Posted on 02/18/2010 4:23:46 PM PST by blam
The Deflationary Trap, Desperate Times and Desperate Measures
Commodities / Gold and Silver 2010
Feb 18, 2010 - 09:25 AM
By: Adam Brochert
Things are going to continue to get darker economically. Nothing has been solved but massive currency debasement has already occurred to try to stem the tide. The reason is simple. I forget where I stole this chart from and if anyone knows who is making this chart and keeps regularly updating it, please let me know so I can check their site periodically:
New debt is now a drag on the economy rather than a boost. This is a bizarre concept. Piling more debt on top of the old, rickety, sky-high debt pile currently in the economy now actually makes things worse. This is a deflationary trap that will require new approaches to stoke up true inflation in the economy.
Now I realize that Prechter doesn't think inflation can be created in this environment and all attempts to inflate will fail, but Mr. Prechter assumes people will play by the rules. The current crew in charge is an amoral group fixated on ultimate wealth and power. They will rape your dog if there's money in it.
Just like in the 1930s and 1970s, the currency will be aggressively debased to keep the games going. In the 1930s, the U.S. watered down a decent Gold standard and turned it into a quasi-Gold standard after confiscating the Gold of private citizens. This devalued the currency by 69% overnight (Gold peg changed from $20.67/oz to $35/oz). Savers got screwed.
In the 1970s, the Gold standard was completely abandoned and rampant inflation ensued, with Gold going from $35/oz to $850/oz at its peak only 9 years later (a 24-fold increase). Savers and those on a fixed income or invested in government bonds got particularly screwed.
We stand on the threshold again. There is no way out of the current debt situation the U.S. is facing. We are not the only ones in trouble but people who think the PIGS are in big trouble and we are not don't understand what is happening. "We are the reserve currency," they say with an arrogant misunderstanding of what happens to an old, cocky prize fighter that insists on continuing to lead with his chin.
No, the U.S. is not a horrible country and no, it is not the end of the world. But it is the end of the line for those in economic denial that have a little money saved. The U.S. Dollar will be aggressively devalued over the next five years. I just don't know when or how it will occur. Will the "powers that be" stop fighting Gold and let it rise naturally as a way for all currencies globally to depreciate? Will the IMF or some other super sovereign entity become the world's central bank and everyone will devalue against the new one world currency?
I am an ant. I don't know. But I do know that the major currencies of the world will all be debased aggressively to allow the banksta debt masters to be at least partially paid back. Gold is the only currency that can't be debased by banksta or bureaucratic decree. Granted, they will continue to try to suppress the Gold price for a while. Consider today's announcement of the IMF selling more Gold.
Really think about this. If you're a Gold bull, you've known about the sale of this Gold by the IMF for months if not years. Why would an organization that can print up paper debt tickets out of thin air sell physical Gold to raise more debt tickets? Is it because they need the money? Of course not. It is designed to crush Gold and crush the spirits of Gold speculators. Gold is a competing currency that bankstaz and governments do NOT want you to be interested in.
If everyone turns to Gold, the Ponzi scheme collapses. If people refuse to accept paper debt tickets as money, then the game is up. But when bankstaz and governments are desperate to inflate and borrow more to pursue ridiculous schemes, Gold is actually the most conservative investment available.
There is already open discussion of seizing 401(k)s and other retirement funds from people and forcing it into government bonds. There is already an open door that allows money market redemptions to be frozen at will by private firms without government oversight. There is already a central banker who has publicly stated that Dollars can be created at almost no cost and dropped from helicopters if needed to spark inflation. When the job of those in charge is to lie constantly, don't expect any more direct hints before you get screwed out of your life savings. Yes, stocks can rise in nominal terms during an agressive inflation, but on an inflation-adjusted basis, stocks will decline (think Dow Jones Industrial Average from 2000-2007).
The deflationary collapse scenario can occur. No question. This is the irony of our situation. We ants have no control individually over monetary policy. Only collective rioting and bloodshed has a chance to free the country from the grips of banskta interests. If the federal reserve decides to stop issuing credit, the economy will collapse in a deflationary heap. If they decide to inflate at all costs, then we risk extremely aggressive inflation or possibly hyperinflation. We are on that razor's edge between the two.
[snip]
Here's The 'V' That Impaled The Shorts, And It's Growing
Happy days or dark days?
Please explain in simple terms how the Fed creating tnes of trillions of dollars out of thin air can make the dollar worth more?
Because the “created” money just sits in banks. Unless they literly hand it out at zero percent or somthing it ain’t going anywhere.
What, you never heard of Social Security?
Seriously, here's how the game is being played. Every couple of months, Congress raises the debt ceiling another trillion or so. The Treasury sells bonds, mostly to foreigners, the rest to "other investors". Then, within 60 days, the Fed buys back half the debt with invented money. Meanwhile, the government has sent out most of that "borrowed" money in benefits, retirement and paychecks for government workers. So it's not just sitting in the banks. And it will inevitably create inflation, not deflation.
Just when I "should" be retiring. I suspect I'll never retire... but what can I do, my knees would never let me be Peter the Greeter at Wally World.
>> The current crew in charge is an amoral group fixated on ultimate wealth and power.
That IS a giant unknown piece of the puzzle, isn’t it?
We can’t count on rational behavior from these folks.
Look even the social give outs can’t makeup the slack, maybe 2 trillion a year. Even if the feds just printed that money. It is a 14 T / year economy. They would still have to drop it out of Helos....
It’s spooky that the author capitalizes the G in Gold... like it’s something to be worshipped.
SHHH!!!! Don't give them any ideas!
Bet then again, they can just give everyone a plastic card and have a computer put money into the account each month, like they do now for food stamps.
Here’s a serious question. Has there ever been a deflationary cycle in a welfare state? Wouldn’t it just allow government to spend more and more created money, which is their natrual inclination anyway?
Ask Japan. They've got 3 times the debt of the U.S., one half the economy, and 21 years of deflation.
Every inflationist has to ignore the last two decades of Japan because Japan shows that modern economics is a flawed theory.
Without knowing the source, well, it could have been done by the same guys that brought us Global Warming.. huh. Otherwise known as completely without a credible source. For right now.. this article is a bold face piece of crap. And the guy who wrote it should be pilloried.
What's really weird is while the government is dumping dollars they still collect taxes......
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