01.16.08
Posted in Old Posts at 1:39 am by Administrator
THE END OF ECONOMICS
by Doug McIntosh 1-08-2008
Over 15 years ago, during the orgy of self congratulations the
USA underwent at our “victory” over the Soviet barbarians in the Cold
War, one Francis Fukuyama wrote a book called “The End of History.” In
it, the good professor, Harvard I think, postulated now that the Soviet
barbarians had been outlasted the world would usher in a new, peaceful
era based on Western Democratic values. Or at least Disneyland uber
alles for another 50 years. Coke, Pepsi and Disneyland are at the core of
economic vision of this New World Order of ours.
Of course, things turned out differently. For instance the Soviet
Barbarians are still barbarians, just in a more ethnic way.
Incidentally, if you click on my archive page link at the bottom of the page you
will find a list of all my essays, going back nearly 10 years here at
gold-eagle.com. One of them talks about Vladamir Putin, who I called the
new Rasputin. I wrote it a looooong time ago, when people still had
illusions the 700 years of terror commonly called Russian history had been
magically removed.
There are two individuals who have had the most impact on history
in my view. Jesus Christ and Genghis, or Chingis, Khan. The birth of
both militant Islam and brutal Russia may be laid at Chingis’ sword, He
was the one who sacked Kiev and Baghdad. The sacking of these two cities
cut both Islam and Russia off from Europe and the revolutions soon to
come in ideas, culture, science, politics and other areas. And that
will be the death of the West.
The death of the West will come in the economic sphere first;
indeed, it is already well underway. One of the reasons I have not written
more recently is I find myself with little to say at this point. Like
Dolly Parton says in her song, “What part of no don’t you understand?”
The modern, fiat dollar system, based upon infinite creation of debt,
and the looting of the common man by mutant bankers, hack politicians the
NWO elite perverts is kaput. Argue with me, call me an idiot, do
whatever you like: the economic system is going down. The Revolution of
1913, the final subversion of the American Republic, has failed. It lasted
some 95 years. During it we saw the American Republic turned into an
Imperial power, its people and culture debased; its politics turned into
an open sewer. The fiat Federal Reserve note, once the reserve currency
of the entire planet, now is not accepted at India’s Taj Mahal due to
its collapse in value. Even the strangely named Canadian dollar, the
Loony, the bird I think, is worth more than our FRN. The wages of
economic sin is a debased currency. Only precious metals reflect the true
failure of the Federal Reserve and its destruction of the American economy
and society. It really is the debt stupid!
However, that doesn’t really matter anymore. We have simply reached
a point in the corporate entity called the USA, where the social chaos
is about to overwhelm us. I think 2008 will be a lot like 1968,
turbulent, chaotic ; with an underpinning of violence, social disorder and a
sense of being overwhelmed emotionally on a daily basis. I was 14 then;
I remember the sense of a system in crisis very well. America is dead.
The New World Order has killed it. We are like the Chinese and their
sentence for people who commit murder. They tied the corpse to the
murderer and made him carry it around. We are now carrying the corpse of the
American Republic tied to this Imperial entity we have allowed thugs
and criminals to create since 1913. The stench is getting unbearable.
The rest of the world is tired of our mind games. They are taking us
down. Hard.
Ah, I am just being negative. No, I am being realistic. Over
Christmas I think the balance tipped. It felt like to me a starter pistol
had been fired and a wave of chaos was released globally, beginning with
the Bhutto murder, Kenya and the like. For me personally, two events
have convinced me the American economy, and then our society are failing.
The first relates to the economic anarchy, yes that is the proper
word, overwhelming the USA. Whether it was the dismal retail environment,
the open inflation in food and energy, the talk of $200 oil by the end
of this year; the unraveling of the housing bubble, there is a
measurable, documented feeling of impending economic doom. Although my view is
there is nothing impending about it.
The canary is bellowing its little lungs out: the roof beams are
shaking and the dust is pretty thick. Those perpetual frauds called the
American stock markets are off to their worst start since 1904, yes
1904, that being 9 years before the vile beast called the FED was created.
Hell, I don’t even have to be a doomer anymore. I mean, I called it
and I called it right. We are going down, as an economy, as a culture, as
a political system and maybe even as a unified people. Gold will
absolutely protect you from economic chaos, although silver is for the day
to day spending. Unfortunately, we are moving beyond economic chaos into
the economic collapse arena.
The second thing that has convinced me American culture is in
serious trouble is the level of social anarchy. In particular, the case of
the Carnation, Washington grand parents, their children and
grandchildren, being slaughtered on Christmas Eve by one of their own is absolutely
#$%^&& intolerable to me. And I am in a real mean mood about it, along
with many other things. Pirates for instance. There have been numerous
media accounts of attacks upon motorists on highways in several parts
of the country, especially the Saint Louis area. This is what the New
World Order, their Federal Reserve, their mutant culture of Paris
Hilton, Britney Spears and the rot called politics have brought us to. Open
Piracy on our highways and a visit to grandpa and grandma that ends up a
horror movie. The system will either change, or the Spirit will allow
it to be destroyed. The foreigners are the instruments of destruction
of both our economy and our Imperial pretenses. They will destroy us
with our bonds, our Treasury notes, and our debt. They will own us all;
when they do they will not tolerate either piracy or Christmas Eve horror
movies.
We are simply beyond it all now. We may pull back from the abyss,
or we may hurtle into it headfirst. There have been periods of
tremendous economic reform in our history. In fact, the vile beast called the
Federal Reserve was the NWO effort to stamp out the antitrust and
corporate accountability reforms of the late 1800’s and early 1900’s. Reforms
in response to the excess of the Robber Barons, like the Rockefellers
and J. P. Morgan. And guess who owns a large part of the Federal
Reserve? Citibank and J.P. Morgan. They are pigs, but they are smart pigs.
The filth they wallow around in has destroyed the American Republic.
There may yet be one more turn of the people rising up against the feudal
thugs who have enslaved us. Or we may be going into the final economic
death spiral. 2008 will be the year that decides our fate. Of that I am
sure. America will have radical change, fundamental change, or we will
collapse into ourselves. If we do that, we will take the entire planet
with us. Of that I am also sure. God, gold and guns. The order is up
to you.
www.gold-eagle.com/research/mcintoshndx.html
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01.15.08
Posted in Old Posts at 10:36 pm by Administrator
Just a heads up; Gartman on Bubblevision just called it:
Margin calls and EVERYTHING was being sold to cover. We could be on the edge of the cliff tonight so watch out for a nightmare this way cometh…it could get very ugly, very fast.
On the flip side if you see the chance to buy physical gold and it gets down into the $800-$850 range, I would back up the dump truck. I would also do the same for any price on silver below $16.
Because INFLATION and a I’m talking brutal destroy your savings and retirement inflation is about to impact our lives….
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Posted in Old Posts at 10:34 pm by Administrator
To everyone concerned, I literally just go the email a second ago and the server for www.thetreeofliberty.com barfed a hard drive thus why it has been down all day long. In the interim if you would like to post, comment, vent, whatever on the day’s events, please feel free to use this thread to post links, news, whatever until Housewolf has it back up and running this evening. Have fun until then…..
Thanks,
John Galt
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Posted in Old Posts at 2:57 am by Administrator
By John Galt
Dichloro-Diphenyl-Trichloroethane, the wonderful chemical banned by the EPA in 1972, about the same time the gold standard was, is NOT what this editorial is about, more like this warning. You see I could easily go on a rant with my tinfoil beanie on too tight and try to point out that the same time we surrendered the “War on Inflation” by running from the gold standard, we surrendered to malaria and tried to say a little inflation won’t hurt you like a little mosquito bite won’t. So much for both theories and the West Nile virus some 30 plus years later. The DDT I’m referring to is the most insidious poison every introduced by our government and the banksters in their desperate attempts to maintain a bankrupt system and collapse our nation’s independence. This DDT though is a byproduct of the monetary poison of the Greenspan era from our wonderful central bank which has spread throughout the economy.
Inflation to the Rescue
If you look at this chart below, you can see that inflation, the magic panacea that was thought to cure the monetary ills of the time much like malaria was the cure to over population, started a rather nasty climb back in the 1970’s ultimately climbing into nightmare levels in the late 1970’s and creating the stagflationary economic joy called the “Carter years” which many of us remember for the great editions of “Saturday Night Live” and of course “The Misery Index”.
While this chart is just a snippet, I closed it off on good old Economagic at 1987 as that was the year we witnessed a breaking point, or change in our equity markets, much like what I foresee this year and again after 2009. But back to the problems and explanation of the DDT subject at hand. As you can see in this chart, we experienced a nightmare in the 1970’s with stagflation plus an inflationary recession which followed. The difference between now and then? The banksters claim to have learned the lessons of the 1930’s Great Depression and the Paul Volker cure which solved the problem. Unfortunately the academic minded folks we have in charge of the Fed now appear to only honor history and have not learned from it. The moves they are about to undertake to salvage prehistoric relics from the multinational banking system will fire off a wave of inflationary pressures as has been signaled by the unrestrained (and surprisingly) uncorrected screaming flight of gold from $700 to $900 in just a four month time period.
While many view gold as an emergency reserve or “insurance policy” as I do, I also take a historical view on the metal as a warning that many nations are viewing the cure to our systemic banking problems as a monetization of the debt and they are rushing to spend their dollars on insurance against a foolish decision by our central banksters. Unfortunately the declaration that indeed we would inflate our way out of a crisis was published in a speech from Dr. Bernanke in 2002 titled “Deflation: Making sure it Doesn’t Happen Here” (http://www.federalreserve.gov/boardDocs/speeches/2002/20021121/default.htm). The portion of the speech which struck me as the most striking was the conclusion:
“For this reason, as I have emphasized, prevention of deflation is preferable to cure. Nevertheless, I hope to have persuaded you that the Federal Reserve and other economic policymakers would be far from helpless in the face of deflation, even should the federal funds rate hit its zero bound.”
This statement indicates that despite the need for a recession to flush the system of asset excesses, our Federal Reserve in concert with the political concerns of Congress and the Treasury Department are more than willing to risk a Japanese style implosion to prevent the necessary flushing and strengthening of our system by allowing the weak hands to go bankrupt and what’s left of their assets to be redistributed or liquidated as a true capitalist system would allow. This interference is why I see gold as a flashing, screaming siren. The commodities markets, be it metals, food or energy are all trying to warn the Fed that the excess dollars being held around the world will be rapidly returning home if the United States continues to dilute it’s currency in a absurd effort to stave off a recession to benefit the political elite during an election year. Sadly, this appears to be the policy to be undertaken in the months ahead.
So Just what Kind of DDT are We Going to Apply?
The DDT I’m referring to is reflected in this chart from John William’s excellent site, www.shadowstats.com, which should be required reading for all statistical and market junkies as the data releases pour forth in the months to come. The chart simply reflects the measure of inflation comparing the original methodology (SGS alternate) vs. the BLS newly revised CPI-U measure.
If you notice the 1980 time portion where both were married to the same statistical rule of thumb, the tweaking started in the mid-1980’s until full blown hedonic revisionism kicked into full gear recently. This has distorted real inflation and the impact is obvious to any average soul who actually purchases their own food or pumps their own gas. The DDT that I am referring to is displayed in the following charts and should be crystal clear to those that remember:
That’s right, DDT is DOUBLE DIGIT TREASURIES and I can foresee the consequences of Bernanke’s folly as DDT’s in 2009-2010. That will be the burst which he has spoken about avoiding as the rates are imposed by the open market and the lack of desire to acquire more debt from a bankrupt government will cause our yields to soar beyond those charts that I’ve displayed above. This is not a prediction but if gold does reach an inflation adjusted level above $2000 as many goldbugs and advocates say it should or will, the 10 and 30 year bonds can easily top yields of 25 percent or more. The result of such an inflationary scenario, which I can see coming true, will be an imposition of such stringent restrictions on spending by the markets that our central banksters will have to monetize the debt or default and either will result in the next Great Depression. As we raise our level of monetary growth to pay the interest on our old debt the viability doing business in America will become impossible for all but those who choose alternate currencies within these borders to do so.
Thus a return to the gold standard will be impossible, although desirable, and the implementation of an alternate electronic based currency will be the only answer for this nation of fast food and lazy voters. We are going to witness an implosion of our system as a result both economically and politically, and the choices made will determine the fate of our history and survival of our Republic as a result.
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01.14.08
Posted in Old Posts at 10:45 am by Administrator
This brief op-ed is a thumbnail summary of the show I put on Friday night and it was quite a popular show so thank you to all of my listeners and the ton of email I got before, during and after the show. The subject matter, based on this morning’s gold and silver prices appears to be timely. I am warning you folks now, that the markets are telling you that prices in the future, the end of this year, are going to be so much higher that it will shock all of us. I predicted an annualized inflation rate of over 18% to possibly 22% using John William’s information provided at www.shadowstats.com . My fear for everyone is that those prepper items that you have been putting off for years are going to be so expensive that you will never be able to obtain them at a reasonable price. A lot of items have already started the absurd rise in prices thanks to the destruction of our dollar and that has major implications for control of the items and the individual’s ability to obtain them. With that, here is the outline of what I said to get and NOW!
1. Food
If you are not stocking up now, go to any financial page and look at the commodity prices. Wheat, corn, rice, barley, hogs, etc. are all skyrocketing. In the short term the meats might drop in price as the farmers are taking their herds to slaughter, but in the long term the prices are only going up with the Asians buying more and more of our products and using their pricing power to pay higher prices for them squeezing the American consumer. You had best develop a food storage program and start loading up now because in this writer’s opinion, you will see food prices double in many cases by year end. For those that can not grasp that, that means milk at $7 to $8 per gallon! Use whatever means you can to get your hands on food now because that is the tool that the powers that be will use to control the economic and political future of your household.
2. Water
The aquifers in the U.S. are in decline in several regions. The Great Lakes are at lower levels than normal as are major lakes and water ways nationwide. The demand for water is increasing as more acreage is planted for the ag industry. And now the foreigners are more than willing to buy our local water utilities because or local governments are incompetent about the long term consequences of the action in a desperate attempt to raise cash for the short term. You need a water storage and sterilization program and you had best start doing the homework and putting a plan into action immediately.
3. Metals
While many people see that and scratch their head, the first tool of barter is the oldest currency in existence, gold and silver. The precious metals are skyrocketing this morning which is telling you that inflation is in the system and is about to expand at an extremely rapid rate. When all is said and done and as I said in my op-ed “Weimarica”, once the dollar reaches the point of no return, many folks will start trading with precious metals as opposed to using the garbage currency we are creating. When societies fail, the metals become the prime currency so get your hands on as much junk silver (90% coins, pre-1965 U.S. dimes, quarters, halves and dollars), silver rounds or bars, or gold as you can.
4. Ammo
Ammunition prices are already at the absurd level with some calibers almost doubling in price. By October of this year there is a good chance per sources that Steve Quayle has, that it will be impossible to obtain any ammo at almost any price. I hope those sources are wrong, but based on what I’m seeing on store shelves there appears to be a deliberate attempt to restrict the flow of ammunition to the “masses” and that is disturbing. Buy it now while you can still afford it because waiting until “tomorrow” might be too late. If you do not have a firearm, you could be in trouble in short order with the society that will evolve from this economic nightmare we are about to enter because sadly, this is not your grandparent’s America.
5. Clothes
Plan ahead. With the dollar crashing clothing prices will increase since we have elected to destroy our textiles industry in this country and that leaves us empty handed once the recession moves into an inflationary depression in the years to come.
6. BBB
No, not “broads, beer and Buicks” but Books, Batteries and Barterables. During the 1930’s if you had smokes or booze you had a barterable and it was a very, very desired one. A small stock of these items could get your car repaired, your hair cut, or a leaking pipe in your home fixed so stocking some away for trade with others is not a bad idea. Just shop for it when it’s on sale because the prices on those items are going to go up, up, up very soon as the nations with strong currencies start to hoard. Books are important from several perspectives. You will want a large survivalist library which includes “How To” books on everything from plumbing to auto repair, medical books and more. If you have children, you’ll need to start an education library plus entertainment library with game books and more as despite popular belief, the internet will not be free and the collapse of the system will make electricity and access to it a valuable commodity for most. Lastly, as predicted in 2007, battery prices have gone nuts, increasing in price by some 30-40% in some cases. This is the time to get some stored away for your portable electronics, preferably buying Ni-Cads with a solar recharger. Once you lose the ability to get the news via radio, it’s all over.
During and after the show, several other great ideas were emailed into me and they were excellent additions to the list above. Tools will be at a premium and you had best have some sort of tool box set aside in your plans or you can forget the “how-to” books I referenced above. Also if you have furkids (pets) please folks, don’t forget them. Get a food rotation plan in place for them also and remember, they can not digest the sodium laden MRE’s. Get a plan in place and now, don’t wait!
There it is gang. Why I did a show on buying “Stuff” now and the things I’ve referred to are the critical items which you’ll need to survive. There is not “well, I can get it anytime” philosophy which will soon be proven to be a disaster for those that think in that manner. The prices we are about to see will prevent that.
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01.11.08
Posted in Old Posts at 2:15 am by Administrator
I could not even begin to make this one up gang….beware of the future as earnings reports stream in….
Thursday, January 10, 2008
10:24 AM Texas Time
Countrywide, IndyMac Shut Out by Warehouser
Warehouse lender Southwest Securities warns customers
Southwest Securities FSB is removing Countrywide Home Loans and IndyMac Bank from its approved investor list, the company told MortgageDaily.com.
The move was made in light of movements in the share prices the two companies, an executive said.
“We started to believe that the stock price is mimicking the movements of some of the other lenders that imploded,” he said.
Link to Story
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01.01.08
Posted in Old Posts at 9:09 pm by Administrator
By John Galt
January 1, 2008
Sigh. There is a philosophical battle among the bears and doomers and it’s really quite frustrating as both parties are somewhat correct. This will be of the epic evolutions in history as one side says the housing crash and credit crisis will usher in another deflationary recession or depression a la the 1929 model, while the other party says it will be 1979 with a dash of 1929 flavoring. I think the philosophical debates can be summed up in the words of the famous philosopher Aristotle when he looked at his class and yelled in Greek “SHUT UP ALREADY!”
There is enough room and validity in both arguments to say everyone is correct to some extent, but the deflationists are going to lose in 2008. While I am not about to proclaim some all-knowing all-seeing vision nor present a litany of technical reasons for my argument as Jim Rogers has taken care of that multiple times for me in 2007, there is some basic analysis of history which gives everyone a clue as to where we are heading economically and when the peak theoretically should occur. The basis for this thinking is a dash of economic expertise from various commentators around the world, some historical analysis of markets and human behavior, and of course the reality of political influence on markets during an election year. There are many who stare at their monitors and figure the world beyond that point of reference is not worth measuring as everything they need to know is taught to them in a tick by tick movement of graphs and the trades they execute to profit from them. There is another groupthink which accepts the economic measurements and statistics presented by political authorities and make investment decisions and advice upon them, which is not only foolish but dangerous. There is a real world out there and once you observe that, yes Jim Cramer that’s a hint to you, you realize that the solution to some of the problems on a short term or interim basis are not what they should be but will matter as the end result.
First and foremost if you begin measuring indexes in terms of non-fiat monetary points of reference it does not take long to realize that the real money has been and will continue to be in commodities. Heck, even if you use the fiat points of reference, the S&P 500 closed at 1469 at the end of 1999 and on December 31, 2007 closed around 1468. Hardly a ringing endorsement of the “buy and hold” strategy but even more importantly, a damnation of what the tinkering with the system has done to your retirement program if you let the banksters and voodoo brokers play with your account and proclaim “fantastic” 3% gains year over year which are far below the rate of real inflation. If you use the charts that www.shadowstats.com, the site the John Williams has been nice enough to publish and maintain the measures of real inflation based on the formula used in the 1990 and for many years before, you see that real inflation in 2007 was well in excess of 11% and obviously made your 9% gain in the NASDAQ, 3.5% gain in the S&P and the broadly watched Dow of 6.4% a somewhat moot point (do the math).
This may not scream monetary inflation but it gives you a hint that despite a concerted effort to reflate the system since 2003, starting with Sir Alan Greenspan’s cuts to 1% of the Fed Funds Rate, the efforts to reflate the equity bubble has pretty much been a failure. This means that with an election approaching and the less practical and experienced group of Federal Reserve Governors have a challenge in 2008. That challenge is to violate their academic education and follow through with Benron Bernanke’s helicopter laden mission of dropping money on fires to extinguish them. The first quarter of 2008 should provide a lesson in just what his line of thinking really is and just how the inflationary fire will be stoked beyond the imagination of anyone in the deflationary camp.
The warning signs for the collapse of the securitization of debt are nothing new and the so-called “credit crisis” of 2007 was actually first warned of back in the late 1990’s. In the October 26, 1998 issue of Business Week, there were warning signs of what was to happen a decade later in the article title “A $2.5 Trillion Market You Hardly Know” Economist Henry Kaufman warned in this article that these markets do underscore a risk and to quote from the article:
‘’the illusion of liquidity.'’ They worry securitization is based on a false premise–that because you can make a loan tradable today, you can trade it tomorrow. ‘’
That concern became a reality and tomorrow is here. The banksters have been cornered in 2008, facing a choice of openly declaring their losses and gambling that the government will subscribe to the “too big to fail” mentality or continue to string the losses out quarter after quarter inducing the specter of continuing doubt into the bond and equity markets which will insure the high levels of volatility we have seen month after month will continue. It’s a classic historical quandary as the failure to shut down the trusts and stock funds in the late 1920’s and openly declare the fraud behind the design of many of them increased the volatility after the Great Crash of 1929 and destroyed the investments of many Americans who bought into the “you can’t lose on Wall Street” mentality which has once again popped it’s ugly head into the modern thinking. It is in my opinion that we will hear the screams of the deflationary side of the discussion the loudest in the first half of 2008 as the banksters dump their bad news on to the markets en masse in the first two to three months of 2008. If they fail to do this we’ll be in for a year long wild ride with the Federal Reserve and Treasury playing the role of fireman putting out fires everywhere and the actually economy drifting into a deep recession rather than a touch and go landing in the first quarter of 2008. I lean towards the put it all on the table, force a market correction which correlates with the actual recessionary conditions the rest of the economy is experiencing and forcing the Federal Reserve and U.S. Government to reflate on a massive scale. The instability will give some rise or bounce to the U.S. Dollar Index but in reality it is a dead cat bounce which might tease the traders into thinking achieving the 80 level is realistic, but from a historical perspective, this currency, our currency, must be taken out and shot for the resolution to the solvency crisis to occur. The U.S. will reflate on a massive scale and create a huge inflationary dilemma for the next administration in 2008. This re-inflation will make the daily and weekly activity of the Federal Reserve in 2007 pale by comparison.
While so many of us focus on the day to day activity of the Federal Reserve, the reality is that all of the central banks of the world realize that if they do not engage in a massive reflation effort, not only will the US Dollar crash and burn, it will bring their economies down with it. Those who subscribe to and maintain the fallacy of fiat currencies will do whatever has to be done to maintain the status quo as long as possible. This means they will actively engage in a policy of currency destruction to a point in 2008 and this policy will continue worldwide until one nation or group of nations elects to stop the policy of importing American inflation and changes the structure of their currency. The most logical and obvious group will be the Gulf Cooperation Council and their desire to withdraw from the U.S. Dollar peg at some point when domestic prices become intolerable to maintain political stability. Once we see this group of nations engage in a change or withdrawal of the dollar peg, the final leg up in America’s inflationary nightmare will begin. The other nation which has a long standing geopolitical reason to burn the dollar would be Russia who could easily stir the markets into complete disarray by reformulating the Ruble to a backing using platinum, gold, oil and the Euro.
The concept of commodity inflation with enduring asset deflation has been a warning that Jim Sinclair and Jim Rogers have been warning about for over two years now, but to much of the American middle class it has not meant anything of importance until they noticed the one measurable, tangible asset, their homes, begin to decline in value. The entire American bubble of this past four years was built on the concept that real estate never declines and that homes are an investment. Sadly, the entire investing philosophy of the American was implanted in their soul during the tech bubble of the late 1990’s and millions of people are still subscribing to the “buy and hold” investing strategy praying their tech nightmares can be re-inflated to save their retirements. Now the political and economic power elite have to create a bubble and quickly to prevent the deflationary spiral they have sworn with the screams of “never again” and rapidly or they will lose control of the situation. The economic and political elite of this nation have realized that to save the nation from a deep recession or worse they must take the last act of pouring gasoline on to the inflationary fire. The result of that will be one more major equity bubble leading into the election season. Thus why I think they will allow and encourage wage and tolerate commodity inflation in a desperate last gasp to keep the consumer alive and spending to postpone the day of reckoning until the elections are complete.
Beyond the obvious political and Keynesian reasoning to expect more government intervention in the markets and one final futile effort to inflate our way out of debt, if you look at the charts below, you will see the development of a parabolic sense of reality, where all of the charts have developed their own momentum, not just in our little slice of heaven, but in markets worldwide.
Of those charts for our domestic economy pictured above which is disturbing just happens to be the CPI-U chart of inflation and deflation. If you notice that prior to the great market crash of 1929 we had a relative period of price stability on a percentage basis based on the government supplied information. Then you see what appears to be relative stability from 1990 onwards except that one has to keep in mind the reversion to hedonic pricing in the inflation calculations and the distortion of the numbers since that time. Unfortunately the first and last chart indicate the real level of concern. On a pricing basis in constant 2005 dollars the screaming siren of inflation is loud and clear for the last 30 years and has basically gone hyperbolic. The amount of credit market debt has also made that frightening turn into economic hyper-drive which indicates to anyone with half a brain that there are only two alternatives to correcting the problem: Default or inflation. The consensus is that they can inflate “gently” without triggering hyperinflation but the reality is that they need the hyperinflation to take care of the government debt obligations and bail the banksters out of the dilemma they face. This is not just a U.S. problem. The price of gold, a warning sign and insurance policy which indicates future economic and geopolitical instability has demonstrated that the inflationary problems are being spread out worldwide by our policies and economic mismanagement.
Other than the obvious indication that our currency is losing value over the long term, the rest of the world to keep our consumer based orgy of spending alive has shown the willingness to devalue their currencies in concert with the dollar. This will not have a happy ending for any nation or any one thinking that we are going into a deflationary recession in 2008. It is this writer’s opinion that the commodity price increases will continue as Russia, China, and India continue to use their dollar reserves to purchase commodities of all types, be they energy, agricultural or industrial and therefore continue to pressure the U.S. economy as we begin the final gasping actions of inflating to preserve our standard of living and political stability. Once this effort fails and the inevitable collapse in our current system, over burdened with fraud and deceit in it’s economic and political hierarchy, happens in 2009, we will see the deflationary nightmare to correct thirty years of excessive consumer, corporate and government spending. In the interim, the deflationary drop in prices we should see in the first quarter of 2008 should only be considered a “head fake” while the banksters and investment houses attempt to scare the central banksters worldwide into flooding the system with trillions of dollars in freshly printed digidollars to preserve the status quo of the fiat system. Do not get fooled into this “deflationerrory” idealism as it impacts the markets in the weeks to come. The flood and impact of this past summer’s interest rate maneuvering take on average eight to nine months to trickle down to the consumer level. Just in time to spike the inflationary punch this summer and during the election.
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