Here Comes Inflation, The Cruelest Tax Of All

[BarnacleBob]

Enjoy it while it lasts .....

Here Comes Inflation,
The Cruelest Tax Of All
By Nicholas Von Hoffman
The New York Post
6-2-4

You don't have to pass a tax bill in Congress to raise people's taxes, and George W. Bush isn't going to ask for one. Instead, heís raising taxes in the cruelest way - through inflation.

As of the end of March, inflation was running at almost 4 percent per year. From every indication at the supermarket or the gas pump, the rate of inflation has accelerated since then. Where and when it will stop is anybody's guess. Nor is 4 percent a small figure when you recall that this is a compounding percentage. During the last 10 years, a period when inflation has been "tamed" or "under control" or "negligible," the cost of what you could have bought for $100 in 1993 has risen to $130.10.

Except for C.E.O.'s and other forms of the egregious rich, most people will need raises of about 5 percent this year to break even. Maybe the labor-supply situation will tighten up enough so that employers will decide that, shipping jobs off to India or not, they will have to put more money in their people's paychecks. So far that hasn't happened, and even if it should, experience with past inflation teaches that salaried and hourly workers get small raises and get them later than the big-money people, if they get them at all.

That is why political economist Milton Friedman, who is often unfairly and inaccurately associated with the hard right, deems inflation a tax on ordinary working people. The rich have a dozen ways to protect themselves from the havoc that inflation works on savings and investments. The kind of people who have no more than five or six months of living expenses in the form of ready money in the bank take it in the chops.

The party line is that inflation isn't happening and will not happen. Let's hope that, for once, the Bush party line has got it right, but the troops are getting nervous. Al Broaddus, the president of the Richmond Federal Reserve Bank, recently said out loud what others in his camp must be thinking: "The growing concern about inflation is certainly understandable. Indeed, I have to confess that after being in the unfamiliar mode of worrying about inflation falling too low, I'm dusting off my old inflation-hawk feathers in case I have to flap my wings one more time before I leave the Fed." Mr. Broaddus said that the "Federal Reserve will monitor incoming information on pricing developments especially carefully in the weeks ahead," although he added that he was "confident" there will be no repeat of the "dangerous, double-digit rates in the late 1970's and early 1980's."

Others don't share his confidence. The price of commodities like copper, wheat and - of course - oil are up. So also are the prices for scrap iron and dairy products. The rising price of milk prompted one stand-up comedian to tell his audience that if dairy prices don't begin to head south soon, the President is going to order a pre-emptive invasion of Wisconsin. The other day, The Wall Street Journal ran a story under the headline of "Summer-Fun Inflation," noting that ballpark hot dogs are up 7 percent, sunglasses 13 percent, a ticket on the Fire Island ferry went up a dollar and admission to Hershey park, that sweet and creamy dreamland in Pennsylvania, has gotten two dollars more expensive than it was last year.

To what do we owe the honor of the incipient inflation? In part, its cause may be found in yet one more White House goof-up/miscalculation in connection with the Iraqi invasion. Having decided that shock and awe would make Iraq a stroll in the park, Mr. Bush et al. decided that they would go to war without bothering to pay for it. It would be simple: You go in, get the evildoers, strip them naked, make them bugger each other, take their pictures and go home. You remember the boasting from the administration about how they would make Iraqi oil revenues pay for rebuilding the country?

The quick, cheap war has turned into a slow, expensive one, but the dogmatists in the White House - who have never taken raising taxes as an article of faith - are trying to pay for it by borrowing. None of the major wars fought by the United States has been paid for by borrowing alone. From the Civil War onward, the big wars have been financed in major part by raising taxes, which lessens inflationary pressures by taking people' spending money away.

Oddly enough, borrowing can also act to depress inflationary forces, but not the way George Bush is doing it. You have to do it the way Franklin Roosevelt and Woodrow Wilson did: You get the people to borrow at low interest rates, thereby putting into government securities money that otherwise would be out roaring around the economy and forcing up prices. Roosevelt was able to pay for the Second World War by borrowing at little more than 2 percent. Of course, he was fighting a war people believed in, against formidable enemies with the military power to defeat us. That no doubt stimulated people's patriotic juices and made the huge war-bond drives of both World Wars I and II great successes.

If George Bush were to attempt an Iraqi war-bond drive, he might get some of his buddies to buy a bond or two, but the non-idiot millions would have none of it. After the lies, blunders and Abu-awful prisoner stories, it will be a cold day between the Tigris and Euphrates before they'll sell out an issue of low-interest government bonds to support the war effort.

Since he has gotten in office, Mr. Bush and his people have not only cut taxes but also talked down saving as they've urged more personal borrowing and more consumer spending. So who, you might ask, is paying for the war? The answer is foreigners. Asian nations - China and Japan for the most part - hold over $2 trillion worth of American debt. We were in hock to the world before Mr. Bush sent us into his war, but now we really, really, really are in hock.

We owe money up the yazoo and, instead of reining ourselves in, we continue to borrow with no immediate hope of beginning to repay the debt. As a result of Mr. Bush's spendthrift ways, the value of the dollar has been sliding for many months, which is to say that each dollar buys less than it used to, and that's called inflation.

The classic ploy for getting out of this spot is cheapening the money - that is, deliberately causing inflation so that a nation can repay loans of expensive dollars with cheap ones which buy less. Over the past several years, the administration has made no bones about fostering a degree of inflation for the purpose of stimulating the economy. Whether Mr. Bush also wants to devalue the money to cheat lenders cannot be known just now - but if he does, he wouldn't be the first king, prince, President or whoever to resort to this form of theft. In the old days, the king used to dilute the value of money by putting less gold or silver in the coins; in the modern era, they simply print more of the stuff.

Lenders aren't jerks, however. They react by selling the dollar-denominated stocks and bonds they've been holding, by refusing to lend more money and demanding higher interest rates. Rapid upward surges in interest rates can contribute to inflation by driving up the cost of borrowing, thus making our financial mess messier.

To get investors to buy bonds in the face of inflation, the government sells something called a TIPS, or a Treasury inflation-proof security. As inflation increases, the government increases the nominal value of the bond. For example, if you buy a $100 bond and inflation goes up 1 percent, the face value of the bond goes up to $101. But a population like ours, which is all but bereft of cash assets, has no money to buy inflation protection. And in the long run, if enough of these bonds are sold, we will have no idea what the national debt is, since the nominal value of bonds will keep getting larger at an unknown future inflation rate.

Apologists for the administration will tell you that a damaging inflation is not in the cards. They argue that business is able to reduce the costs of goods and services so successfully that prices cannot rise significantly. Up to a point they may be right, but we have probably passed it by now.

But not to worry if the basics look grim. Alan Greenspan has been reappointed to four more years as chairman of the Federal Reserve Board, where he has presided over one big boom, two recessions and two stock-market crashes. This will be his first inflation. Lots of luck to us all.

- You may reach Nicholas von Hoffman via email at: nvonhoffman@observer.com

COPYRIGHT © 2004 THE NEW YORK OBSERVER. ALL RIGHTS RESERVED

http://www.observer.com/pages/observer.asp

[Hypertiger]

I guess you are all suffering from the just think positive inflation forever religion...

I don't usually post other posters work but MANNFM11 knows the score...

"From MANNFM11 at Prudent bear chat.
Until you understand the Fed hasn't given away one thin dime, much less trillions that everyone seems to be screaming about, you will continue to believe this nonsense....We are the fools borrowing this stuff, they aren't giving it away."

The last sentence is "We are the fools borrowing (requesting commercial banks to create debt out of thin air with interest attached) this stuff, they aren't giving it away."

And they won't be giving it away either...

The Treasury prints FRN's...

The FED does not print a thing...

Current consumer income is mostly previously created out of thin air debt with interest attached by Commercial banks at the request of the consumer or other consumers in the system...

Current consumer income which is mostly previously created out of thin air debt is used as a basis for consumer requests for commercial banks to create new debt out of thin air with interest attached...

Also debt inflated assets like Real estate and stocks can be used as collateral in the mix...

Federal reserve notes or what are mistakenly called US Dollars only need to be printed in a debt backed by debt system when...

1.A previously printed FRN wears out and needs to be replaced...The vast majority of the Money printing currently going on is to supply ATM's with cash that will not Jam the machines...The FED retires/destroys and replaces Billions of dollars of FRN's every week...

2. The demand for printed FRNs begins to outstrip supply in bank vaults...

There is no wage inflation...one by one each sector (debt inflated empire) in the economy will cave in due to lack of debt inflationary growth to support the production and distribution of product...

During the Great Depression England dumped Grain at sea in an attempt to raise the price while children starved...

In the US from 1929 to 1939 the population dropped by 8 million...

Luxury cars? They increased in engine size and price before they collapsed...

During the Great depression there was no shortage of anything...except consumer consumption of debt...or debt inflation great enough to overpower debt deflationary potential...

This time should be a little different since there is more cartel control...But this time the US economic system is post industrial so it is ultra exposed to debt deflationary shocks and the banking system in 1929 was far stronger... the majority of the money supply was still static...the actual dynamic portion or Debt out of thin air with interest attached was maybe 30% to 40% of the total supply...

Now the dynamic portion that will contract in a hyperdeflationary implosion is either 97% or 100% depending how you account for debt...

This is all a replay but far worse...The New world order plan? The Legue of Nations...Globalization and Free Trade? all implemented after WWI...and was the primary reason why the great depression happened...Back then the US could actually produce it's way out of the Hole...It was also self sufficient in energy production...

The US is in the weakest position economically in it's entire history...

A house of cards that is about to be hit by a hyperdeflationary implosion of debt hurricane...

All the other Houses of card nations in the world are hoplessly dependant on the US house of cards for debt inflation to support their houses...

When the US caves...everyone else will be sucked to their doom also...

[lhslancers]

You might be proven correct in the long run but we get hyperinflation first. The world ain't coming to an end just the current monetary system. I'm betting we don't end up in caves. See you on the other side.

[Hypertiger]

I don't know how we get hyperinflation first...How do you get hyperinflation without wage inflation?The Number 1 export of the US is debt inflation...

The US was beginning to hyperinflate in the 70's but due to the implimentation of the controled destruction of the economy policy in 1979 the US offically switched from a industrial producer nation to a post industrial consumer nation...The Number 1 product that consumers in the US request the commercial banks manufacture for consumption is debt...without wage inflation there will be no hyperinflation...All the job growth in the last 4 years has taken place outside of the US in China and India...and close to 100,000 Mexicans are crossing the border a month...so wage inflation in the US is not going to happen...the replacement of almost 3 decades of trashed industrial productive ability is not going to happen in the next few months either...

The division of labor in the US which is basicly just a debt inflated make work ponzi scheme will suffer a mind boggling collapse...300,000 workers a week for the past 4 years have been laid off and recycled into lower wage brackets or oblivion...100,000 workers a week run out of Unemployment benifits and are not counted any more...

Soon everything I post about will become sickeningly blindingly self evident...

[Outrider]

You might be proven correct in the long run but we get hyperinflation first. The world ain't coming to an end just the current monetary system. I'm betting we don't end up in caves. See you on the other side.

But to get to the other side we just might have to pass through something like "Mad Max" or "The Postman" - (a poor picture). And not all will make it through.

"We" can revert to the savage pretty quick.

Outrider

[gpond]

Wage inflation does seem highly unlikely. This is the fatal flaw in current inflationary schemes, imho. Not that inflation won't blow our way... it just isn't exculpatory in our current situation.

[wrs]

Well, I have known Barry for about three years now and when we first started having these arguments about how it would work itself out, I wasn't too clear on the collateralization process for creating credit. What I do realize is that we are already operating in a state of bankruptcy internally which allows one to discharge debt with tokens. As far as buying something with real money, that is rarely done except when you pay for a toll with change or buy a candy bar with change. Real money just doesn't exist in any meaningful quantity. That is where the "deflationary" situation will arise but it's going to arise because the money of account that is used to describe worthless stocks and bonds will become unmarketable. Hence, the real economy will begin to be transacted with real money and that means coins, not digits in a computer. If we are out of oil or short of oil, computer technology is going to be set aside except for the most important tasks but the days of ubiqitous computing are going to die with the oil supply.

The inflation that everyone speaks of is illusory because it's all in things claiming to have value in the money of account but which are not in themselves really valuable. They simply have a market value which will collapse as soon as the FRN support has left the room and that is not too far off. When oil ceases to flow freely but is fought for by millions, then FRNs will be worthless and we will have deflation in terms of the prices paid in real money but in terms of the money of account, well there just wont be any difference any longer between money of account and money. Then the economy will have to be sustained on about $4-5B which is all there was to begin with back in '33. If you have $10,000 in real money under those circumstances, I promise you, you are rich.......

In terms of real money, 100 oz of gold is $5000 or it could be $2000 depending on which coinage act you refer to. If you use 1985, which I prefer at this point, it's $5000. You can take your double eagles and spend them for $20 but that would be dumb. This is why I buy Gold Eagles with $50 printed on them. I also have plenty of silver money that is even cheaper to obtain which I suspect will circulate more than the gold. Finally, it would be a good idea to get a few hundred dollars in clad coinage as well.

Just one warning, you better get out of debt because any debt contract with your signature on it will bind you to the lender. If you are in debt, you can rest assured that the only way to get out is to use FRNs now before they all get used up. Sure there will be a rush to get FRNs but who will give up gold for them? No one with gold should be in debt and most of those who own gold are not in debt and if they are, they will pay their debts with their gold and be left with nothing. If you have debts and no gold, prepare to wear chains while you work your debt off.

[BarnacleBob]

Prolly gonna be an influx of debtors into Florida:

Imprisonment for debt.--No person shall be imprisoned for debt, except in cases of fraud. --ARTICLE I, SECTION 11, Constitution State of Florida

[Barbara's Relic]

If you have $10,000 in real money under those circumstances, I promise you, you are rich.......


Just one warning, you better get out of debt because any debt contract with your signature on it will bind you to the lender. If you are in debt, you can rest assured that the only way to get out is to use FRNs now before they all get used up. Sure there will be a rush to get FRNs but who will give up gold for them? No one with gold should be in debt and most of those who own gold are not in debt and if they are, they will pay their debts with their gold and be left with nothing. If you have debts and no gold, prepare to wear chains while you work your debt off.

Here's where goldbugs usually start making no sense. I've been reading through and found that Money Matters makes the same point. If gold is worth $10,000 FRNs, whether FRNs are "scarce" or not shouldn't matter; the market says an ounce will fetch you 10,000 FRNs, then it will. When you sell off 1% of your gold stash to get those FRNs, then you are out of debt. If FRNs are going to be so valuable that no amount of gold can make people cough them up, then why are you saving in gold?

[gpond]

Prolly gonna be an influx of debtors into Florida:

Imprisonment for debt.--No person shall be imprisoned for debt, except in cases of fraud. --ARTICLE I, SECTION 11, Constitution State of FloridaThanks for the tip. Gotta spare couch, have you? I don't eat much.

[Halophyte]

Missouri Constitution :

Sec. 11. That no person shall be imprisoned for debt, except for non-
payment of fines and penalties imposed by law.




It's our choice to liquidate for survival or continue to service our eventual defaults.

.

[Goldie]

Missouri Constitution :

Sec. 11. That no person shall be imprisoned for debt, except for non-
payment of fines and penalties imposed by law.




It's our choice to liquidate for survival or continue to service our eventual defaults.

.


Ah, but relocation/FEMA "camps" aren't considered prisons.

[Hypertiger]

A hyperinflation of a fiat currency destroys it...In Germany people across the spectrum refused it in the end...It was by law money but everyone refused it...That is why I don't see a hyperinflationary printing press plan taking effect and without a wage inflation mechinism a hyperinflation like Germany is structurally impossible...Gold and silver coin are in short supply they don't come from a printing press and can't be created out of thin air so they will find a level in the market place...since they float against everything else including FRNs which are hard to counterfit and are also in limited supply...

The printing press talk is just talk...The last straw to explain away the hyperdeflationary implosion truth...

There's going to be an implosion...no there's not silly...we have an invention called a printing press...it's impossible...hahaha fool...

During the Great depression the Federal Reserve had an obligation to purchase FRNs from the Treasury to make the accounts of the member banks liquid with cash...The FDIC was not needed and is mostly just a scam a psychological tool...But the logistical problems showed up so all the FED did was support the Big money center banks which then consumed all the smaller banks who were left to die in fits of agony...One minute you are a Millionare Banker the next you are digging ditches to prevent starving to death while your wife is turning tricks...

Now the Gold and silver markets along with the stock markets will shut down at some point...The Gold and silver markets are debt inflated paper speculator markets which could not begin to deliver a fraction of the Gold and silver that would be demanded...The stock markets would implode to zero because almost all the companies are just debt inflated ENRON accounting ponzi schemes...They would just cease to exist overnight...

Just the propping they accomplish now at Breakdown/out points takes massive monumental effort and coordination...You just can't comprehend how big this is...

The Tech wreck...Enron...etc...2000-2003 Bear market? That is just a Molecule on the tip of the iceburg...

When it hits full force You are not going to care any more...All this posting we do now will be the last thing on your minds...This site won't even exist...there won't be a way to pay for it or the servers or the ISP's or even electricity to run this show...

I can't even believe I'm talking like this...I can't even believe any of this...I'm just like all of you...I don't want to believe it...But unfortunately I know far too much for my own good...

Now my original prediction 23 months ago was 16 to 24 months until implosion...And what I mean by that is that the implosion began decades ago but we are in the terminal phase...the end game, so the implosion I'm talking about is when it becomes self evident...when the psychology of the just think positive inflation forever religion caves in...then we will rapidly crumble beyond current abilities to comprehend...A science fiction type economic horrorshow...

We should see some astounding action in the next 2 months...

Don't ask me what to do...Figure it out on your own...And when the main event goes down...Try not to post sob stories or cries for help...I'll bail long before the screams of agony start showing up...I'm nothing...a totally insignificant entity in your lives...I'll have to leave at some point...

When your source of income vanishes there will be no printing press showing up.

[wrs]

You need to read my post on page three of the Something Bad is coming to the USA thread. The US is operating in bankruptcy and as a sop to the people, in order to keep the banks going, FRNs were made legal tender whereas they weren't before. They were always exchangeable for lawful money which is coin. FRNs are not lawful money and so what you need to understand is that a debt in $ must be settled in $ or a legal tender. Your bank account isn't a legal tender. If you tried to pay off your mortgage with cash now, you would probably find the cash confiscated and you being subject to interrogation as to how you accumulated that much. The laws still state that holding more than $10,000 in cash is a crime, if you look for it you will discover it on the books. It was part of the Executive orders that Roosevelt made. So when the system collapses and bank accounts don't work, you still have a debt and you legally cannot posess enough FRNs to pay it down. The system is one of creating an entire class of indentured servants. If you have debt and not enough lawful money to pay it, you are at the mercy of whomever holds the other end of the contract you signed.

Im not a "goldbug" and I don't care for the term. I understand the system and you clearly do not. Gold is money, BY LAW, FRNs are not.......

[Hypertiger]

The "USA" and "Law" are figments of your imagination...

The only thing holding the world together at the moment is the leveraging of leverage and ignorance of that fact...nothing more.

[wrs]

And see how fast those figments become reality. Once you get entangled with the system, don't expect to get untangled very quickly. You need to get a grip on reality. We aren't getting oil delivered because of leverage, it's far more complicated than that and neither you nor I are able to discern the many reasons for the contradictory nature of things happening right now. However, the one thing that TPTB must have to rule is consent of the ruled. The existence of laws imply the consent of the governed. Once laws are determined to be null and void, there will be anarchy and rioting, then nothing much at all will be useful as money. If that happens, the people that have created this whole scheme will not get what they desire so I think you are mistaken. This is going to proceed as any other reorganization does, with the company coming out on the other end having a new name, smaller or no debts and many less employees but it's core business is still intact.

You should go read some more of Barry's posts over at PruBear if you want a good illustration of how the takeover is being engineered. I think he hit the nail on the head, it's not unlike what happened in Egypt when Joseph stored seven years of grain and the people ended up giving 20% of their earnings as a tax to Pharoah ever afterward. The small ears ate the large ears. The small ears are the lawful money and FRNs that the pyramid is built upon. Legally, the most you can have in FRN's is $10,000 and I would rather have mine in gold and silver because I think FRN's are going to be worthless eventually because of the simple fact that they are perishable and can be copied but gold and silver cannot.

[BarnacleBob]

We should see some astounding action in the next 2 months...

Inflation = expanding money supplly
Deflation = contracting money supply

The Fed has produced huge and powerful injections of liquidity since 1992 that have wafted thru the global economy and are now returing as "price inflation." IOW the monetary damage has already taken place and is now manifesting as "rising" prices in an economic environment where wages are stagnate and unemployment is growing.

The consumption/debt based US dollar economy the world is reliant upon to produce 95% of global inflation thru expanding production and consumption fueled by debt is about to hit a brick wall.

The Fall Street clones and FED want you to believe stocks are money and a savings vehicle. IMO the FED has been using the stock markets as means to drain liquidity from the global financial system when all other means have been exhausted to control price inflation. If in fact this scheme has been employed it's use is now severely limited and will only produce marginal returns for the operation .....

Standard prices are rising much to fast while wages remain stagnate. How long may people continue to invest their dwindling purchasing power into stocks and greater debt levels when cost of living increases are rising 30% - 50% while they earn same wage??? Prior to 2003 prices were rising slowly, people were not concerned about debt because prices illusionally appeared stable and credit/debt serviceable .....

What is now occurring is REALITY, debt and consumption retraction, a slowing of consumer debt and confidence as the masses begin to realize they are in debt over their heads and must begin saving and paying off debt (deflation). Do you remember the day after 9/11, the talking heads were on the TV begging people to be patriotic as they replayed the WTC collapses over and over inducing the people to just go buy something, "support America?" The situation was dire, TPTB were staring into the abyss of no return on 9/12. 9/11 saved them for a couple of more years, TPTB repackaged the collapsing economic bubbles and the patriotic consumers induced by the major medias and artificially low Fed induced interest rates went insane on a spending orgy with the new found credit driving housing and commodity prices to never seen before valuations within such a short term period. When housing prices increase 38% across the board within three years something is very wrong folks ....

The damages are done and cannot be repaired without wage increases that will allow the servicing of the debt already produced. The labor markets are saturated with labor and labor that will work for less just to keep rent & utilities paid & meals on the table. Where are all of these College Graduates that the Tenured have been grinding out by the thousands every year with $200 K educations going to work that pays more than $40K annual salary? The other major problem I see is that corporate America is more addicted to debt than even the consumer is. They have negated production "net, net, net," profitability and built their profit centers around the ever expanding debt ponzi scheme to finance their production creating artificial demand. If they cut lending, their future production will decline by the amount of credit contraction. They are credit/debt addicts too that have robbed from the future to provide their existence for today!

No amount of derivatives or any other self serving idiotic schemes may save the day when credit contracts either voluntarily by the retrenchment of the consumer, or contraction forced by the debtors or laws of economics (supply and demand).

Are the consumers to blame? Thats a tough question ..... "is a starving man to blame for stealing food when the government authorities and owners of the food induce him to steal their food?" Ultimately the universal responsibility lays with the individual, however, when the individual has been intentionally taught fallacy of economic laws and principles concerning coin and credit by those in power that knew better and those that have sought to enrich themselves through a generational scheme of ignorant miseducation I find it hard to blame them.

The universe is constructed in such a way that it will upright the wrongs and the fallacy until the universal laws of the universe are restablished. When price inflation roars, the debtors will capitulate and walk away from the debt, the merry-go-round will stop, the black market (a.k.a. the free market) will thrive without THEM! This is what THEY fear, the people may discover we dont need THEM to survive! Gold and Silver is just such a statement, (The "USA" and "Law" are figments of your imagination...) we dont need your stinkin stage scrip, your regulations, your taxation and your pious moralizations that always seem to benefit THEM at a very heavy expense to US!


Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked: 'Account Overdrawn." --Ayn Rand: “Atlas Shrugged”


Demand for gold rises 11.4% in first quarter

http://www.busrep.co.za/index.php?fSectionId=&fArticleId=2099241


Jim Sinclair's Commentary:

You haven't seen anything yet! Hyperinflation is roaring toward us because of the "Bernanke Electric Mayhem Money Printing Press" which produced huge and powerful injections of liquidity that cannot be drained from a global financial system.

All this is going to hit the dollar directly on its head and as a result gold will go much higher. Maybe the COMEX guys should worry about what their lunch costs. That is presumably within their limited reasoning power.


The Fed Can't Stop Inflation
Kenneth J. Gerbino

From 1973 to 1981 the inflation rate in the U.S. averaged 9.2% per year ! The Fed raising interest rates during this time, on balance did nothing ! Why ? Because the money increases from prior years were already in the system…the horses were out of the barn. For most of this time gold went up, interest rates went up and inflation went up. Prior to this time the money supply (M2) from 1965 to 1974 increased 101%. This caused the inflation from 1973 to 1981. The Fed could not stop it. Gold went from $100 to $850.

Here is a reality check on the above mentioned $1.5 trillion created from the year 2000. First, I will refer to the U.S. money supply (M2) in 1980. It was $1.5 trillion. All the tangible wealth in the United States, every bridge, office building, home, car, television, plane, everything was created over 200 years with a money supply that ended up at $1.5 trillion. 200 years of blood, sweat and tears to create all the tangible wealth in the U.S. Our country in a bit more than four years has created the same amount of money! $1.5 trillion! This new money has not created anything near the tangible wealth of the first 200 year's $1.5 trillion. This is currency depreciation on a grand scale.

M2 just since 2000 is up 32%. Since 1995, up 73%. This means plenty of inflation in the next 5-10 years, and although hard to imagine, the bond market could lose 30-40% of it's value. Raising interest rates couldn't stop inflation from 1973 to 1981 and it won't stop it now. All the money printed in the late 60's and early 70's was already in the system. Today it is no different. This time it could be much worse because of all the debt, which dwarfs the debt levels of the 70's.

http://www.gold-eagle.com/editorials_04/gerbino051804.html

[Hypertiger]

Here we are again...TPTB's Diabolical master plan is coming together so when in Rome do as the Romans...Sorry the plan is flying to pieces and blowing up in their faces...That's what you are seeing when you catch the odd glimpses of reality...

They are just as screwd as everyone else...

DOOOMED...Screwed blued and tatooed...

The entire "thing" you mistakenly think is reality is nothing but a colossal debt inflationary self delusional soap bubble of fantasy...

[BarnacleBob]

Here we are again...TPTB's Diabolical master plan is coming together so when in Rome do as the Romans...Sorry the plan is flying to pieces and blowing up in their faces...That's what you are seeing when you catch the odd glimpses of reality...

They are just as screwd as everyone else...

DOOOMED...Screwed blued and tatooed...

The entire "thing" you mistakenly think is reality is nothing but a colossal debt inflationary self delusional soap bubble of fantasy...

Russell Comment -- If gold and silver don't rise in the face of what the Fed is doing to the US money supply, then the forces of global deflation are sending us an unbelievably ominous message, and I'll be writing about this in future reports.

Yessiree, gold and silver are transmitting de, de, defla-a-a-a-tion signals across the board in neon lights. The Fed pumped $155 billion over 4 weeks into money supply and nothing happened, a big goose egg, a magnificent but costly ZERO! Wow!

Whats next, $310 billion every two weeks? Yikes.....

[wrs]

Here is a worse thought. The debt increase that is the source of the M3 pumping at this point is not consumer based, it's mostly govt debt and hence it's debt we didn't ask for. The taxpayer is being used to replace the debts that are being paid off by the corporations and the redemptions that are occurring from the stock market by foreigners and hence causing dollars to be drained from the system that must be replaced.

Heres the money flow scenario Im thinking of

Asians sell treasuries and receive dollars which are removed from the banking system unless Greenspan buys them. The dollars the Asians receive are used to buy oil and other commodites which increases OPEC coffers and now they have too many dollars so they need to get rid of them, hence they use them to pay down their debts and the dollars exit the system forever. In case you didn't know it, SA is a net debtor but of late has been running surpluses which means they are paying down their dollar debts which of course vaporizes the dollars associated with those debts. Of course Brazil and the rest of the commodity rich countries are heavily in debt to the IMF and the western banks and they are paying their debts down with this outflow of dollars from the US.

Now what is the result of all this? It's maybe what HT keeps alluding to but never really can say and I doubt it's cause he doesn't want to, just that he hasn't figured it out yet. I suspect that if the outflow of dollars continues, then the money supply will continue to shrink because the banks need good assets to keep on the books and good debtors paying off debts reduces the number of good debts and hence the proportion of bad debts rises. That isn't acceptable so new debt from a good source must be solicited but since commodities are providing such great cash-flows, the third world doesn't need to borrow any longer. This means the US govt is the borrower of last resort and eventually that is going to destroy the dollar and the banks.............

America is toast and the banks are being destroyed by their own success. They created so many dollars, the value of commodities is overwhelming them. Fiat is soon to be forgotten then gold and silver will likely become money again.....