Posted on 10/02/2010 7:08:58 AM PDT by blam
Rampant Inflation In 2011? The Monetary Base Is Exploding, Commodity Prices Are Skyrocketing And The Fed Wants To Print Lots More Money
The Economic Collapse Blog
October 2, 2010
Are you ready for rampant inflation? Well, unfortunately it looks like it might be headed our way. The U.S. monetary base has absolutely exploded over the last couple of years, and all that money is starting to filter through into the hands of consumers. Commodity prices are absolutely skyrocketing, and it is inevitable that those price increases will show up in our stores at some point soon.
The U.S. dollar has already been slipping substantially, and now there is every indication that the Fed is hungry to start printing even more money.
All of these things are going to cause a rise in inflation. Not that we aren't already seeing inflation in many sectors of the economy. Airline fares for the holiday season are up 20 to 30 percent above last year's rates.
Double-digit increases in health insurance premiums are being reported from coast to coast. The price of food has been quietly sneaking up even at places like Wal-Mart. Meanwhile the U.S. government insists that the rate of inflation is close to zero. Anyone who actually believes the government inflation numbers is living in a fantasy world. The U.S. government has been openly manipulating official inflation numbers for several decades now. But we really haven't seen anything yet.
As increasingly larger amounts of paper money are dumped into the economy, we are eventually going to see the worst inflation in American history. The only real question is how far down the road are we going to get before it happens.
Take a few moments and digest the chart below. It shows just how dramatically the U.S. monetary base has been expanded recently....
Up to this point this dramatic expansion of the U.S. monetary base has not caused that much inflation because U.S. government borrowing has soaked most of it up and U.S. banks have been hoarding cash and have been building up their reserves.
However, this situation will not last forever. Eventually all this cash will make its way through the food chain and into the hands of U.S. consumers.
But what is even more troubling is the dramatic spike in commodity prices that we have seen in 2010.
Wheat futures have surged 63 percent since the month of June. Wheat has recently been selling well above 7 dollars a bushel on the Chicago Board of Trade.
But wheat is far from alone. In his recent column entitled "An Inflationary Cocktail In The Making", Richard Benson listed many of the other commodities that have seen extraordinary price increases over the past year....
*Agricultural Raw Materials: 24%
*Industrial Inputs Index: 25%
*Metals Price Index: 26%
*Coffee: 45%
*Barley: 32%
*Oranges: 35%
*Beef: 23%
*Pork: 68%
*Salmon: 30%
*Sugar: 24%
*Wool: 20%
*Cotton: 40%
*Palm Oil: 26%
*Hides: 25%
*Rubber: 62%
*Iron Ore: 103%
Now, as those price increases enter the chain of production do you think that there is any chance that they will not cause inflation?
Do you think there is any chance at all that producers and retailers will not pass those costs on to consumers?
It is time to face facts.
Those cost increases are going to filter all the way through the system and your paycheck is soon not going to stretch nearly as far.
Inflation is coming.
Many savvy investors understand what is going on right now. That is one reason why gold and silver are absolutely soaring at the moment.
The price of gold set another record high on Friday for the sixth straight day.
Silver has also experienced extraordinary gains recently, and the U.S. Mint has officially raised their wholesale pricing above spot on American Silver Eagles from $1.50 to $2.00.
Meanwhile, there are even more rumblings that the Fed wants to print lots more money. On Friday, the president of the Federal Reserve Bank of New York, William Dudley, stated that the high unemployment and the low inflation that the United States is experiencing right now are "wholly unacceptable"....
"Further action is likely to be warranted unless the economic outlook evolves in such a way that makes me more confident that we will see better outcomes for both employment and inflation before long."
During his remarks, Dudley even mentioned what the effect of another $500 billion increase in the Fed’s balance sheet would be.
Now keep in mind, this is not just another "Joe" who is making these remarks.
This is the president of the Federal Reserve Bank of New York - the most important of all the regional Fed banks.
In recent weeks it is almost as if you can hear Fed officials salivate as they consider the prospect of flooding the economy with even more money.
Up to this point, very little has worked to stimulate the dying U.S. economy. The Federal Reserve and the Obama administration are getting nervous as the American people become increasingly frustrated about the economic situation.
So will flooding the economy with even more money and causing even more inflation do the trick?
Well, no, but what inflated GDP figures will do is enable Obama and the Fed to say: "Look the economy is growing again!"
But if a flood of paper money causes the value of goods and services produced in the U.S. to go up by 5 percent but the real inflation rate is 10 percent, are we better off or are we worse off?
It doesn't take a genius to figure that one out.
So don't get fooled by "economic growth" numbers. Just because more money is changing hands doesn't mean that the U.S. economy is doing better.
In fact, many American families are going to be financially shredded by the coming inflation tsunami.
Just think about it.
How far will your paycheck go when a half gallon of milk is 10 dollars and a loaf of bread is 5 dollars?
Already, it is incredibly difficult for the average American family of four to get by on $50,000 a year.
So how much money will we need when rampant inflation starts kicking in?
And do you think that your employers will actually give you pay raises to keep up with all of this inflation?
Not in these economic conditions.
In fact, median household incomes are declining from coast to coast all over the United States.
Earlier this year, Ben Bernanke promised Congress that the Federal Reserve would not "print money" to help the U.S. Congress finance the exploding U.S. national debt.
Did any of you believe him at the time?
Did any of you actually believe that the Federal Reserve would act responsibly and would attempt to keep the money supply and inflation under control?
The reality is that the entire Federal Reserve system is predicated on perpetual inflation and a perpetually expanding national debt.
Whatever wealth you and your family have been able to scrape together is going to continue to be whittled away month after month after month by the hidden tax of inflation.
And unfortunately, as discussed above, inflation is about to get a whole lot worse.
Time to buy some gas and oil ETFs...
Of course the collapse in demand will likely limit the gains....
Time to hoard your commodities... well, it was time to start that years ago. :)
I wish I could have hoarded sodium hypochlorite (liquid chlorine) for the pool a few years ago when it was 1/3rd what it is now.
And the masses will be too stupid to understand everything caused by the dems leading up to it.
They’re trying to scare the $$$$ out from the corporate mattresses. Business is holding on to Trillions because they can’t invest it in growth right now since we have pinheads running the government.
So the pinheads are trying to stir up fears of inflation in an effort to scare the businesses into letting go of their money. But here’s the problem. So long as consumer confidence is down, demand is down. That is anti-inflation.
"Further action is likely to be warranted unless the economic outlook evolves in such a way that makes me more confident that we will see better outcomes for ... inflation before long."
In the minds of our masters, inflation is good.
Doom on them.
...hold on to your hats for higher food prices...I noticed that Walmart has done away with ‘rollback’ grocery specials at my local store...another sign of the times: my favorite Chinese restaurant has new pricing on the menu.
Soon you will have to label them:
October 31, 2010 and November 1, 2010.
Inflation helps those who are in debt over their heads (they pay back debt with worthless moeny), those who charge to the hilt, and those who live irresponsibly.
In short, Obama is sticking it to the middle class and helping the irresponsible. It's a different way to do redistribution, but just as effective.
Many of us for years have imagined a future of extreme austerity. It has been a long time now, so I can't understand why there are still people who have mortgages they couldn't pay off if they had to, any debt except maybe a car loan, and have put themselves in a situation where they can avoid expensive repairs, etc. Go to your local dollar store and figure out which foods are healthy and cheap.
Anyone who has prepared properly might finally be able to get ahead somewhat if interest rates on savings skyrocket and they can figure out which things in their lifestyles are actually luxuries.
I suspect the majority of the population could end up for all practical purposes as slaves, afraid to speak out or change jobs if they have them, living paycheck or handout check to just get by to the next one and with an amount of debt that makes it impossible to break the cycle.
This has always been true. The price of food, or anything that anyone actually needs for that matter, never goes down, ever.
Inflation is caused by increasing the monetary base (printing money). The only thing we need now is the velocity (circulation) and there’s inflation.
.....Inflation is coming......
The author misunderstands on a grand scale.
The whole point of his article is to point out that inflation is already here and from this point out will continue.
That was the conventional wisdom when inflation hit in the 1970s. I'm just not sure it worked that way. It seemed that those who went into it with no debt and minimal expenses and lived frugally, staying out of savings (even if it meant being on the edge of poverty) outlasted it.
My mother lived in a neighborhood of mostly seniors back then. It seems to be how it worked out. A lot of those seniors remembered the lessons of growing up in the depression. Some gave up cars, they wore clothes they already had, they had gardens, they kept life real simple and didn't try to outsmart anyone or anything. My mom, even when the interest rate went down to 2%, never took more than that interest out of the bank each year. When those interest rates skyrocketed, she lived quite comfortably, and pretty much kept to that frugal lifestyle.
“They’re trying to scare the $$$$ out from the corporate mattresses. Business is holding on to Trillions because they can’t invest it in growth right now since we have pinheads running the government.
So the pinheads are trying to stir up fears of inflation in an effort to scare the businesses into letting go of their money. But here’s the problem. So long as consumer confidence is down, demand is down. That is anti-inflation.”
I agree. It really doesn’t make a whole lot of sense to me right now as to why industrial commodities should rise.
Here’s what’s occurred to me:
1. I don’t see the industrial demand. The economy is moribund, and it will remain that way until Obama and his Marxist Rat allies are kicked out for good.
2. I don’t see systemic inflation kicking in for at least a couple of years. If anything, deflationary forces are at work right now.
So, I wonder what the motivation is for commodity price rises:
1. Long term investment, while the dollar is still worth something?
2. Money from the rigged stock market has fled into commodities?
3. A nefarious scheme using leverage for a pump and dump operation by Soro, et. al.?
4. A scheme by the Fed to counter deflation by leveraged purchases in the commodities futures markets?
Anybody care to comment?
My son in his third year of selling popcorn for his Cub Scout pack is getting looks of disbelief this year when his customers look at the prices. They have skyrocketed.
A bag of caramel popcorn with a box of microwave popcorn – $47.95
Bag of almonds $49.95
Trail Mix $27.95
2 boxes of movie popcorn $39.95
Yogurt-covered Pretzels $43.95
Then add $8.95 for shipping if you order over the web
Granted the Scouts add to the cost with money that will go back to them – but there is a threshold people just won’t cross, especially when the economy is so bad. Even my son, who is only nine, looked at the price list and said “what the heck?”
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