenders need more capital to lend, or when the Fed decides not to pay interest on bank reserves, the Fed will have to reverse course and, instead of buying bonds (which removes cash from its balance sheet and increases the money supply), it will be selling bonds (removing cash from the economy, reducing the money supply). This is where things could get dicey. This is also why the Fed would like to end QEIII as soon as possible. Because the longer it continues, the more money there will be to remove and this could cause a severe dislocation in the financial markets. In other words, when the Fed ceases QEIII, the stock market could decline along with bond prices.
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Those knowing economics know that the coming bond market crash will take stocks as well and the only safe place will be gold. Warren Buffett has been telling people to stay in the market while reports have it that Buffett has a dozen Swiss bank vaults filled with gold. What is interesting if you Google this article to see the graphs---Europe and US have the least action in gold purchases while Asia has the most. Now, people in the US have been shouting to get rid of the FED because of this criminal cartel operation----GO BACK TO THE GOLD STANDARD. Well, if you are a FED wanting to stay in business---you don't want a lot of gold hanging around. I read that the largest purchases of gold are in China and India---seems Indian women love gold. Wonder if these purchases are simply global investment firms? We know they are protecting themselves from this crash with gold. The other place you see gold are Central Banks in third world nations some tied to Trans Pacific Trade Pact----gathering gold for the global corporate tribunal perhaps. You see very little gold being bought in the US and Europe. Notice how people in the know entered the gold market in early 2000s and got a huge payoff-----think that is where these Clinton neo-liberal and Bush neo-con pols are hiding their wealth?
When this hyper-inflation hits and our currency THE DOLLAR collapses----gold will be the only thing that holds value. This is how you wipe out all of America's wealth and send it to the world's rich as gold. If you watched Dr Seuss's 5,000 Fingers of Dr. T------Dr T has all the money and everyone else work with BITCOINS and Baltimore Bucks.
Hyper-inflation kills value on all assets.
People will be forced out of mortgage loans as with those young middle-class moving into Baltimore even as HARP and Baltimore housing non-profits are putting people back into homes with the last subprime mortgage fraud. All that money and the houses will go to Wall Street investment firms.
This is how you open cities like Baltimore up to having a population of the world's rich----with FOXCONN factories for everyone else!
This is as well how pols and players in Baltimore Development capture will lose all as well----
1,600 Reasons to Buy Gold Now
By Peter Krauth, Resource Specialist, Money Morning • January 14, 2014
Peter KrauthGold fell by 28% in 2013.
That's a huge reversal of a decade-plus trend.
Between 2001 and 2012, gold managed positive gains every single year, a track record unmatched by any major asset.
The precious metal went from a low of $255 in April 2001 to a high of $1,900 in September 2011, for a peak return of 745%.
Since then, gold has given back 35% from its $1,900 high, leading many to call the end of the gold bull market.
But is it really finished?
By looking at history and numerous indicators, I've found a different story.
One that will jumpstart your 2014 profits…
Simple Economics Guarantees a Gold RallyFundamental drivers for gold are so numerous I hardly know where to start.
Unprecedented quantitative easing (money printing) and ultra-low interest rate policies imposed by central banks – especially in the United States, Japan, Europe and China – are in the news every day.
Here are several others that aren't grabbing headlines yet, but shouldn't be ignored.
Shuttering Operations: It's no secret that falling gold prices have made numerous mines unprofitable. That's pressured management at those mining companies to rationalize their operations. Producing gold at a loss doesn't make for happy shareholders.
So mines are being put on care and maintenance, seriously cutting into gold production worldwide. Evy Hambro, who manages BlackRock Inc.'s $8 billion World Mining Fund, said gold supply could fall "quite rapidly" as producers restrict output at higher-cost mines.
Fewer Discoveries: Lower gold prices have meant, of course, lower profits. So, miners are cutting back
on expenses that aren't immediately accretive, affecting the development of mine expansions, new projects, and exploration. That's inevitably going to mean fewer ounces available to mine in the near and medium terms than would have been the case without this gold price rout. There were half as many drills looking for precious metals in the first 9 months of 2013 versus 2012.
High-Grading: In response to lower prices, gold miners have resorted to mining higher-grade ores while leaving behind low-grade ores. That allows them to be more profitable on ounces produced this way, but it means much higher prices will be needed to go back to the lower-grade ores. In some cases, these may never even be mined out at all.
Physical Asian Buying: Asia loves gold, and that trend continues. In the first nine months of 2013, India and China together had bought 1,500 tonnes (1,653 short tons) of gold, easily dwarfing Western purchases. When Indian, Chinese, and central bank buying are combined, they account for nearly the entire annual world gold production.
Overall, gold fundamentals have not only remained intact, they've continued to improve. So it's easy to project them to push higher gold prices in the future. They've got the laws of economics behind them…
Gold Hits the Same Bottom – TwiceAn important part of technical analysis involves analyzing price action. And gold's had plenty of that over the past year.
Most significant was the massive price drop in mid-April when a black swan crash-landed on the gold market.
Over just two trading days, gold futures prices shed 13%, falling from $1,575 to $1,375. That $200 cliff dive was the largest two-day drop in 33 years.
By late June the price had fallen further still, to $1,180 per ounce. So far, that's been the low.
Recent news of the Fed's QE tapering again weighed on gold in late December, causing it to momentarily drop to $1,182, then immediately reverse upward by $32.
While it's still early to say for sure, that may have been a "double bottom" – dropping twice to the same level without moving further down – hit in June then in December. This increases the chances that the $1,180 level is the low for gold prices in this drawn-out consolidation process.
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This was written in 2008 so it states 'if' with hyperinflation' and not when. Economists place a 10 year window on hyperinflation since that will be the point the US government has gone through wiping out all Federal public Trusts and programs through austerity-----people will lose the last of homeownership unless rich----and building of FOXCONN factories in cities like Baltimore over ten years will have a place for Baltimore citizens to live. So, hyper-inflation does not hit right after the coming bond market crash----it just sets inflation on steroids.
Think of all the gold buy-back commercials this decade----WE WILL BUY ANY GOLD----in pawn shops et al. That is happening because they knew FED and Wall Street policy was leading to gold as the only asset safe from these policies. Moving real estate to global investment firms was Obama's leading economic stimulus so between gold and real estate----global corporations have it all!
If Baltimore City Hall is filled with REAL progressive social democrats that simply default on that fraudulent debt O'Malley and Maryland Assembly loaded onto Baltimore----if it enforced Rule of Law and brought back homes victimized by this bond fraud and the subprime mortgage fraud and made all this consolidated real estate purchases in the city illegal---AS THEY ARE-----and enforced Equal Protection in education and housing----THE CITY OF BALTIMORE COULD WEATHER THESE ECONOMIC CRISES. WE CAN PROTECT OURSELVES---BUT NOT WITH THE GLOBAL POLS IN OFFICE.
Wall Street will literally get all US private assets----from homes to TVs----from cars to the family jewels-----all with financial policies involving NO MONEY USED TO CREATE CRISES THAT TAKES REAL ASSETS AND IT IS ALL ILLEGAL.
You see below where real estate just bought is the worst of investments in this coming economic crash with inflation. What did we just see as a priority with Obama, O'Malley, and Rawlings-Blake as hundreds of millions of dollars from the last subprime mortgage fraud went to loans to young middle-class families in Baltimore? ALL THE WHILE OBAMA, O'MALLEY, AND RAWLINGS-BLAKE KNEW THESE WOULD DEFAULT AS WITH THE SUBPRIME MORTGAGE LOANS! These are real criminals folks.
Is Real Estate a Good Hedge Against Hyperinflation?
AS THE MARKETS CONTINUE BUCKING WILDLY, and the fed slashing rates with more cuts to come, we can expect more volatility with our currency. The U.S. will likely spin into a long era of high inflation. The coming years will look like the 1970s. There is also a good risk of hyperinflation, which is a particularly severe bout of high inflation. Thus, the vital question for every investor is how to hedge, or protect, your wealth against inflation. Some, especially realtors, urge to hedge this risk with real estate. So should we really hedge with real estate?
To answer this, we need to consider two closely linked topics. First, what is an inflation hedge? Second, what makes a good inflation hedge? The first answer is simple. An inflation hedge is an asset that loses little value in periods of rising prices. Thus, it holds its value and purchasing power during inflation. This also applies to hyperinflation. An investor expecting inflation will buy this asset to hedge against inflation.
The answer to the second question requires understanding of the two basic types of assets: real assets and financial assets. Real assets have intrinsic value. They have value of their own. People value them for their direct or indirect usefulness. Examples include books, TVs, cars, wheat, gold, real estate, land, etc.
Financial assets, on the other hand, are a claim on the income or wealth of a firm, family or the government. Their typical form is a certificate or a receipt. Examples include paper money, stocks, bonds, mortgages and exchange traded funds. All money market and capital market instruments serve as examples.
In general, real assets hedge better than paper assets. By definition, real assets have a value of their own. Inflation does not erode their value. Thus, any real asset can be an inflation hedge. It follows that real estate is also a hedge, but it’s not the best.
Good hedges have a few key properties. We mention here only four. One key property of a hedge is that it holds its value. It should lose little value over time. Cars and eggs lose value over time. Land, silver and wine do not.
Another key property is marketability. This means that it is easy to sell. Other people will easily take it for payment. Hence, it is good for barter. Chairs and clothes do not sell. Corn and gold do.
A third key property is divisibility. This means that the asset splits into smaller parts without a loss of value. Houses, cars and cows are not divisible. Rice, wine, gas and gold are.
The last key property is financing. It is vital. Experts prefer to fully ignore it. Investors buy assets with either cash or credit. Cash-based hedges are good. Credit-based hedges are bad. History repeatedly shows that assets bought on credit are prone to speculation and bubbles. The hedge might be already overvalued. In this case, investors should avoid it. Credit clearly drives real estate. Moreover, real estate recently went through a wild bubble. It is grossly expensive, so a poor hedge.
The verdict is clear. Real estate is a hedge, but a poor one. It fails all of the above four tests. On the other hand, gold is a far superior hedge. Gold aces all the tests of a good hedge. That is why it is the ultimate inflation hedge. Better yet, now gold is cheap, while real estate is dear. Thus, as a hedge, gold handily beats real estate.
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Real estate bought with cash, free and clear of any debt, might be a poor hedge, but it is nevertheless a hedge. It will protect the value of your money. It is not as good a hedge as gold, but it will do the job. However, we emphasize that real estate bought on credit (with a mortgage) creates substantial new risks to the investor. It’s possible to hedge one risk by assuming another, but not recommended.
So what are the risks, or traps, associated with leveraged real estate? We mention here four. First, we could be wrong! What if prices actually fall — or you have what people commonly call a deflation? Deflation kills those who borrowed to hedge with real estate, because it makes those debts more difficult to pay. Even worse, deflation triggers recession, unemployment and falling income. Similarly to what happened during the Great Depression and to Japan during the 1990s, deflation results in massive foreclosures and business failures.
Another trap for leveraged real estate is that the possibility of another credit crunch might spook the market. We saw this in February; we saw it again in August. Real estate was no place to hide then.
The third trap concerns how investors finance real estate. An ARM, or adjustable rate mortgage, can be a risky way to finance. Rising prices drive interest rates higher. Mortgage rates may rise from a modest 3-4% to 12-15%. This actually happened during the 1970s. Thus, monthly payments could easily triple. Obvious, yet millions of Americans fell for it once again in the early 2000s. Sure, they fell driven by greed. Still, many hedgers are oblivious to this.
The last trap is by far the most insidious, for it is the hardest to see. Inflation overwhelms the borrower; it eats him alive. Before long, food prices double, gas doubles, electricity doubles; prices of all the basic needs double in short order. Yet salaries do not; they lag far behind prices. Oftentimes, as in the 1970s, salaries lag many years behind. Similarly, prices of basic goods, such as food and energy, have more than doubled since 2002. Eventually, there comes the time that after paying for your basic needs, there’s not enough left to pay the mortgage. Let’s further clarify this point with an example.
Say the borrower makes $2,000 — $1,000 goes to pay the mortgage; the other $1,000 goes to pay the bills. Rising food and gasoline prices squeeze the borrower. To pay the bills, he cuts down on consumption, but the bills overwhelm him — they cost him now $1,600. He got a raise and his salary is now $2,300, but he must still borrow some more, maybe on his credit cards, to pay the bills and keep up with the mortgage. He falls deeper and deeper into debt. The higher interest on the credit drains more and more of his income, leaving less for living expenses and the mortgage. Eventually, the consumer buckles. Only now it becomes apparent that he erred — he knew all along that he was paying off his mortgage with cheaper dollars, but he didn’t realize that the same cheap dollars made up his monthly salary. Even a mortgage with a fixed interest rate and fixed monthly payments did not help. Many fell for this in the 1970s, but few saw it coming. Worse, many seem to fall for this today, yet no one warns them. Forewarned is forearmed!
Thus, leveraged real estate is not only a poor hedge against inflation, but also a very risky one. However, if you must hedge, then hedge with gold, not with real estate.
Sincerely,
Dr. Krassimir Petrov
January 24, 2008
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I repeat-----every legitimate Wall Street analyst and Federal financial official and national labor and justice organization leadership has known where the FED policies take the US economy. I am not a rocket scientist-----I simply follow financial policy and economic journalism. So, they all know the bond market WILL CRASH because the US has too much bond debt. They know the FED will be FORCED to raise interest rates to 2-3% so Janet Yellen is not deciding anything---it was all decided by Ben Bernanke in 2009.
That is why groups called left-leaning who advocate against raising the FED interest rate are not left-leaning. I did not hear them shout years ago that all this FED policy was financial terrorism. The FED's low interest rates have only sent trillions of dollars to the rich and completely stagnated job creation in the US.
That is why a Federal government under control of corporate politicians and especially global corporate politicians always end with massive frauds and economic catastrophe. That is why small government and deregulation is bad-----history shows this over and over and over again and yet----Baltimore pols are central in moving these policies through the Maryland Assembly all for Wall Street Baltimore Development and Johns Hopkins who profit from all this.
BELOW YOU SEE A BUNCH OF PROPAGANDA JUST AS ANY THIRD WORLD STATE MEDIA WOULD PRESENT.
Many activists and economists, including the left-leaning nonprofit Center for Popular Democracy’s Fed Up
The Fed Just Inched Closer To Raising Interest Rates
The announcement alarmed left-leaning activists concerned about slow wage growth. Daniel MaransReporter, The Huffington Post
Fed Chair Janet Yellen. The Federal Reserve announced on Wednesday that it will keep interest rates at or near zero for now, but implied it would soon raise them, alarming left-leaning activists and economists concerned about stagnant wages.
The Federal Open Market Committee (FOMC), which is the central bank’s body responsible for managing key interest rates, said in a statement that its decision was based on the conclusion that interest rates of zero to 0.25 percent -- known as the “zero lower bound” -- were still needed to “support continued progress toward maximum employment and price stability.” The statement refers to the Fed’s dual mandate to both pursue full employment and keep inflation low through its control of the money supply.
The FOMC said that inflation in particular continues to remain too low to warrant an interest rate hike.
“Inflation continued to run below the Committee's longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports,” the committee said in the statement.
However, the Fed also indicated in its statement that it is optimistic about the pace of economic growth, buoying expectations of a rate hike in September when the FOMC meets next. Many analysts have been predicting that the Fed would raise rates as soon as September, or at least before the year’s end.
The FOMC statement noted that “economic activity has been expanding moderately in recent months. The labor market continued to improve, with solid job gains and declining unemployment.”
The Fed has kept the primary interest rate it controls near zero since December 2008.
Many activists and economists, including the left-leaning nonprofit Center for Popular Democracy’s Fed Up campaign, believe that the Fed has prioritized the inflation half of its dual mandate at the expense of full employment. They argue against raising rates before unemployment gets low enough for employers to raise wages. And they are especially considered that unemployment rates remain disproportionately high in communities of color.
The Fed Up campaign was pleased that the Fed did not raise rates on Wednesday, but called the lack of a rate hike a “low bar,” since it was not even expected by most observers. Instead, the campaign emphasized its frustration with the FOMC statement for ignoring signs of slack in the job market.
“The FOMC statement hails ‘solid job gains,’ but does not mention that the most recent job figures showed a slowdown in wages,” said Jordan Haedtler, deputy campaign manager for Fed Up. “The downward trend in wages is a major reason why the Fed should not raise interest rates in 2015.”
The FED had to pretend unemployment was low and inflation controlled and GDP showing a growing economy in order to install those FED policies of zero interest and QE to send trillions of dollars more to global corporations and the rich.
When they say inflation is near zero or 1%---they mean for the 1%---not main street.
Remember, social democracy has cost of living inflation figures that represent what is happening on main street so include health care, food, child care, home energy and water costs. That was how these GDP and inflation rates were figured all of last century until Reagan/Clinton installed market-based policy. Inflation on main street has been these several years 5% and higher and that is why communities are starved of cash and local economies stagnant....people not only have no money---they don't want to pay that much. Inflation is critical in a nation's economy---hyper-inflation makes goods and service rates soar. That is to where the FED policy is taking the US---to hyper-inflation because of the level of US Treasury bond debt, state and local bond debt combined with a crashing economy.
CLINTON NEO-LIBERALS AND BUSH NEO-CONS ARE WORKING WITH THE FED AND WALL STREET TO DELIBERATELY THROW THE US INTO A DEEP DEPRESSION JUST TO INSTALL GLOBAL CORPORATE GOVERNING STRUCTURES.
If we get rid of global pols and build a local, domestic economy that will reverse all this stagnation and ability of Wall Street to control our city and state economies. The pols in Maryland State Assembly and Baltimore City Hall are working for global pols installing bad policy and we need to get rid of them.
What Is The Real Inflation Rate?
October 8th, 2012 E Trade Financial
Michael Snyder:
Can we believe any of the economic numbers that the government is feeding us these days? Most of the focus recently has been on the bizarre jobs report that the government released last Friday, but the truth is that the inflation rate is a lie too. In fact, the way that the government calculates inflation has changed more than 20 times since 1978. The government is constantly looking for ways that it can make inflation appear to be even lower. According to John Williams of shadowstats.com, if inflation was measured the same way that it was back in 1990, the inflation rate would be about 5 percent right now. If inflation was measured the same way that it was back in 1980, the inflation rate would be about 9 percent right now. But instead, we are expected to believe that the inflation rate is hovering around 2 percent. Well, anyone that goes to the supermarket or fills up their vehicle with gasoline knows that prices are going up a lot faster than that. Just about everything that we buy on a regular basis is steadily becoming more expensive, and so most Americans are not buying it when government officials tell us that there is barely any inflation right now.
John Williams is not the only one doing research into these inflation numbers. According to the American Institute for Economic Research, the real rate of inflation was about 8 percent last year. The following is an excerpt from a story that was recently posted on the website of Pittsburgh’s NPR news station….
The federal government says that consumer prices rose moderately last year, but if you think the cost of everyday purchases increased more than that, then you’re probably right according to the American Institute for Economic Research (AIER).
Have you ever wondered how billionaires continue to get RICHER, while the rest of the world is struggling?
"I study billionaires for a living. To be more specific, I study how these investors generate such huge and consistent profits in the stock markets -- year-in and year-out."
The Bureau of Labor Statistics’ Consumer Price Index (CPI) was up 3.1% in 2011. However, AIER’s Everyday Price Index (EPI) indicates most Americans saw their day-to-day costs increase by 8%. That’s because the EPI excludes housing, automobiles, furniture, appliances and other items purchased occasionally.
So what are we supposed to believe?
Anyone that buys food on a regular basis knows that food prices have been going up significantly over the past couple of years, and because of the current drought things are about to get a whole lot worse.
In particular, the drought is expected to send meat prices much higher over the next 12 months. The following is from a recent Reuters article….
The worst drought to hit U.S. cropland in more than half a century could soon leave Americans reaching deeper into their pockets to fund a luxury that people in few other countries enjoy: affordable meat.
Drought-decimated fields have pushed grain prices sky high, and the rising feed costs have prompted some livestock producers to liquidate their herds. This is expected to shrink the long-term U.S. supply of meat and force up prices at the meat counter.
Some analysts are projecting that we could see food prices rise by 14 percent or more over the next year.
So you might want to start clipping more coupons, because a trip to the supermarket is about to become even more painful on the wallet.
Water bills have also been steadily rising all over the country. According to a study conducted by USA Today, some Americans have seen their water bills triple over the past 12 years….
While most Americans worry about gas and heating oil prices, water rates have surged in the past dozen years, according to a USA TODAY study of 100 municipalities. Prices at least doubled in more than a quarter of the locations and even tripled in a few.
So what is causing water prices to skyrocket?
The following are the reasons given by USA Today….
The trend toward higher bills is being driven by:
– The cost of paying off the debt on bonds municipalities issue to fund expensive repairs or upgrades on aging water systems.
– Increases in the cost of electricity, chemicals and fuel used to supply and treat water.
– Compliance with federal government clean-water mandates.
– Rising pension and health care costs for water agency workers.
– Increased security safeguards for water systems since the 9/11 terror attacks.
Unfortunately, one of the experts USA Today interviewed said that we can expect water bills to rise between 5 percent and 15 percent a year moving forward.
Of course the price of gasoline has also become absolutely outrageous. It has doubled since Barack Obama entered the White House, and the average American household spent more than $4000 on gas last year.
In California, temporary refinery problems have sent gasoline prices absolutely skyrocketing over the past week. The average price of a gallon of gasoline hit another brand new record high on Sunday. According to AAA, the average price of a gallon of regular unleaded gasoline in California is now $4.655, and at some stations it is well over $5.00 a gallon.
Sadly, some analysts are warning that the supply problems in California may last until November.
Hopefully this is a reminder to all of us of just how vulnerable our economic infrastructure can be. If temporary refinery problems can cause this kind of chaos, what would a major crisis do?
But despite all of the evidence to the contrary, Federal Reserve Chairman Ben Bernanke continues to insist that prices are very stable right now.
In fact, one of the reasons why he says that more money printing (“quantitative easing”) is okay is because we are in a “low inflation” environment at the moment.
Sadly, this is exactly the kind of delusional thinking that led to the horrible crisis in the Weimar Republic back in the 1920s. Quantitative easing did not work for the Weimar Republic, and it is not going to work for us either.
But it will cause the prices of the things that we buy on a regular basis to go up even more.
So what can we do about all of this?
Well, perhaps we can avoid paying higher prices for things by having the government give them to us for free.
That is what some Americans are doing.
There are some Americans out there that have absolutely no shame at all and will squeeze as much free stuff out of the government that they can. For example, one woman in Baltimore has actually accumulated 30 free “Obamaphones”. The video below explains how she has been able to get 30 free cell phones all paid for by the U.S. government….
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'There are some Americans out there that have absolutely no shame at all and will squeeze as much free stuff out of the government that they can. For example, one woman in Baltimore has actually accumulated 30 free “Obamaphones”. The video below explains how she has been able to get 30 free cell phones all paid for by the U.S. government….'
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As it says below, hyper-inflation comes when a nation's monetary unit is devalued. That is to where Bush and Obama has taken the dollar with tens of trillions of dollars in corporate fraud sucking all wealth out of the US economy tied to loading debt at the national, state, and local level. This is why Congress passed laws that allowed US Treasuries to be hawked worldwide like subprime mortage loans and it is why Maryland's Governor O'Malley and the Maryland Assembly loaded the state and City of Baltimore with debt----all to implode the US monetary unit----the dollar.
This coming economic crash is designed to be so deep and debt so high that they know inflation in the US will soar to never-seen levels. People will not be able to consume---ergo, they have no money or products to buy. That is how you kill an economy for a decade or more. At the same time Clinton neo-liberals and Bush neo-cons are pushing all these social non-profits that mirror the kinds of NGO operations in third world nations----the new idea of progressive becomes simply keeping people so impoverished with food, water, and shelter. That is where these global policies lead. Citizens in US cities are seeing this now as churches receive all social service funding and dole out basics of life.
THESE ARE ALL TRANS PACIFIC TRADE PACT STRUCTURES TAKING THE US TO THIRD WORLD STATUS.
Since the US Constitution does not allow all of this ------they juke the stats----and inflation is a great big JUKE.
If social democrats control city government next year 2016 when the economic crash is to come-----then those pols will stand firm with defaulting on illegal debt. If the same pols working for Wall Street are still in office---they will bring the economy down allowing all that fraud to yet again---stay with Wall Street. BALTIMORE IS GROUND ZERO FOR THIS AND WHAT THE CURRENT POLS HAVE IN STORE WILL MAKE POVERTY IN OUR COMMUNITIES LOOK LIKE CHILD'S PLAY. SEE WHY THEY ARE MILITARIZING COMMUNITY POLICING?
DEFINITION of 'Inflation'
Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.
'Inflation'
As a result of inflation, the purchasing power of a unit of currency falls. For example, if the inflation rate is 2%, then a pack of gum that costs $1 in a given year will cost $1.02 the next year. As goods and services require more money to purchase, the implicit value of that money falls.
Monetarism theorizes that inflation is related to the money supply of an economy. For example, following the Spanish conquest of the Aztec and Inca empires, massive amounts of gold and especially silver flowed into the Spanish and other European economies. Since the money supply had rapidly increased, prices spiked and the value of money fell, contributing to economic collapse.
Historical Examples of Inflation and Hyperinflation
Today, few currencies are fully backed by gold or silver. Since most world currencies are fiat money, the money supply could increase rapidly for political reasons, resulting in inflation. The most famous example is the hyperinflation that struck the German Weimar Republic in the early 1920s. The nations that had been victorious in World War I demanded reparations from Germany, which could not be paid in German paper currency, as this was of suspect value due to government borrowing. Germany attempted to print paper notes, buy foreign currency with them, and use that to pay their debts.
This policy led to the rapid devaluation of the German mark, and with it, hyperinflation.
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Keep in mind the person below is an investment analyst and speaks from Wall Street's vision, not main street. What Obama and Clinton neo-liberals did as soon as they came to office was set the stage for this coming economic crash and high debt JUST TO CREATE HYPER-INFLATION. This will kill Social Security and Medicare and all social programs under the guise of the government not having the money and costs of goods and services being too high. This is why Obama and Affordable Care Act end Medigap in Medicare in 2020====it is why Obama created myRA ---the privatized Social Security fund sent to the stock market-----and it is why Affordable Care Act is building a wellness preventative care for all. It will be the equivalent of health care dispensed in third world clinics. All of these economists and financial journalists KNEW IN 2009 when the FED and Congress moved to these financial policies what the goal was.....I said 5 years ago just what these journals are saying today......it was planned. They try to pretend all this had to be done but Obama came to office with Rule of Law requiring he recover the tens of trillions of dollars stolen in fraud which would have reversed all this debt. THAT WAS WHAT THE FED AND CONGRESS WERE SUPPOSED TO DO.
When you are creating a third world society where 90% are impoverished you must control the masses with just enough food, water, shelter while keeping their lives chaotic----that is what Baltimore City Hall has done for decades. Third world poverty is worse. Think about the move to privatize water and waste-----privatize public transportation----and hand most real estate to global investment firms who will act as slum landlords and you have the policies Maryland Assembly and Baltimore City Hall installed these several years. That is to where they are working.
From The Economist-------
Hyperinflation Fearing the worst
Mar 14th 2013, 20:33 by R.A. | WASHINGTON
'The full story in the event of a hyperinflationary catastrophe is far too complex to predict, but it's fun to think about how it might go. Here's my very rudimentary sense of things. Why would America, if "pressed for cash", start financing its spending through rapid inflation? Probably because the cost of issuing new debt (currently a relatively cheap option) had become too dear. But then the Treasury's credit rating would tank even further, and the cost of borrowing would become really prohibitive, forcing the government to finance new spending mainly through new revenue. But runaway inflation would quickly kill the real value of any taxes collected, no matter how high rates are jacked up. So, assuming Americans won't contemplate anything like selling the Grand Canyon to a consortium of sheiks (in euros, or gold-pressed latinum), it would become simply impossible to finance Social Security and Medicare at current real levels. There is, sorry to say, no legal entitlement to social-insurance transfers, so the government would violate no law by backing out of its promises. Should the hallowed institutions of the American state somehow manage to survive a hyperinflationary cataclysm, presumably Congress would simply scrap the inflation-indexing of Social Security, and/or continue to mail cheques that America's seniors and health-care providers will find good mainly for kindling, or a laugh. That's how the safety net unravels. There's no way to continue to pay for it, so it stops being paid for, and so it goes away.'
Make no mistake----this was all planned a few decades ago and it is meant to lead to the global corporate tribunal rule with a new currency that will be standardized through all nations tied to these Trans Atlantic/Trans Pacific Trade agreements. See why international justice activists call these trade deals less about trade and more about re-structuring government?
Apr 28, 2014 @ 06:43 PM 31,337 views
Is U.S. Hyperinflation Imminent?
Mike Patton ,
Contributor Forbes
I provide analysis on the economy, investing and financial planning.
Introduction
According to renowned economist Marc Faber, hyperinflation in the U.S. is a certainty within the next 10 years. Mr. Faber has correctly predicted some of the most important financial events in the modern era including, the stock market crash of 1987; the rise of oil, precious metals and other assets in the 2000′s; and on Fox News in February 2007, he said a U.S. stock market correction was imminent. The market peaked six months later. Is Mr. Faber correct this time? Is U.S. hyperinflation imminent in the next 10 years?
In this article, we will discuss the effects of inflation and hyperinflation, consider an example of hyperinflation and discuss the possibility of this occurring in the U.S. One thing is certain, if hyperinflation does materialize, it would be devastating to our economy. Let’s begin with inflation.
Inflation
The Fed is the primary catalyst for inflation. Moreover, it actually attempts to create a low to moderate level of inflation. Why does the Fed want inflation? Because inflation is a signal of a growing economy. Additionally, if inflation is too high, the economy will suffer. If it’s too low, deflation becomes a threat. Therefore, low to moderate inflation is the goal.
Inflation may be defined as “A general rise in prices” and occurs when demand outpaces supply..............
Hyperinflation
Hyperinflation is much less common than inflation. Unfortunately, there is no specific numerical definition for hyperinflation. However, there is some consensus. For example, a few economists suggest that an inflation rate of 50% per month would constitute hyperinflation. Using this rate, a junior cheeseburger deluxe at Wendy’s, which costs about one dollar today, would cost $130 a year from now and nearly $17,000 in 2 years. Needless to say, hyperinflation is a destructive force which is best avoided. Could we actually see hyperinflation in America? Has hyperinflation occurred frequently?
The Nineteenth century was the century of deflation, whereas the Twentieth century was the period of inflation. Hyperinflation occurred as many as 55 times over the past century. Notable countries include: China, Russia, Brazil, Germany, Argentina, Poland, Chile and others. Could it happen in America? Many experts say no.
Because the U.S. has a very proactive Fed, and there’s such a large amount of historical data from countries that have experienced hyperinflation, we should be able to learn from the past mistakes of others and avoid it. However, since inflation and hyperinflation are triggered by an excess of currency, which is not backed by gold or any other substance of value (i.e.; called “fiat” currency), there is no limit to the amount of dollars the U.S. can print (though we don’t print that much actual paper these days). Therefore, we need to briefly discuss the gold standard.
Gold Standard
There are a few different types of gold standards. However, in the interest of brevity, we’ll only skim the surface on this subject. Generally speaking, when a country adopts a gold standard, the amount of currency it may issue is limited by the amount of gold it holds in reserve. During times of war, a country’s need for capital increases, so abandoning the gold standard allows a country to expand its money supply to finance the war. This has been the typical path for countries during wartime. Today, there are no countries on the gold standard. In the absence of this, again there is no limit to amount of currency a country may print. This can be problematic, especially in smaller, developing nations. The absence of a gold standard was a key factor in one of the worst cases of hyperinflation in history. I’m referring to Germany following WWI.
Germany’s Hyperinflation After WWI
When WWI began, Germany abandoned its gold standard in order to print more currency to finance the war. When the war ended, Germany admitted they had started the war and agreed to pay reparations to various countries, with France being the major beneficiary. The details were included in the Treaty of Versailles, the document which formally ended the war. The amount Germany was required to pay was enormous. In fact, the total was close to 226 billion gold marks (approx $846 billion in current U.S. Dollars). After it became evident that Germany was unable to meet this demand, in 1921 the burden was reduced to 132 billion marks, the equivalent of $442 billion in today’s dollars.
Due to the war, Germany’s economy was in shambles. Moreover, with many of its factories in ruin, its production capacity was severely reduced. Hence, even the reduction to 132 billion marks was well beyond its ability to repay. However, to help assure compliance, France and Belgium deployed troops to Germany from 1923 to 1925. During this period, Germany’s central bank, the Reichsbank, issued a massive amounts of marks to repay its debt. However, because Germany had abandoned the gold standard, its currency was backed only by the full faith and credit of its government. Between this monetary explosion and the loss of confidence in its currency, the German mark experienced a massive decrease in value, which resulted in severe hyperinflation. To better grasp the situation at that time, prices doubled during the five years from 1914 to 1919. They doubled again in only five months in 1922. In 1914, the ratio between the mark and the U.S. Dollar was 4.2 German Marks to one dollar. By 1923, it took 4.2 trillion marks to equal one dollar. The German currency had totally collapsed. This also contributed to a brief, but sharp recession in the U.S. (August 1918 to March 1919).
Who Benefits And Who Suffers From Inflation And Hyperinflation?
The beneficiaries of high inflation include any individual or entity who has borrowed money at a fixed rate. High inflation also benefits investors who own commodities, and businesses that derive a significant portion of revenue from exports. Who loses with inflation? First, the overall economy suffers. Specifically, consumers lose purchasing power and their standard of living erodes. Lenders are also hurt as are those who need to borrow. The latter group suffers because lenders raise their interest rates to hedge against inflation. In short, money becomes much more expensive. Finally, import-oriented businesses struggle when inflation is high.
Hyperinflation, on the other hand, hurts almost everyone. It decimates the middle class. It can cause massive bank failures, especially banks with large amounts of outstanding fixed-rate loans. And, although borrowers who have a fixed rate loan do benefit, because prices on everything else are increasing so rapidly, any benefit from the loans is erased by the extreme cost of goods and services. There really are no winners with hyperinflation.
The Potential for Hyperinflation in the U.S. Today
Could the U.S. experience hyperinflation? If you look at the amount of the Feds monetary expansion since 2008, then you would likely conclude yes. For example, when the financial crisis began, the Fed’s balance sheet was around $800 billion. Today, it is over $4 trillion. That’s a tremendous increase. However, it’s important to note that the majority of this new money is sitting at the Federal Reserve and has not actually entered the economy. If this were not the case, if all this capital were allowed to enter the economy, inflation would be very high. Perhaps not hyperinflation, but I believe it would be much higher than it was during the late 1970s.
Why would the Fed flood the market with so much money if it wasn’t intended to enter the economy? Because during the 2008 crisis, not counting the banks that did go out of business, a large number of other banks nearly collapsed. The actions of the Fed were nothing short of brilliant. They created a glut of new money through T.A.R.P., QEII, Operation Twist and QEIII. Then they offered to pay interest to banks on their reserves, which from a financial standpoint made it profitable to banks to leave large amounts on reserve. Hence, with the majority of this new money in reserve, bank balance sheets have been greatly strengthened. It’s important to note that the financial sector must be strong if the economy is to thrive. The Feds challenge will come when it’s time to unwind it all.
With over $4.2 trillion on the Fed’s balance sheet ($3.8 trillion more than at the beginning of the crisis), when demand finally increases and lenders need more capital to lend, or when the Fed decides not to pay interest on bank reserves, the Fed will have to reverse course and, instead of buying bonds (which removes cash from its balance sheet and increases the money supply), it will be selling bonds (removing cash from the economy, reducing the money supply). This is where things could get dicey. This is also why the Fed would like to end QEIII as soon as possible. Because the longer it continues, the more money there will be to remove and this could cause a severe dislocation in the financial markets. In other words, when the Fed ceases QEIII, the stock market could decline along with bond prices.
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Those knowing economics know that the coming bond market crash will take stocks as well and the only safe place will be gold. Warren Buffett has been telling people to stay in the market while reports have it that Buffett has a dozen Swiss bank vaults filled with gold. What is interesting if you Google this article to see the graphs---Europe and US have the least action in gold purchases while Asia has the most. Now, people in the US have been shouting to get rid of the FED because of this criminal cartel operation----GO BACK TO THE GOLD STANDARD. Well, if you are a FED wanting to stay in business---you don't want a lot of gold hanging around. I read that the largest purchases of gold are in China and India---seems Indian women love gold. Wonder if these purchases are simply global investment firms? We know they are protecting themselves from this crash with gold. The other place you see gold are Central Banks in third world nations some tied to Trans Pacific Trade Pact----gathering gold for the global corporate tribunal perhaps. You see very little gold being bought in the US and Europe. Notice how people in the know entered the gold market in early 2000s and got a huge payoff-----think that is where these Clinton neo-liberal and Bush neo-con pols are hiding their wealth?
When this hyper-inflation hits and our currency THE DOLLAR collapses----gold will be the only thing that holds value. This is how you wipe out all of America's wealth and send it to the world's rich as gold. If you watched Dr Seuss's 5,000 Fingers of Dr. T------Dr T has all the money and everyone else work with BITCOINS and Baltimore Bucks.
Hyper-inflation kills value on all assets.
People will be forced out of mortgage loans as with those young middle-class moving into Baltimore even as HARP and Baltimore housing non-profits are putting people back into homes with the last subprime mortgage fraud. All that money and the houses will go to Wall Street investment firms.
This is how you open cities like Baltimore up to having a population of the world's rich----with FOXCONN factories for everyone else!
This is as well how pols and players in Baltimore Development capture will lose all as well----
1,600 Reasons to Buy Gold Now
By Peter Krauth, Resource Specialist, Money Morning • January 14, 2014
Peter KrauthGold fell by 28% in 2013.
That's a huge reversal of a decade-plus trend.
Between 2001 and 2012, gold managed positive gains every single year, a track record unmatched by any major asset.
The precious metal went from a low of $255 in April 2001 to a high of $1,900 in September 2011, for a peak return of 745%.
Since then, gold has given back 35% from its $1,900 high, leading many to call the end of the gold bull market.
But is it really finished?
By looking at history and numerous indicators, I've found a different story.
One that will jumpstart your 2014 profits…
Simple Economics Guarantees a Gold RallyFundamental drivers for gold are so numerous I hardly know where to start.
Unprecedented quantitative easing (money printing) and ultra-low interest rate policies imposed by central banks – especially in the United States, Japan, Europe and China – are in the news every day.
Here are several others that aren't grabbing headlines yet, but shouldn't be ignored.
Shuttering Operations: It's no secret that falling gold prices have made numerous mines unprofitable. That's pressured management at those mining companies to rationalize their operations. Producing gold at a loss doesn't make for happy shareholders.
So mines are being put on care and maintenance, seriously cutting into gold production worldwide. Evy Hambro, who manages BlackRock Inc.'s $8 billion World Mining Fund, said gold supply could fall "quite rapidly" as producers restrict output at higher-cost mines.
Fewer Discoveries: Lower gold prices have meant, of course, lower profits. So, miners are cutting back
on expenses that aren't immediately accretive, affecting the development of mine expansions, new projects, and exploration. That's inevitably going to mean fewer ounces available to mine in the near and medium terms than would have been the case without this gold price rout. There were half as many drills looking for precious metals in the first 9 months of 2013 versus 2012.
High-Grading: In response to lower prices, gold miners have resorted to mining higher-grade ores while leaving behind low-grade ores. That allows them to be more profitable on ounces produced this way, but it means much higher prices will be needed to go back to the lower-grade ores. In some cases, these may never even be mined out at all.
Physical Asian Buying: Asia loves gold, and that trend continues. In the first nine months of 2013, India and China together had bought 1,500 tonnes (1,653 short tons) of gold, easily dwarfing Western purchases. When Indian, Chinese, and central bank buying are combined, they account for nearly the entire annual world gold production.
Overall, gold fundamentals have not only remained intact, they've continued to improve. So it's easy to project them to push higher gold prices in the future. They've got the laws of economics behind them…
Gold Hits the Same Bottom – TwiceAn important part of technical analysis involves analyzing price action. And gold's had plenty of that over the past year.
Most significant was the massive price drop in mid-April when a black swan crash-landed on the gold market.
Over just two trading days, gold futures prices shed 13%, falling from $1,575 to $1,375. That $200 cliff dive was the largest two-day drop in 33 years.
By late June the price had fallen further still, to $1,180 per ounce. So far, that's been the low.
Recent news of the Fed's QE tapering again weighed on gold in late December, causing it to momentarily drop to $1,182, then immediately reverse upward by $32.
While it's still early to say for sure, that may have been a "double bottom" – dropping twice to the same level without moving further down – hit in June then in December. This increases the chances that the $1,180 level is the low for gold prices in this drawn-out consolidation process.
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This was written in 2008 so it states 'if' with hyperinflation' and not when. Economists place a 10 year window on hyperinflation since that will be the point the US government has gone through wiping out all Federal public Trusts and programs through austerity-----people will lose the last of homeownership unless rich----and building of FOXCONN factories in cities like Baltimore over ten years will have a place for Baltimore citizens to live. So, hyper-inflation does not hit right after the coming bond market crash----it just sets inflation on steroids.
Think of all the gold buy-back commercials this decade----WE WILL BUY ANY GOLD----in pawn shops et al. That is happening because they knew FED and Wall Street policy was leading to gold as the only asset safe from these policies. Moving real estate to global investment firms was Obama's leading economic stimulus so between gold and real estate----global corporations have it all!
If Baltimore City Hall is filled with REAL progressive social democrats that simply default on that fraudulent debt O'Malley and Maryland Assembly loaded onto Baltimore----if it enforced Rule of Law and brought back homes victimized by this bond fraud and the subprime mortgage fraud and made all this consolidated real estate purchases in the city illegal---AS THEY ARE-----and enforced Equal Protection in education and housing----THE CITY OF BALTIMORE COULD WEATHER THESE ECONOMIC CRISES. WE CAN PROTECT OURSELVES---BUT NOT WITH THE GLOBAL POLS IN OFFICE.
Wall Street will literally get all US private assets----from homes to TVs----from cars to the family jewels-----all with financial policies involving NO MONEY USED TO CREATE CRISES THAT TAKES REAL ASSETS AND IT IS ALL ILLEGAL.
You see below where real estate just bought is the worst of investments in this coming economic crash with inflation. What did we just see as a priority with Obama, O'Malley, and Rawlings-Blake as hundreds of millions of dollars from the last subprime mortgage fraud went to loans to young middle-class families in Baltimore? ALL THE WHILE OBAMA, O'MALLEY, AND RAWLINGS-BLAKE KNEW THESE WOULD DEFAULT AS WITH THE SUBPRIME MORTGAGE LOANS! These are real criminals folks.
Is Real Estate a Good Hedge Against Hyperinflation?
AS THE MARKETS CONTINUE BUCKING WILDLY, and the fed slashing rates with more cuts to come, we can expect more volatility with our currency. The U.S. will likely spin into a long era of high inflation. The coming years will look like the 1970s. There is also a good risk of hyperinflation, which is a particularly severe bout of high inflation. Thus, the vital question for every investor is how to hedge, or protect, your wealth against inflation. Some, especially realtors, urge to hedge this risk with real estate. So should we really hedge with real estate?
To answer this, we need to consider two closely linked topics. First, what is an inflation hedge? Second, what makes a good inflation hedge? The first answer is simple. An inflation hedge is an asset that loses little value in periods of rising prices. Thus, it holds its value and purchasing power during inflation. This also applies to hyperinflation. An investor expecting inflation will buy this asset to hedge against inflation.
The answer to the second question requires understanding of the two basic types of assets: real assets and financial assets. Real assets have intrinsic value. They have value of their own. People value them for their direct or indirect usefulness. Examples include books, TVs, cars, wheat, gold, real estate, land, etc.
Financial assets, on the other hand, are a claim on the income or wealth of a firm, family or the government. Their typical form is a certificate or a receipt. Examples include paper money, stocks, bonds, mortgages and exchange traded funds. All money market and capital market instruments serve as examples.
In general, real assets hedge better than paper assets. By definition, real assets have a value of their own. Inflation does not erode their value. Thus, any real asset can be an inflation hedge. It follows that real estate is also a hedge, but it’s not the best.
Good hedges have a few key properties. We mention here only four. One key property of a hedge is that it holds its value. It should lose little value over time. Cars and eggs lose value over time. Land, silver and wine do not.
Another key property is marketability. This means that it is easy to sell. Other people will easily take it for payment. Hence, it is good for barter. Chairs and clothes do not sell. Corn and gold do.
A third key property is divisibility. This means that the asset splits into smaller parts without a loss of value. Houses, cars and cows are not divisible. Rice, wine, gas and gold are.
The last key property is financing. It is vital. Experts prefer to fully ignore it. Investors buy assets with either cash or credit. Cash-based hedges are good. Credit-based hedges are bad. History repeatedly shows that assets bought on credit are prone to speculation and bubbles. The hedge might be already overvalued. In this case, investors should avoid it. Credit clearly drives real estate. Moreover, real estate recently went through a wild bubble. It is grossly expensive, so a poor hedge.
The verdict is clear. Real estate is a hedge, but a poor one. It fails all of the above four tests. On the other hand, gold is a far superior hedge. Gold aces all the tests of a good hedge. That is why it is the ultimate inflation hedge. Better yet, now gold is cheap, while real estate is dear. Thus, as a hedge, gold handily beats real estate.
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Real estate bought with cash, free and clear of any debt, might be a poor hedge, but it is nevertheless a hedge. It will protect the value of your money. It is not as good a hedge as gold, but it will do the job. However, we emphasize that real estate bought on credit (with a mortgage) creates substantial new risks to the investor. It’s possible to hedge one risk by assuming another, but not recommended.
So what are the risks, or traps, associated with leveraged real estate? We mention here four. First, we could be wrong! What if prices actually fall — or you have what people commonly call a deflation? Deflation kills those who borrowed to hedge with real estate, because it makes those debts more difficult to pay. Even worse, deflation triggers recession, unemployment and falling income. Similarly to what happened during the Great Depression and to Japan during the 1990s, deflation results in massive foreclosures and business failures.
Another trap for leveraged real estate is that the possibility of another credit crunch might spook the market. We saw this in February; we saw it again in August. Real estate was no place to hide then.
The third trap concerns how investors finance real estate. An ARM, or adjustable rate mortgage, can be a risky way to finance. Rising prices drive interest rates higher. Mortgage rates may rise from a modest 3-4% to 12-15%. This actually happened during the 1970s. Thus, monthly payments could easily triple. Obvious, yet millions of Americans fell for it once again in the early 2000s. Sure, they fell driven by greed. Still, many hedgers are oblivious to this.
The last trap is by far the most insidious, for it is the hardest to see. Inflation overwhelms the borrower; it eats him alive. Before long, food prices double, gas doubles, electricity doubles; prices of all the basic needs double in short order. Yet salaries do not; they lag far behind prices. Oftentimes, as in the 1970s, salaries lag many years behind. Similarly, prices of basic goods, such as food and energy, have more than doubled since 2002. Eventually, there comes the time that after paying for your basic needs, there’s not enough left to pay the mortgage. Let’s further clarify this point with an example.
Say the borrower makes $2,000 — $1,000 goes to pay the mortgage; the other $1,000 goes to pay the bills. Rising food and gasoline prices squeeze the borrower. To pay the bills, he cuts down on consumption, but the bills overwhelm him — they cost him now $1,600. He got a raise and his salary is now $2,300, but he must still borrow some more, maybe on his credit cards, to pay the bills and keep up with the mortgage. He falls deeper and deeper into debt. The higher interest on the credit drains more and more of his income, leaving less for living expenses and the mortgage. Eventually, the consumer buckles. Only now it becomes apparent that he erred — he knew all along that he was paying off his mortgage with cheaper dollars, but he didn’t realize that the same cheap dollars made up his monthly salary. Even a mortgage with a fixed interest rate and fixed monthly payments did not help. Many fell for this in the 1970s, but few saw it coming. Worse, many seem to fall for this today, yet no one warns them. Forewarned is forearmed!
Thus, leveraged real estate is not only a poor hedge against inflation, but also a very risky one. However, if you must hedge, then hedge with gold, not with real estate.
Sincerely,
Dr. Krassimir Petrov
January 24, 2008
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I repeat-----every legitimate Wall Street analyst and Federal financial official and national labor and justice organization leadership has known where the FED policies take the US economy. I am not a rocket scientist-----I simply follow financial policy and economic journalism. So, they all know the bond market WILL CRASH because the US has too much bond debt. They know the FED will be FORCED to raise interest rates to 2-3% so Janet Yellen is not deciding anything---it was all decided by Ben Bernanke in 2009.
That is why groups called left-leaning who advocate against raising the FED interest rate are not left-leaning. I did not hear them shout years ago that all this FED policy was financial terrorism. The FED's low interest rates have only sent trillions of dollars to the rich and completely stagnated job creation in the US.
That is why a Federal government under control of corporate politicians and especially global corporate politicians always end with massive frauds and economic catastrophe. That is why small government and deregulation is bad-----history shows this over and over and over again and yet----Baltimore pols are central in moving these policies through the Maryland Assembly all for Wall Street Baltimore Development and Johns Hopkins who profit from all this.
BELOW YOU SEE A BUNCH OF PROPAGANDA JUST AS ANY THIRD WORLD STATE MEDIA WOULD PRESENT.
Many activists and economists, including the left-leaning nonprofit Center for Popular Democracy’s Fed Up
The Fed Just Inched Closer To Raising Interest Rates
The announcement alarmed left-leaning activists concerned about slow wage growth. Daniel MaransReporter, The Huffington Post
Fed Chair Janet Yellen. The Federal Reserve announced on Wednesday that it will keep interest rates at or near zero for now, but implied it would soon raise them, alarming left-leaning activists and economists concerned about stagnant wages.
The Federal Open Market Committee (FOMC), which is the central bank’s body responsible for managing key interest rates, said in a statement that its decision was based on the conclusion that interest rates of zero to 0.25 percent -- known as the “zero lower bound” -- were still needed to “support continued progress toward maximum employment and price stability.” The statement refers to the Fed’s dual mandate to both pursue full employment and keep inflation low through its control of the money supply.
The FOMC said that inflation in particular continues to remain too low to warrant an interest rate hike.
“Inflation continued to run below the Committee's longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports,” the committee said in the statement.
However, the Fed also indicated in its statement that it is optimistic about the pace of economic growth, buoying expectations of a rate hike in September when the FOMC meets next. Many analysts have been predicting that the Fed would raise rates as soon as September, or at least before the year’s end.
The FOMC statement noted that “economic activity has been expanding moderately in recent months. The labor market continued to improve, with solid job gains and declining unemployment.”
The Fed has kept the primary interest rate it controls near zero since December 2008.
Many activists and economists, including the left-leaning nonprofit Center for Popular Democracy’s Fed Up campaign, believe that the Fed has prioritized the inflation half of its dual mandate at the expense of full employment. They argue against raising rates before unemployment gets low enough for employers to raise wages. And they are especially considered that unemployment rates remain disproportionately high in communities of color.
The Fed Up campaign was pleased that the Fed did not raise rates on Wednesday, but called the lack of a rate hike a “low bar,” since it was not even expected by most observers. Instead, the campaign emphasized its frustration with the FOMC statement for ignoring signs of slack in the job market.
“The FOMC statement hails ‘solid job gains,’ but does not mention that the most recent job figures showed a slowdown in wages,” said Jordan Haedtler, deputy campaign manager for Fed Up. “The downward trend in wages is a major reason why the Fed should not raise interest rates in 2015.”
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