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Inflating Our Way to a Government-Controlled Economy

Apr 11

Posted by ImpeachCongress in Abuse of Power, Economics, Economy, Inflation, Opinion | 2 Comments

By: Lee DeCovnick

Spiraling food prices, record energy costs and federally mandated health insurance reflect this Administration’s slavish ideological devotion to the centralized planning of key sectors of the American economy. So, what are the current results of Obama’s indoctrination of America into progressive collectivism? Global food costs have risen an astonishing 29 % in the past year, and almost 4% a month between October and January of 2011. Retail prices for gasoline have doubled in the 26 months since Obama was inaugurated. And the Democratic majorities in Congress passed a mandated health insurance bill that is not only unconstitutional, but also riddled with exemptions, political payoffs while adding 159 new boards, commissions and programs.

The current quagmire of budget deficits coupled with the viral growth of the federal government continues to be carefully planned and executed. We can especially thank the silent and complicit MSM for allowing this radical Administration and Obama’s handpicked shadow government, the thirty-nine unconfirmed czars now running the Federal bureaucracies, to eviscerate trillions of dollars of earned capital. The Marxists’ natural enemy, the professional capitalists (the American “bourgeoisie” in classic Marxist terminology) are rapidly losing significant chunks of disposable income to inflation and energy prices without a formal tax increase. The first and second quartiles (the two lowest socio- economic populations) are far more more dependent on government subsidies then 26 months ago. Plus the federal government last week plummeted an additional $7.7 billion deeper into debt each day.

Honestly, the Marxists and progressive collectivists who populate the senior levels of this Administration could be popping Veuve Clicquot nightly in celebration of their wildly successful, ongoing financial dismemberment of the upper middle class of America.

Here are two photos that refute the USDA propaganda that inflation in food costs will only increase 3% to 4% in 2011.


Yes, five dollars for a loaf of bread and six dollars for a 27.5 ounce box of corn flakes plus a few tablespoons of sugar. How absurd are these prices? Yuban coffee costs 24 cents an ounce, Frosted Flakes now costs 21.8 cent an ounce, and a loaf of bread runs 20.3 cent an ounce.

The World Bank’s brief account of February 2011 maize (corn) prices reminds us that seemingly good intentions can easily subvert a great nation and its food supply.

Maize prices have increased sharply and are affected by complex linkages with other markets. In January 2011, maize prices were about 73% higher than June 2010. These increases are due to a series of downward revisions of crop forecasts, low stocks (U.S. stocks-to-use ratio for 2010/11 is projected to be 5% the lowest since 1995), the positive relationship between maize and wheat prices, and the use of corn for biofuels. Ethanol production demand for corn increases as oil prices go up, with sugar-based ethanol less competitive at current sugar prices. Recent United States Department of Agriculture (USDA) estimates show the share of ethanol for fuel rising from 31% of U.S. corn output in 2008/9 to a projected 40% in 2010/11.

Read that stat one more time. “In January 2011, maize prices were about 73% higher than June 2010.” That is a jaw-dropping annual inflation rate of 146%, for the most basic of food commodities. Corn also feeds cattle as well as making Frosted Flakes. Also, “Recent United States Department of Agriculture (USDA) estimates show the share of ethanol for fuel rising from 31% of U.S. corn output in 2008/9 to a projected 40% in 2010/11.” Why does anyone think that harvesting food crops for fuel is a good idea?

We can no longer waste newsprint or electrons on whether this Administration and it’s appointed political thugs are incompetent, naïve or Machiavellian. They are all of the above as it suits their purposes. Those purposes, after 26 months in office, are undeniable.

Using the silent complicity of the MSM, these progressive collectivists want an uncontested control of the six key sectors of the American economy: food, energy, healthcare, auto manufacturing, higher education and non-military government workers. Why this headlong plunge toward the centralization of planning and production? What is the end game?

From eHow.com, a very concise paragraph on economic models points the way:

The Marxist economic model is based on the economic and sociopolitical theories of 19th-century philosopher Karl Marx. Marx proposed that all human struggles could be traced back to the capitalist system and its unequal distribution of private wealth. The Marxist model of economics seeks to correct social and economic inequalities through public confiscation of private property. [the redistribution of wealth] This model supports a completely public economy, in which the state controls and manages all wealth and property for the benefit of people rather than for profit. The Marxist socialist model eventually — if implemented according to Marx’s design — gives way to a completely classless system known as communism.

Exactly so.

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The Federal Reserve Must Implement QE3

Apr 6

Posted by ImpeachCongress in Economics, Economy, Inflation, Opinion | No Comments

By: Naional Inflation Association

Gold prices surged today to a new all time high of $1,463.70 per ounce, while silver prices soared to a new 31-year high of $39.785 per ounce. Silver is now up 129% since NIA declared silver the best investment for the next decade on December 11th, 2009, at $17.40 per ounce. The gold/silver ratio is now down to 37, compared to a gold/silver ratio of 66 when NIA declared silver the best investment for the next decade. This means that not only is silver up 129% in terms of dollars since December 11th, 2009, but silver has also increased in purchasing power by 1.78X in terms of gold.

Gold is the world’s most stable asset and the best gauge of inflation. This brand new breakout in the price of gold leads us to believe that the Federal Reserve is getting ready to unleash QE3 at the end of June. The Fed will surely not call it QE3, but NIA can pretty much guarantee that the Fed will continue on with their purchases of U.S. treasuries. If the Fed pauses after QE2, it will mean that treasury bond yields will need to surge to a level where they attract enough private sector and foreign central bank buyers in order to not only support the funding of our rapidly rising budget deficits, but to support the redemption of maturing treasury securities.

In the month of March, the U.S. government spent more than eight times its monthly tax receipts, when you include the money spent for maturing U.S. treasuries. The U.S. treasury netted $128.18 billion in tax receipts during the month of March, but paid out a total of $1.05 trillion, which included $49.8 billion in Social Security benefits, $47.4 billion in Medicare benefits, $22.58 billion in Medicaid benefits, and $37.9 billion in defense spending. However, by far, the U.S. paid out the most for maturing U.S. treasuries, which equaled $705.3 billion.

In order for the U.S. government to stay afloat with only $128.18 billion in tax receipts, it had to spend $72.5 billion from its balance of cash, which ended the month at $118.1 billion, and sell $18 billion worth of TARP assets. But most importantly, the U.S. treasury had to sell $786.5 billion in new treasury bonds.

The U.S. government is the largest ponzi scheme in world history. We can only fund our government expenditures and pay off maturing debt plus interest, by issuing larger amounts of new debt. Americans are lucky that we have been blessed with record low interest rates for an unprecedented amount of time, but NIA believes that as we roll over U.S. treasuries in the future, we will have to refinance them at much higher interest rates. Our national debt is now so large that interest payments on our debt will become the government’s largest monthly expenditure.

If the Federal Reserve doesn’t implement QE3, NIA believes it will just about guarantee a bursting of the U.S. bond bubble in the second half of 2011. If the Fed stops buying U.S. treasuries, there is a chance that we won’t find foreign buyers for our bonds no matter how high interest rates rise. The world is waking up to the fact that the U.S. government is insolvent, and the benefits of propping up the U.S. dollar are no longer worth the expense to our foreign creditors. The U.S. government ponzi scheme will soon be exposed for the world to see.

Japan has been the most consistent buyer of U.S. treasuries. With Japan needing to raise $300 billion to rebuild parts of their country that were destroyed by the earthquake, tsunami, and nuclear disaster, we believe they will be forced to dump their U.S. treasuries, at a time when the U.S. desperately needs Japan to roll over their treasuries into larger amounts of new ones. Not only that, but with Arab revolutions taking place across major Saudi states and the U.S. beginning to occupy Libya for no reason at all, we will likely see Gulf states follow in Japan’s footsteps and stop purchasing/dump U.S. treasuries. Plus, China appears to be becoming more reluctant to continue buying U.S. treasuries, and is positioning the yuan to be the world’s new reserve currency. Without Japan, Saudi states, and China, there will be no buyers left for U.S. government bonds.

The fact is, with no QE3, we could literally see the 10-year bond yield double from 3.52% to north of 7%, overnight. Even then, it is unlikely to attract foreign buyers and we will likely be faced with failing bond auctions, which would cause a massive rush out of the U.S. dollar and trigger the currency crisis NIA has been predicting. NIA sees no other option for the Fed, but for it to continue on with its endless money printing and destructive inflationary policies.

Federal Reserve officials discussed last month in closed-door meetings the possibility that rising commodity prices could cause inflation. The fact is, rising commodity prices don’t cause inflation, they are a symptom of inflation. When the Fed leaves interest rates at 0% for over two years and prints $600 billion as part of QE2, that money printing and easy money is the inflation of our money supply, and rising prices are the result.

The Fed is narrow-minded and continues to focus on the CPI, which only grew last month by 2.11% year-over-year. Fed Chairman Ben Bernanke says he expects rising commodity prices to create a “transitory” boost in U.S. inflation. Meaning, when the CPI rises even higher in the upcoming months, Bernanke will likely place the blame on what he considers to be temporarily high oil and soft commodity prices.

The CEO of Wal-Mart is now saying that U.S. inflation is “going to be very serious” and that Wal-Mart is already seeing “cost increases starting to come through at a pretty rapid rate.” He predicts that because of huge increases in raw material costs, along with soaring labor costs in China, and skyrocketing fuel costs around the world, retail prices will start increasing at Wal-Mart and all of their competitors in June, especially for clothing and food.

When asked about the predictions of Wal-Mart’s CEO, Bernanke said that he expects price pressures to remain largely stable, but then added, “Wal-Mart has more data than the government does.” Bernanke was also quoted as saying, “We have to monitor inflation and inflation expectations extremely closely because if my assumptions prove not to be correct, then we would certainly have to respond to that and ensure that we maintain price stability.”

The European Central Bank (ECB) is expected to raise interest rates tomorrow for the first time since 2008. Many people are now speculating that the Federal Reserve will begin raising the Federal Funds Rate at the end of 2011. NIA is receiving many new ‘NIAnswers’ and email questions on a daily basis, asking us what will happen to gold and silver prices if the Federal Reserve were to raise interest rates.

In our opinion, the Federal Reserve raising the Fed Funds Rate would actually be very bullish for gold and silver prices, because it will serve as an admission that even the Fed believes inflation is becoming a major problem and beginning to spiral out of control. Historically, the best performing time period for precious metals has been when the Fed begins to raise artificially low rates. Remember, when the Fed begins to raise rates, they will probably raise rates only 1/4 or possibly 1/2 of a percentage point at a time. Interest rates of 1% or 2%, although higher than 0%, are still artificially low and will do nothing to curtail inflation. NIA believes the real rate of U.S. price inflation is now 6% and we will need to see the Fed Funds Rate rise to a level that is higher than the real rate of price inflation, if the Fed wants to have any hope of preventing hyperinflation.

It is important to spread the word about NIA to as many people as possible, as quickly as possible, if you want America to survive hyperinflation. Please tell everybody you know to become members of NIA for free immediately at: http://inflation.us

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NIA Responds to Harvard Economics Professor About Inflation

Mar 29

Posted by ImpeachCongress in Economics, Economy, Inflation, Opinion | No Comments

By: national inflation association

Harvard economics professor Gregory Mankiw wrote an article that was published in the NY Times yesterday entitled, “It’s 2026, and the Debt Is Due”. In this article, Mankiw gave a hypothetical Presidential address the President of the U.S. might make in the year 2026 after a failed bond auction. Mankiw’s hypothetical Presidential address takes place in a scenario where in the year 2026, the U.S. Treasury “tried to auction its most recent issue of government bonds” but “almost no one was buying.” According to Mankiw’s hypothetical speech, during this 2026 crisis the President will admit, “The private market will lend us no more.”

Unfortunately, Professor Mankiw fails to understand that the U.S. has zero chance of surviving until the year 2026. What Mankiw predicts will happen 15 years from now is already happening today right under his nose, but somehow he fails to realize it.

The public today has already stopped buying U.S. treasuries. The Pimco Total Return Fund, which was the largest private holder of U.S. government bonds, has just reduced their holdings down to zero. The private sector was buying 30% of U.S. treasuries, but today is no longer buying at all. The Federal Reserve is currently buying 70% of U.S. treasuries. If it wasn’t for the Federal Reserve buying U.S. treasuries, we would already be experiencing failed bond auctions today.

According to Mankiw, the President will say in 2026, “Today, most of the large baby-boom generation is retired. They are no longer working and paying taxes, but they are eligible for the many government benefits we offer the elderly.” The fact is, the last baby-boomer turned 46 years old in 2010 and 46 is the age in which the average American reaches peak consumer spending. Therefore, even though most baby-boomers might not be retired, baby-boomer spending is now in free-fall while baby-boomers are simultaneously signing up for entitlement programs at record pace. This will begin to affect our economy today, not 15 years from now.

Mankiw’s hypothetical speech has the President admitting in 2026 that we “have to cut Social Security immediately, especially for higher-income beneficiaries. Social Security will still keep the elderly out of poverty, but just barely” and we “have to limit Medicare and Medicaid. These programs will still provide basic health care, but they will no longer cover many expensive treatments. Individuals will have to pay for these treatments on their own or, sadly, do without.” The truth is, if the U.S. government cut 100% of all spending except for Social Security, Medicare, and Medicaid, we would still have a budget deficit from these entitlement programs and interest payments on our debt alone. If the U.S. wants to prevent hyperinflation and survive until 2026, we need to make major cuts to these programs today. By 2026, it will be over a decade too late and these programs will no longer exist at all.

Mankiw’s hypothetical 2026 Presidential address goes on to say that “over the last several years” the U.S. has experienced a “vicious circle of rising budget deficits” and “as the ratio of our debt to gross domestic product reached ever-higher levels, investors started getting nervous”. Does Mankiw realize that the U.S. just reported a budget deficit for the month of February 2011 of $222.5 billion, more than the entire fiscal year of 2007? In our opinion, our budget deficits can’t rise much more viciously than what they already are today, without the U.S. experiencing an outbreak of hyperinflation. We need to begin sharply reducing our deficits immediately or else hyperinflation this decade is inevitable.

Our real debt to GDP ratio in the U.S. today is already north of 500% when you include unfunded liabilities for entitlement programs, as well as other commitments like the backing of Fannie Mae and Freddie Mac. It will simply be impossible for this figure to rise much higher without the U.S. experiencing hyperinflation. NIA believes that unless the U.S. government completely eliminated Social Security, Medicare, and Medicaid, there is no way the U.S. government will be able to stay afloat for another 15 years with such an unprecedented level of debt.

In 2026, Mankiw believes the President will admit that, “Our efforts to control health care costs have failed.” He suggests the President will proclaim that, “We must now acknowledge that rising costs are driven largely by technological advances in saving lives. These advances are welcome, but they are expensive nonetheless.” Does Professor Mankiw own a laptop computer, plasma TV, or mobile phone? These technologies are improving by leaps and bounds yet prices are falling. Technological advances are not driving health care costs higher! It is the government’s involvement in the health care sector and their failure to allow the free market to operate that is driving health care costs through the roof.

Professor Mankiw believes the President will continue by saying, “We have to cut health insurance subsidies to middle-income families.” NIA believes it is the very same subsidies Mankiw is referring to that are driving health care costs sky high. It is just like in the college education industry. If the government didn’t provide subsidies for students to learn voodoo Keynesian economic theories from professors like Mankiw, college tuitions would be a lot more affordable.

To solve this supposed 2026 crisis, Mankiw believes the President will announce, “We will raise taxes on all but the poorest Americans. We will do this primarily by broadening the tax base, eliminating deductions for mortgage interest and state and local taxes. Employer-provided health insurance will hereafter be taxable compensation.” Although NIA believes employer-provided health insurance should be taxable compensation because it would end the employer based health insurance system and make health insurance cheaper for all Americans, we believe it will be impossible for the government to raise any additional revenues from tax increases. We are at a point where any additional taxes will drive economic activity overseas and result in less tax receipts. When hyperinflation soon arrives, taxes will become irrelevant. The government will fund over 99% of its spending by printing money and less than 1% from taxation.

Mankiw also believes the President in 2026 will, “increase the gasoline tax by $2 a gallon. This will not only increase revenue, but will also address various social ills, from global climate change to local traffic congestion.” Come 2026, gasoline will probably cost $20,000 per gallon, if we are lucky. An additional $2 gasoline tax will be absolutely pointless and meaningless.

Mankiw suggests that the President in 2026 will, “secure from the I.M.F. a temporary line of credit to help us through this crisis.” The I.M.F. recently sold a large percentage of its gold reserves and by 2026 will likely be broke. Even if the I.M.F. was still around 15 years from now and did provide the U.S. with a line of credit that helps it survive the crisis, the largest line of credit the I.M.F. could possibly financially provide would only support a U.S. government that is less than 1/10 of its size today. Therefore, NIA believes the U.S. government should begin dramatically reducing its size immediately, before it is in need of a line of credit from the I.M.F.

It would be nice to think that the U.S. will be able to borrow and print money for another 15 years to fund endless budget deficits and that 2026 is some magical year when all of our debts will come due. The economy does not work this way and it is disgraceful that our nation’s most prestigious ivy league schools are teaching such dangerous economic principles. Considering that a large percentage of our highest ranking government officials graduated from Harvard, it really explains a lot when you look at who is teaching economics at Harvard. Mankiw is the same professor who in April of 2009 called for the Federal Reserve to implement negative interest rates. Mankiw called for savers to be punished and for all Americans with $100,000 in the bank to have only $98,000 one year later.

It is the destructive Keynesian theories of economists like Mankiw that have gotten the U.S. economy into the dire situation it is in today. Mankiw and other professors like him are brainwashing American students into believing that forcing people to spend is the key to a healthy economy and the way to solve all economic problems is to create a lot of inflation. All across America, students are graduating colleges with hundreds of thousands of dollars in debt, no jobs, and no idea of how the economy actually works. They will spend the rest of their lives paying off their debts and trying to get the false economic information they were taught out of their heads. The college education system in America is the single largest fraud that exists today, and NIA is going to expose the truth about the government’s conspiracy to turn American students into debt slaves in our next feature documentary, coming in April.

It is important to spread the word about NIA to as many people as possible, as quickly as possible, if you want America to survive hyperinflation. Please tell everybody you know to become members of NIA for free immediately at: http://inflation.us

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