Archive for hyper inflation
Hyper Inflation Is The Recovery Plan
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By Peter Costa
Since 2008 the US economy has been hit with a wrecking ball. It started with sub prime mortgages faltering and has escalated into a credit crisis. From toxic mortgage debt to the banking crisis unfolding, the US economy has been in need of surplus capital. In the last 2 years with the combined private bailouts and stimulus packages we have spent well over $2 trillion trying to keep the economy afloat. As each year passes the need for capital is only compounding. Our deficit is at an all time high and projections for the future seem grim. As new budget plans are purposed for 2010 we can start to gauge where the year will take us and how close we are to hyper inflation.
With only 2 months into the new decade the US government has been working rigorously trying to revive the US economy. A purposed $3.8 trillion budget plan is floating around congress and is grossly inflated from years passed. Behind all the fancy wording and political jargon we all know that the rescue efforts are nothing short of continuing to pump money into the system in hopes of recovery. This plan is similar to an individual applying for more credit cards to cover the current outstanding ones or a Ponzi scheme bringing in more money to pay off old debts. Like the later everything has its breaking point and sooner or later we will hit that point. With unemployment numbers at an all time high this has been the main focus of the new budget plan. If the US government gets their way we could see a $3.8 trillion budget plan passed this year. Why is this alarming? It does not take a mathematician or renowned economist to know that this is going to lead to hyper inflation. You cannot print up $3.8 trillion and avoid devaluation of the dollar it is next to impossible. We have lost confidence with our major lenders such as China and have seen many countries begin to abandon the greenback.
China has lost such confidence in the US dollar that for 5 months now they have stopped purchasing US treasuries. On Tuesday, 16th February, the US Department of the Treasury released Treasury International Capital [TIC] data for December 2009. It revealed that China sold over $34 billion US Treasuries in December 2009. With this recent news China is no longer the largest holder of US debt they have passed the title to Japan. “For over a decade now China has increased their US Treasury holdings by 8 fold, it is extremely alarming that they are now dumping them and paints a picture of where our economy is heading” stated Ronald Fricke president of Regal Assets. A tsunami of Treasury auctions are set to take place this year, amounting to a total $2 trillion to fund this year’s budget deficit. The Fed is likely to monetize a sizable portion of this debt due to the difficulty the Treasury will face off-loading such a large quantity onto the market. This would have been an easy feat in the 90s or the first half of the last decade, but with the debt ceiling now in excess of $14 trillion, the market will soon realize that buying US government debt is not “risk free” with a default likely. If we are not able to unload the required Treasuries on foreign countries, citizens of the United States may be the next target. There is a bill that is currently being passed around congress that is looking to nationalize retirement plans where if approved will make it mandatory for individuals to place a portion of their retirement holdings in US Treasuries. This will be a devastating blow to the individuals that have already incurred massive losses on their retirement plans and could cause major chaos. As lofty of a bill as it may be I am appalled that forcing Treasuries on US citizens would even be an option.
Based on what has been unfolding since 2008 I am not saying that gold and silver are going to do well I am insisting that they are going to do well. Hyper inflation is the next logical step in our recovery plan and for the people pulling the strings I do not feel that they have even taken into account the devastation it will cause. More importantly I am convinced that who ever is pulling the strings does not care about the US or the dollar. The more I research the more I feel that this may be a carefully orchestrated collapse. In any event we need to wake up and turn our useless pieces of paper into honest currency that cannot be manipulated by government. It is time for us to preserve what we have worked so hard for. Social Security? Not likely. IRA and 401Ks? Not all of it. For centuries royalty and the elite have been preserving their wealth in precious metals. It is time to follow suite before you get left with the short end of the stick. No one else is going to get our back, it is literally left up to us to take action.
Fiat Money Paving The Way For Hyper Inflation
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By Peter Costa
With a new decade upon us one cannot help but ponder the direction we are heading in as a whole. It seems like we are in a relentless circle of repetition doomed to repeat the same mistakes our previous generations fought to overcome. As we step into this new day and age we need to open our eyes to the reality of things versus the illusions we have been made to believe. When you turn on the television today you are inundated with the constant smoke and mirrors used to shield us from the truth. Allow me to remove the smoke and mirrors from you and share the reality of our economy as we step into this new decade.
Last year we saw many events unfold that have crippled our economy and contributed to the unavoidable reality we will all soon face which is inflation. Inflation has been caused by fiat money and is an underestimated effect that has resulted in the death of many nations which in more recent times includes the Wymore Republic and Former Soviet Union. It is the catalyst for economic uncertainty and if not handled correctly could render a currency useless launching a nation into complete financial meltdown. Here are the top 3 events unfolding in the US that are leading us down the path of hyper inflation:
1. The Banking Crisis
The banking crisis alone is a burdensome situation that could ignite hyper inflation in the coming times. Since 2008 we have had 195 banks file for bankruptcy. In 2009 over 140 banks failed and included the 6th and 10th largest bank failures in the United States history abducting billions in assets and drying up the FDIC insurance fund. FDIC is down to less than $10 billion in assets promising to insure over $6.2 trillion in deposits. How deep does this thing go? Well let’s just say that Neil Borofsky who is heading up TARP said the banking crisis alone could cost us $27.3 trillion to fix. Ronald Fricke president of Regal Assets says this number is more than the cost of all the wars the US has ever fought combined and is the most that has ever been spent on a single effort in American history which amounts to $80,000 for every US citizen. To make matters worse last year Citigroup reported a second quarterly profit of 4.3 billion but the figure included the $6.7 billion after tax profit from its sale of Smith Barney. If you exclude this onetime event the bank lost 3.4 billion. Similarly BofA showed a profit of $2.42 billion but this figure included the $5.3 billion from its sale of shares of China Construction Bank without this BofA would have reported a massive loss. To make matters worse over 515 banks are on the troubled list and could face bankruptcy this year as well as 35 ongoing criminal and civil investigations of suspected account, securities and mortgage fraud is taking place. You would think with this kind of pressure the banks would be walking on egg shells… that is far from the case. In lieu of such a horrendous year the banks decided to hand out over $587 billion in bonuses to their executives. Is this AIG all over again? These bonuses alone could have paid off every state in the US debt including California or saved mortgages for another 2 years. Needless to say the government has applied pressure to the banks in revealing where the money went and have been struggling to receive answers. The banks know that this fiat money is doomed to fail and according to them there is nothing in the constitution that requires them to reveal this information.
2. Rising Unemployment
It is no surprise that unemployment is at the highest it has been in over 26 years. From September to December 2009 over 538,000 jobs were lost taking unemployment to over 10% nationwide. We all know that 10% is the public number and the reality of the situation is more like 17%. With over 1 million Americans on unemployment it will not be long before they start getting cut off. In fact this year alone we could see as many as 200,000 Americans cut off from unemployment because their pay period has come to an end. This event will muscle thousands of unemployed citizens to cash out of their retirement plans thus pulling money out of the stock market forcing another major drop in the markets. To make matters worse a slew of mortgages are about to renew on houses that are already worth half their value. Mix that in with the increasing unemployment numbers and you get a surge of individuals abandoning their properties and mortgages triggering another wave of the mortgage crisis guaranteeing hyper inflation. The current debt the mortgage crisis is sitting at is around $1.75 trillion.
3. Unaccounted For Bailout Money
Since 2008 copious institutions and companies have been lining up to receive government bailout fiat money. We have seen AIG, Chrysler, GM, Ford and major banks come to Uncle Sam in an attempt to keep things afloat. The result has lead to multiple stimulus packages including a $787 billion package followed by a $1 trillion package. Where does that lead us to today? Over 90% of the money being unaccounted for! The government has been scrambling to figure out who has what and has spent close to $25 million in an attempt to receive answers. We all know that the $152.8 billion given to AIG was used to hand out over inflated bonuses to their executive and treat themselves to lavish days out on the town including a day at the St. Regis Hotel and a hunting trip in Europe. With the banks we know over $537 billion has been handed out in executive bonuses and substantial amounts sent oversees to various institutions in an attempt to invest money in foreign entities and recover their losses. It safe to say that over $600 billion has been dedicated to compensating the lousy executives that helped create this problem in the first place. The already $1.8 trillion that has been dedicated to placing scotch tape and band aids on the holes of the economy is only going fend off the inevitable for so long.
To summarize everything, with the banking crisis, rising unemployment and government bailouts alone we are looking at well over $30 trillion just to keep things afloat not even chipping away at our deficit as a whole. This is the catalyst for an unavoidable expansion of the money supply which will result in hyper inflation. It is time to look back at all the civilizations and nations that have tried to use fiat money as a monetary exchange and you will see that it has never worked. Having a useless paper currency backed by absolutely nothing is the primary reason why so many great nations have failed including Rome. In the history of our world not one nation has made fiat currency work and the US will face a similar fate. With gold prices where they are today you could not be in a better time to transfer your wealth into the only honest money the world has ever had.
Fiat Currency Is Doomed To Fail
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By Peter Costa
Gold bears are sitting in their glory as gold takes the much anticipated correction. It amuses me how gold has been such a proven asset for over 5000 years and the second it has a correction people start to abandon ship. I am a gold bug and proud to admit it. I cease to believe the illusionary dollar recovery and have no doubt in my mind that inflation is about to rear its ugly head. The problem with most gold investors is that they see gold as an investment rather than an asset. They look at gold and try to turn profit on its volatility not even considering that it is an asset more than anything. Gold is a precious asset and only those who appreciate and understand this are going to benefit from the preternatural climb it is about to have.
I am from the school of truth rather than fiction. The world goes in cycles and history repeats itself. Fiat monetary systems have never worked in the history of the world. What most established countries are on right now is a completely fiat system where the majority of their currency is backed by absolutely nothing and the limits to creating money are nonexistent. All across the globe you can smell the fresh crisp bills coming off the printing press of each and every country as a result of current economic events most especially in the United States. Hereon is where the problem lies for any kind of economic recovery. We can put as many band aids and scotch tape on the holes of this monetary system but sooner or later it will all fall apart. There is a reason that the first monetary system in the United States was backed by gold and silver and had limits to the production of money. The founding fathers of the United States foresaw the faultiness of a fiat monetary system and in the constitution banned this type of practice.
We can have all the fake economic recovery we want but as long as we remain on a paper currency backed by absolutely nothing we are doomed to continue down the path of no return. With no limitations to the production of our money supply over the last year we have devalued the dollar so aggressively that we are forcing our creditors to make an impossible choice, stay with the dollar and see 50% of the intrinsic value wiped out… or abandon the dollar and risk global economic catastrophe. We can force the citizens of the United States to continue using the debased dollar but we cannot force our global neighbors. We are already seeing a loss of confidence in the greenback from India, Russia, China, Sri Lanka and many other countries who have been fleeing to gold in an attempt to ditch their US dollar reserves. As stated by Ji Xiaonan Chairman of the Supervisory Committee “China should increase the amount of gold it holds in reserves to reduce potential losses from a depreciating dollar. We recommend China increase its gold reserves to 6,000 metric tons within three-to-five years and possibly to 10,000 tons in eight to 10 years.” The US dollar has lost 15% of its value last year alone due to the incessant printing of money and has no end in sight. Ben Bernanke said it best in his 2002 speech, “The US Government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost.” Comments like this paint the reality of things and the truth behind our economic recovery. We may be building consumer confidence in the United States but the global economy is not on the same page. While the magical technology called a printing press is spewing out the greenback we can guarantee gold to continue breaking new record highs. “With China looking to increase its gold reserves to 6000 metric tons in the next 3 years it is safe to say that this purchase alone will guarantee the price of gold to hit $2000.00 an ounce” Ronald Fricke president of Regal Assets stated last week in an interview.
For those who are from the school of truth, now is the perfect time to purchase gold. Prices have had a small correction allowing the true fans of gold to purchase before the holiday season. Gold bugs enjoy this little gift and pick up as much as you can because the yellow metal is about to take off breaking through levels unheard of.
What Happened To The Banks We Bailed Out?
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By Peter Costa
Gold continues to break record highs while the economy shows no sign of recovery. Inflation is around the corner and will be unprecedented from anytime in the nation’s history. Will it be at the levels of the Wymore Republic or former Soviet Union? I sure hope not but I am not staying in the dollar to find out. There has been a lot of speculation about hyper inflation and some very congenial arguments have been made. I am on the hyper inflation train and these days I am feeling it is going to happen sooner than later. How have I come to this conclusion? The banking crisis unfolding in 2009 is all the proof I need and is rapidly becoming a never ending black hole sucking away any hope we have for dollar recovery.
This year alone over 115 banks have declared bankruptcy and there are still over 400 banks on the troubled list which amounts to over 5% of the nation’s banks. We have already seen the 6th and 10th largest bank failures in the United States history take place this year with a combined loss of $33 billion in assets. Last Friday marked the largest one-day government seizure since the financial crisis began closing the door of 9 banks nationwide. Rumors have been swirling around for some time that Citigroup is next and that they are likely to file for Chapter 11 if the Abu Dhabi Investment Authority pulls its $7.5 billion investment. Bank of America posted a $2.2 billion loss from July through September making it the second quarterly loss in the past year. Things are extremely unsettled in the banking world and we could see it escalade into the New Year.
The most alarming data from this unfolding crisis is the current state and solvency of FDIC. In the beginning of 2009 FDIC was down to $52 billion in their insurance fund for failing banks. With over 115 bank failures this year it has nearly dried up the fund leaving less than $10 billion. With less than $10 billion, FDIC is now promising to insure over $6.3 trillion in assets. We all know that the government would never let them fail and that FDIC has the ability to borrow up to $500 billion. The problem is what that will do to the overall buying power of our dollar. The grand total of all government and FED programs aimed at absorbing or supporting bad loans has now reached $23.7 trillion. With 400 banks on the troubled list we could see this number escalade very quickly guaranteeing rapid inflation. “The banking crisis is just the tip of the ice berg and as more countries jump ship from the dollar things are going to start compounding” says Ronald Fricke president of Regal Assets in response to Friday’s bank seizures.
The banking crisis is becoming worse and more countries are jumping ship from the failing dollar. Banks have been operating on a faulty system for decades and the breaking point is near. It is safe to say that the digits in our bank accounts are nothing but digital numbers and there are not enough greenbacks in circulation to back up the number. If you have any dollars that you do not need for a couple years you owe to yourself to start preserving them now and place them in gold . Last year the dollar lost 15% of its total buying power this year the number could very well double. If we continue on this path in less than 5 years the dollar could become worthless.
