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How Inflationary and Deflationary Outcomes Might Affect Your Bullion and Mining Shares

Editor — Tue, 07 Feb 2012 03:34:01 +0000

Whilst we, as staunch Austrians, would prefer less liquidity provision and more allowance for markets to naturally self-correct and deleverage… we suspect that as markets try to self-correct, the authorities generally will be forced to print more and more [as] it is the easiest course for them to take and the typically all too human option…As such we look once more at how inflationary and deflationary outcomes might affect precious metal investors. Words: 1323

So says Will Bancroft (http://www.stockopedia.co.uk) in edited excerpts from his original article* which Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Bancroft goes on to say, in part:

Inflation and perhaps hyperinflation.

An inflationary, and possibly hyperinflationary, scenario is naturally an outcome we are lead to by desperate authorities becoming locked into the printing press as a policy response. We believe Bernanke is pretty much well down this road now as, should he try to flip-flop back to austerity as a new response, his previous raison d’etre would be completely undermined and his legitimacy busted.

We believe this month’s announcement by the world’s leading central banks to act collectively to provide essentially unlimited liquidity to the financial system is further consolidation towards this collective policy response.

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We continue to urge investor cynicism with the inflation figures reported by the authorities who naturally have their interests to protect. Note the differences found in the official American data, and the data released by John Williams’ Shadow Government Statistics. When it comes to managing our portfolios and returns, we would prefer to use Mr Williams’ inflation in-puts [and,] in such a scenario when the inflationary genie starts to emerge further and further from the monetary lamp, and as the world’s savings and purchasing power are depleted, the precious metals should shine.

In this scenario, as we experience higher and higher prices…for gold and silver, their upside price limits…are only limited to how enthusiastically the authorities increase the money supply. [Refer to "Gold: $3,000? $5,000? $10,000? These 151 Analysts Think So!" for what] more adept forecasters than us…look for [ in future] gold prices… [We, too,] find gold and silver fundamentally undervalued today in relation to recent levels of money printing and the attendant risk in the financial system, so should easing become the general global policy response gold and silver are set to move significantly higher.

[Read these articles for their understanding of the implications such quantitative easing will have on the future price of gold:

Within this scenario we would also see the mining shares rewarding investors richly. In fact we like Jim Sinclair’s hypothesis that the precious metals miners will become the most significant dividend payers and will thus become the ‘utilities of the future’. The use of the term ‘utility’ in relation to the gold and silver sector might be a new way of thinking for some, but should gold and silver return to the heart of the monetary system, these miners are essentially supplying our money. They would be supplying an essential commodity, not that different to water or electricity. We are sympathetic to this prediction, and the gold miners are thinking more intelligently about the issue of dividends, admirably lead by Newmont Mining. It would be the precious metal miners acting as such dividend payers and utility stocks that would start to bring in some larger more long term focused investors that have as yet remained on the sidelines; the pension funds. So far pension funds have had minute allocations to the bullion and the miners. [Read "Pension Funds: Why $5,000 Gold May Be Too Low!"]

Deflation

This is where our analysis will perhaps become more controversial, because we believe that a significant deflation in today’s financial system will also be positive for precious metal investors.

Although we feel precious metal investors would be rewarded in this scenario, this may occur more slowly than in a significantly inflationary scenario. We would suggest that deflation would gradually put unbearable pressure on banks’ balance sheets, and bank failures would become more and more common. Fiat currencies, working hand in hand with a highly leveraged reserve banking model, have conspired to deliver us to our current situation. Investment banking failures might not capture the immediate attention of Main Street, but as this contagion spreads to commercial banks, savers would open their eyes further to the potentially risky nature of keeping cash in a bank. As Eric Sprott continually reminds us, ‘keeping money in a bank is a risky investment’…

Given the degree of leverage still at work in the banking system a domino effect of failures is not difficult to imagine. The depositors of the world would then increasingly have to reconsider what vehicle is more apt for holding their savings. The market will simply have to find a new savings mechanism in which to contain its money and liquidity. Where would the market turn to in this reallocation of capital? Well, the market has typically chosen gold and silver as money throughout the history of human development. As gold and silver’s almost unique properties are more widely appreciated once more, the fact that these assets are no-one else’s liability will again be greatly appreciated. [Read "Surprise, Surprise – Gold Is A Safer Investment Than Any Other!"]

Within this deflationary scenario, we also see the mining shares rewarding investors, and find the case of Homestake Mining during the 1930s in America a useful guide post. Amidst a wider deflation of significant proportions, pretty much the only capitalist endeavour one could get financing for was for a gold mine. During this decade there were close to 100,000 gold mines in North America. The share price of Homestake went from $80 in October 1929 to $495 in December 1935, but this capital appreciation was not the only reward for investors. During these six years Homestake paid out a total of $128 in cash dividends, and the 1935 dividend alone was $56 per share. A 70% dividend yield pay-out (basis year 1929) in only one year is pretty exceptional in a wider deflation. It is for these reasons we are so encouraged by Newmont Mining’s previously mentioned moves regarding dividend pay- outs. As John Hathaway at the Tocqueville Gold Fund comments, these mining stocks are going to be growth stocks.

Some readers may be wondering about how silver miners might perform in this scenario given silver’s industrial demand component. We are bullish on silver

and thus quality silver miners, in such a scenario because of our previously articulated analysis of silver’s fundamentals…[which] may be high level, macro, and contain some premises which are new to readers, but it is because of our opinions above on gold and silver’s potential performance during inflation or deflation that we are so attracted to these asset classes. This is why we find gold and silver bullion as an excellent place to hold some of your liquidity or money [read "Your Portfolio Isn’t Adequately Diversified Without 7-15% in Precious Metals – Here’s Why"] (gold first, then silver as a more speculative allocation), and the precious metal miners as one of the best places to allocate your investment capital.

*http://www.stockopedia.co.uk/content/inflation-deflation-and-precious-metals-what-a-future-might-look-like-for-your-bullion-and-your-mining-shares-62642/

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von Greyerz: Expanding Central Bank Balance Sheets Guarantee Massively Higher Inflation & Gold/Silver Prices – Here’s Why

Editor — Fri, 03 Feb 2012 03:19:49 +0000

I am astonished to see how much money the central banks are printing and how their balance sheets are expanding. We have the absolute perfect recipe for hyperinflation and thus a massive increase in the price of gold and silver.

So said Egon von Greyerz (www.goldswitzerland.com) in edited excerpts from an interview* with King World News.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

von Greyerz went on to say, in part:

It’s not just the ECB balance sheet that’s gone up in the last six months or even the last three months by hundreds of billions of dollars. It’s the same with the Fed, Bank of Japan, The Bank of England and the Swiss National Bank. They are all exploding. This can lead to only one thing - an explosion higher in gold and silver prices and the beginning of the massive inflation, which will lead to hyperinflation. Unfortunately, the market seems to be totally ignorant of this.

Regarding the Fed

The recent Fed action is totally consistent with what we’ve said for some time. The Fed knows they have to continue to print money and they will print unlimited amounts of money. On top of this, the U.S. is not taking any measures whatsoever to cut down on spending.

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Every year the Fed is printing between $1.5 trillion and $2 trillion. As you know, just during President Obama’s term the debt in the U.S. has gone up by about $4.5 trillion. This is about 30% of total borrowing in the U.S. It’s just incredible and it’s accelerating – but they are not the only central bank doing this. The ECB is in the same mess…

Regarding Gold

The move in gold, so far, looks extremely good. I’m always pleased that we don’t have a straight move up, although I do think we will have faster moves higher in the not too distant future. This is strong action with small corrections.

I think that within the next couple of months we will certainly be touching $1,900 and continuing higher from there. I don’t think $1,900 will be a stopping point for very long.

Regarding Silver

I really like the action of silver. Silver still hasn’t broken out like gold has, but I can see $37 being taken out within the next 30 days and then we will just start flying from there. It won’t take long to get up to $50 again.”…

Regarding Mining Shares

Regarding mining shares, I like them here. We’ve started buying them. We prefer physical bullion, but we’ve now started buying mining shares because they are massively undervalued and they will move a lot faster than the metals…

Conclusion

[As I said at the top of the article the actions of the central banks around the world] can lead to only one thing – an explosion higher in gold and silver prices and the beginning of the massive inflation, which will lead to hyperinflation.

*http://goldswitzerland.com/index.php/vongreyerz-gold-market-positioned-for-massive-upside-move/

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Related Articles:

1. Creating More Inflation is Now the Official Policy of the Fed

The Fed is completely convinced that without an inexorably rising rate of inflation there won’t be enough money made available to finance our rapidly increasing national debt. [As such, they have just] disclosed that they now have an inflation goal of at least two percent . As a result, we are stuck with a perpetually decreasing standard of living, a middle class that is on the endangered species list and provided the holders of U.S. dollars a target rate for its destruction…[Indeed,] Bernanke’s actions are so destructive to savers that I’m sure if he were a broker, he would be telling his clients to buy more gold.

2. Williams STILL Believes a Hyperinflationary Great Depression is Coming! Here’s Why

The U.S. economic and systemic-solvency crises of the last five years continue to deteriorate yet they remain just the precursors to the coming Great Collapse: a hyperinflationary great depression. The unfolding circumstance will encompass a complete loss in the purchasing power of the U.S. dollar; a collapse in the normal stream of U.S. commercial and economic activity; a collapse in the U.S. financial system, as we know it; and a likely realignment of the U.S. political environment.

3. Why More QE is Coming and What That Means for the Future Price of Gold

Most traders and some economists believe the Fed will step in with another round of Quantitative Easing (QE3) in the first half of 2012. This will pump up the stock market, particularly bank stocks, giving the impression that the US economy can’t be that bad, after all, [but in the process] debase the dollar and reduce purchasing power. [This, in turn, will result in higher]…inflation causing prudent investors to buy more gold. [Let me explain further what I see transpiring this quarter and why.] Words: 718

4. 2012: More Money-printing Leading to Accelerating Inflation, Rising Interest Rates & Then U.S. Debt Crisis! Got Gold?

Evidence shows that the U.S. money supply trend is in the early stages of hyperbolic growth coupled with a similar move in the price of gold. All sign point to a further escalation of money-printing in 2012…followed by unexpected and accelerating price inflation, followed by a rise in nominal interest rates that will bring a sovereign debt crisis for the U. S. dollar with it as the cost of borrowing for the government escalates…[Let me show you the evidence.] Words: 660

5. These Indicators Say Inflation to Go to 4% Soon – and 6% by 2014

In response to the financial crisis of 2008, the Fed injected unprecedented levels of liquidity into the banking system. While inflation has been modest to date, an analysis of similar periods in history shows that it typically takes more than two years for the impact on consumer prices to be seen. Consequently, we are now at a pivotal point in the current cycle as Fed stimulus began more than two years ago. [Let me explain further.] Words: 2755

6. Will This Be The USA in 2012?

The economic condition of the country continues to decline toward its rendezvous with an, as yet, unknowable catastrophe. Here is… a look (not a prediction) at a series of not improbable events that could develop [and which] would change our economic world overnight. Words: 1550

7. Coming Inflation to Make U.S. Dollar Not Only Worth Less – But Worthless!

The Federal Reserve is now trying to figure out ways to boost inflation expectations… so that Americans are encouraged to spend more before their money is worth less. Unfortunately, not only will their money soon be worth less, it will literally become worthless! Words: 904

8. News Flash! The Fed Has Declared That It MUST Create Inflation! Got Gold?

In… September’s Federal Open Market Committee minutes, the Fed officially announced that … “Unless … underlying inflation moved back toward a level consistent with the Committee’s mandate, they would consider it appropriate to take action soon” and take “… possible steps to affect inflation expectations.” That’s Fed-speak for a MANDATE TO CREATE INFLATION! Words: 694

9. The Fed MUST Inflate Away Debt or Default So MAJOR Inflation IS Coming!

If our assessment is correct, over the coming years, stocks, precious metals, commodities and real-estate will appreciate in value versus paper currencies. Furthermore, on a relative basis, we expect precious metals and commodities to outperform all other asset-classes. Conversely, we anticipate that cash and fixed income instruments will probably turn out to be the worst assets to own over the next decade. Words: 869

10. Major Changes in Inflation, Interest Rates, ‘Taxes’ and U.S. Dollar Coming

The economy is now so manipulated by politicians, big bankers, and special-interest groups that making sense of the markets has become an almost impossible feat. Which is to say, it must push even harder on the levers of its printing presses, further setting the stage for the massive period of inflation we continue to see as inevitable… and for a stunning rise in interest rates. Words: 968

11. Gold Price Keeps Going Higher As U.S. Debt Keeps Increasing – Got Gold?

Will our National Debt be trillions higher than today in a few years? If you think the answer is yes, than buying physical gold today is a good idea. It’s that simple. Just look at the chart. Words: 140

12. Here’s Proof: Global Central Bankers are Driving Up the Price of Gold!

Check out this chart (via Ed Yardeni) that shows the price of gold relative to U.S. Treasury and U.S. agency securities held by the Federal Reserve and other central banks – a VERY interesting correlation to say the least. Words: 260

Williams STILL Believes a Hyperinflationary Great Depression is Coming! Here’s Why

Editor — Mon, 30 Jan 2012 05:40:09 +0000

So says John Williams (www.shadowstats.com) in a recent interview: Read More @ KingWorldNews.com and in his previous articles:

“A Hyperinflationary Great Depression Is Coming to America by 2014! Here’s Why“
“Williams: U.S. Can Not Avoid Coming Financial Armageddon” and
“Williams: Expect Hyperinflation Within the Next 5 Years“
as posted on www.munKNEE.com.

Related Articles:

1. A Hyperinflationary Great Depression Is Coming to America by 2014! Here’s Why

The U.S. economic and systemic-solvency crises of the last four years only have been precursors to the coming Great Collapse: a hyperinflationary great depression. Outside timing on the hyperinflation remains 2014, but there is strong risk of a currency catastrophe beginning to unfold in the months ahead…moving into a full blown hyperinflation [in a few] months to a year… depending on the developing global view of the dollar and reactions of the U.S. government and the Federal Reserve. [Let me go into more detail.] Words: 2726

2. Williams: U.S. Can Not Avoid Coming Financial Armageddon

The U.S. economy is in an intensifying inflationary recession that eventually will evolve into a hyperinflationary great depression… [at which time] a $100 bill in the United States will become worth more as functional toilet paper/tissue than as currency. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, and gross mismanagement. The article is long but well worth the read. Words: 3565

3. Williams: Expect Hyperinflation Within the Next 5 Years

Pushing the big problems into the future appears to have been the working strategy for both the Fed and recent Administrations, yet the U.S. dollar and the budget deficit do matter, and the future is at hand. The day of ultimate financial reckoning has arrived, and it is playing out. Words: 1096

4. Hyperinflation to Occur in U.S. as Early as 2013! Here’s Why

In our estimation, the most likely time frame for a full-fledged outbreak of hyperinflation in America is between the years 2013 and 2015 [based on 12 warning signs that are on the horizon.] Americans who wait until 2013 to prepare, will most likely see the majority of their purchasing power wiped out. It is essential that all Americans begin preparing for hyperinflation immediately. Words: 2065

5. New Boom-bust Cycle Risks Hyperinflationary Depression and Much Higher Gold Price – Here’s Why

It is my view that the world has entered a new boom-bust cycle driven by oil prices. Oscillating oil prices – as opposed to credit cycles – will repeatedly stimulate and crash the highly levered global economy. Governments have not recognized this new cycle, and as part of a fruitless effort to retain control over deteriorating real growth and rising unemployment central banks will print more and more money, risking a hyperinflationary depression (stagflation at best). [As such,] the only respite for many investors is gold. [Let me explain.] Words: 925

6. 2012: More Money-printing Leading to Accelerating Inflation, Rising Interest Rates & Then U.S. Debt Crisis! Got Gold?

7. True Money Supply Is Already Hyperinflationary! What’s Next?

Economists are telling central banks to accelerate monetary growth even faster…to avoid a bank balance sheet implosion with all the deflationary consequences that implies. [As such,] the prospects for 2012, and thereafter, are for Total Money Supply to continue its hyperbolic trend – and when such a trend becomes established it becomes almost impossible to stop because the whole debt-based economy and the banking system would collapse. [Let me explain further.] Words: 550

8. How Likely Will Hyperinflation Occur in the U.S.?

There is a difference between inflation and hyperinflation…and there is no gradual path from one to the other. To wind up with true hyperinflation, some very bad things have to happen. The government has to completely lose control… the populace has to completely lose faith in the system… or both at the same time. [Are we there yet? Let's take a look.] Words: 1188

9. 21 Countries Have Experienced Hyperinflation In Last 25 Years – Is the U.S. Next!

[Hyperinflation is not an unusual phenomenon. 32 countries have experienced hyperinflation over the last 100 years of which no less than 21 have experienced it in the past 25 years and 4 in the past 10 years. The United States is one of the few countries to have experienced two currency collapses during its history (1812-1814 and 1861-1865). Is it about to happen again?] Words: 1450

10. The Great American Apocalypse 2011-2012: The Video

Unlike the credit crisis that triggered the last major stock market collapse … the “Fiscal Armageddon” that could “dwarf 2008″ will be intensely personal. Millions of Americans will face the specter of lost incomes … lost savings … lost buying power … lost homes … lost liberty. View the video for all the details.

11. Will This Be The USA in 2012?

12. Coming Inflation to Make U.S. Dollar Not Only Worth Less – But Worthless!

13. Washington Politicians Will Cause Rampant Inflation With Their In-Action and Mis-Action!

The National Inflation Association (NIA) believes it is very unlikely that our representatives in Washington will have the political backbone and courage to implement any of the National Commission on Fiscal Responsibility and Reform’s proposed cuts in domestic and defense expenditures and increases in tax revenues. [Instead, as the NIA sees it,] the U.S. is on a path towards exploding budget deficits in the years ahead that could cause an outbreak of hyperinflation by the end of calendar year 2015. Words: 887

14. Remedies to Fiscal Gap Guarantee Hyperinflation!

Boston University economist, Prof. Kotlikoff, maintains that the U.S. cannot end its fiscal crisis by doubling taxes, as the International Monetary Fund suggests, or further stimulus spending [as Bernanke is doing] because it will simply increase the debt. [Instead he has some radical proposals of his own.] Words: 704

15. The Fed MUST Inflate Away Debt or Default So MAJOR Inflation IS Coming!

16. Investors Should Prepare Now for Coming Inflationary Depression – Got Gold?

It is an old saying that the “road to hell is paved with good intentions”. Well, in recent years, that road has been changed to a super-highway! America was put on that super-highway a few years ago and right now we are traveling at break-neck speed toward the financial abyss. Words: 1132

17. What’s Coming: A Hyperinflationary or A Deflationary Depression?

While I believe that the US is heading towards a Weimar style hyperinflationary depression there are several developments that point to the possibility of another deflationary depression, similar to the 1930’s. Words: 858

18. Finally: A Clear Understanding of Hyperinflation, Money Demand & the “Crack-Up Boom”

Some people consider a rise in overall prices of 10 percent per month (which implies an annual rate of price increases of around 214 percent) as hyperinflation; others indentify hyperinflation as a monthly price rise of at least 20 percent (which implies an annual increase in prices of nearly 792 percent). Words: 1353

19. Coming Inflationary Depression Means Future Commodities Super-boom

Mladjenovic explains his contention that we are in for a inflationary depression and, as such, investors should put their money in those things that will benefit from both inflation and strong demand and supply and stay away from where there is a deflationary impact, such as real estate. Words: 825

$10,000 Gold Debunked

Editor — Tue, 24 Jan 2012 00:14:46 +0000

$10,000 (U.S.) gold [is] a gold bug’s dream come true [but] investors would be wise to have far have more modest expectations. [Let me explain why.] Words: 1000

So says Rudy Luukko (www.morningstar.com) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Luukko goes on to say, in part:

[While] ten grand a [troy] ounce is an astronomical price for gold and would be more six times higher than bullion was fetching this week it does make for a catchy book title and marketing campaign. [That is just what] Toronto-based Bullion Management Group Inc. [BMG] and its president and CEO Nick Barisheff…[was doing when he] presented his unabashedly bullish case for bullion to an affluent audience of about 400 at an Empire Club event in Toronto [recently. See his speech here. After all,] what’s good for gold is good for BMG and its chief bullion booster.

Since the launch of its first bullion fund in 2002, BMG has grown to $540 million in assets under management. Along with its mutual fund flagship, the $369-million BMG BullionFund which holds equal amounts of gold, silver and platinum, BMG also offers the $126-million BMG Gold BullionFund, and its BullionBars program that enables investors to make direct purchases of bullion.

Later this year, Barisheff plans to publish a book entitled $10,000 Gold: The Inevitable Rise and Investors’ Safe Haven. His thesis is that amid rising government debt and weakening currencies, gold bullion will soar to stratospheric heights.

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Barisheff puts forward a scary scenario of hyperinflation. Governments, he says, are debasing their currencies by cranking up the printing presses to cope with slowing growth and spiralling debt. “This is exactly what we’re seeing today,” he said. “Gold can rise as high as currencies can fall.” [ Most of the "Related Articles" hyperlinked below fully support that contention.]

Gold’s glittering performance over the past decade has enhanced its allure, attracting new investors and speculators alike during a period when stock markets have been disappointing. In the 10 years ended Dec. 31, gold has had a compound annual return of 19 per cent in U.S. dollars.

BMG’s aggressive time frame for predicting $10,000 gold strains credibility. “Nick says if the economic conditions with regard to currency creation continue as they have, then we could see $10,000 gold within approximately five years [that is, by 2016 latest],” Robert Para, BMG’s vice-president of marketing, told me. [He is not alone. Other analysts also see gold going to $10,000 - or higher - as well of which 8 see such happening within the next year or two.

Since gold now fetches about $1,650, a surge to $10,000 over five years would represent an eye-popping annualized return of about 44%. To put that number in perspective, if crude oil rose at the same rate, we’d be paying $7.50 a litre at the gas pumps five years from now.

Even if one accepted the scenario of an inflationary Armageddon, diversification would still be prudent. Sure, gold serves as an inflation hedge, but so would a fund providing exposure to a wide range of commodities and hard assets, including precious metals.

Looking back at the past decade, Canadian investors should also put gold’s gains in perspective. Since bullion is customarily priced in U.S. currency, the returns of the past 10 years don’t look as good [for non-U.S. residents or other countries who have their national currencies tied to that of the US dollar. [For example,] when expressed in Canadian dollars, gold bullion has a 10-year compound annual return of ["only" 14%]…

None of [the above] debunks the notion that gold, when held as part of a diversified portfolio, has investment merit [and, while] gold pays no income, in this low-rate environment there’s less income to be sacrificed by holding gold bullion, or gold coins, or bullion funds. Even so, investors would be wise to have far have more modest expectations for gold. [After all,] bullion prices can also experience sharp losses as we’ve seen recently with gold [currently down approximately 15%] from its record high in early September.

*http://www.thestar.com/business/article/1115050–gold-returns-not-all-they-appear-to-be

Why spend time surfing the internetlooking for informative and well-written articles on the health of the economies of the U.S., Canada and Europe; the development and implications of the world’s financial crisis and the various investment opportunities that present themselves related to commodities (gold and silver in particular) and the stock market when we do it for you.We assess hundreds of articles every day, identify the best and then post edited excerpts of them to provide you with a fast and easy read.Sign-up for Automatic Receipt of Articles in your Inbox or via FACEBOOK | and/or TWITTER so as not to miss any of the best financial articles on the internet edited for clarity and brevity to ensure you a fast an easy read.

Related Articles:

1. Nick Barisheff: $10,000 Gold is Coming! Here’s Why

This is not a typical bull market. Gold is not rising in value, but instead, currencies are losing purchasing power against gold and, therefore, gold can rise as high as currencies can fall. Since currencies are falling because of increasing debt, gold can rise as high as government debt can grow. Based on official estimates, America’s debt is projected to reach $23 trillion in 2015 and, if its correlation with the price of gold remains the same, the indicated gold price would be $2,600 per ounce. However, if history is any example, it’s a safe bet that government expenditure estimates will be greatly exceeded, and [this] rising debt will cause the price of gold to rise to $10,000…over the next five years. (Let me explain further.] Words: 1767.

2. Buy Gold NOW Ahead of Further QE – Here’s Why

Due to high unemployment and a weak recovery world central bankers are focused on weakening their currencies to boost exports. [As such,] I think [even more] quantitative easing and other currency intervention is in our future…[and this will further increase]…both inflation and the price of gold. Let me explain with a few charts.] Words: 350

3. These 5 Apocalyptic Engines Causing Hyperbolic Growth in US Money Supply

I recently wrote an article showing how US True Money Supply (TMS) appeared to be growing at a hyperbolic rate [see here], and that gold was also on a hyperbolic course…Hyperbolic growth in the quantity of money ends with hyperinflation… [and] both TMS and the dollar price of gold are pointing to a hyperinflationary outcome. This article explains why this might be so. Words: 764

4. True Money Supply Is Already Hyperinflationary! What’s Next?

5. 2012: More Money-printing Leading to Accelerating Inflation, Rising Interest Rates & Then U.S. Debt Crisis! Got Gold?

6. Economic/Currency Collapse Could Bring Martial Law and Confiscation of Your High-priced Gold! Got Silver?

Do we really honest-to-God no-fingers-crossed cherry-on-top believe that the powers-that-be will simply allow us to mosey up to the cashiers cage and redeem or convert our Gold for whatever monetary unit reigns supreme or is created [should our current financial system and currencies collapse? As such,] IF there comes a time when the best move forward is to sell most of our Gold and switch to another asset class, one more likely to survive the transition intact, will we be able to see this as obvious and a no brainer? [Let me explain what could well happen and the effect such a development would have on all things Gold.] Words: 3037

7. What is Money – Really – and Why Do We Need to Own Gold – Really?

Have you ever wondered what money really is [and why we need to own some gold as a result]? You’ll notice that everyone you read has a strong opinion , but who’s right? [Let look at the situation and see if we can come to an answer that we both can agree on.] Words: 3086

8. Egon von Greyerz Interview on Future QE, Hyperinflation and the Price of Gold

A final or total catastrophe of the currency system will occur as a result of unlimited money printing that will lead to hyperinflation. Stock markets will benefit temporarily from this QE [but we expect that the] markets will fall 90% against gold in the next few years. The correction in the precious metals [will] likely [soon] be over and we should see the metals going to new highs in 2012. Words: 450

9. Continuing High Unemployment = More Money Printing = Higher Gold & Silver Prices

The Federal Reserve has a dual mandate set by Congress of maximum employment and stable prices. During Chairman Bernanke’s most recent press conference he indicated that the Federal Reserve has done a better job of maintaining price stability while falling short of fostering maximum employment. [As such,] we believe the Federal Reserve will continue to increase the monetary base and weaken the dollar as long as unemployment remains elevated. While the economy (measured by real GDP) and the unemployment rate have not benefited from a substantial increase in the monetary base, the price of gold and silver have benefited from money printing. We believe this statement is quite important for monetary policy and for investors. [Let us explain further.] Words: 388

10. Where Is This Unprecedented Global Financial Crisis Headed? A Retrospective from Alf Field

Everyone must be wondering where this “unprecedented global financial crisis”, (the World Bank’s words), is heading. What follows, for what they are worth, are my cogitations on this crisis. Words: 1641

11. Continuing High Unemployment = More Money Printing = Higher Gold & Silver Prices

12. Why Negative Real Interest Rates + Stimulative Money Supply = $10,000/ozt. Gold

Question: What do you get when you mix negative real interest rates with stimulative money supply efforts by global central banks? Answer: An exceptionally potent formula for higher gold prices that could send gold to the unimaginable level of $10,000 an ounce. [Let me explain further.] Words: 1049

13. These 8 Analysts See Gold Going to $3,000 – $10,000 in 2012! Here’s Why

Back in 2009 I began keeping track of those financial analysts, economists, academics and commentators who were of the opinion that it was just a matter of time before gold reached a parabolic peak price well in excess of the prevailing price. As time passed the list grew dramatically and at last count numbered 140 such individuals who have gone on record as saying that gold will go to at least $3,000 – and as high as $20,000 – before the gold bubble finally pops. Of more immediate interest, however, is that 8 of those individuals believe gold will reach its parabolic peak price in the next 12 months – even as early as February, 2012. This article identifies those 8 and outlines their rationale for reaching their individual price expectations. Words: 1450

14. Gold Bounce Confirms Bull Market Intact on Its Way to $3,000 – $10,000

With what is happening in the price of gold these past few weeks/months it is imperative to take a look at the big picture and in doing so it shows that we are still very much in a long-term bull market. Let’s take a look at some charts that clearly outline where we are currently and where we could well be going. Words: 925

15. Goldrunner: Gold Now on Its Way to $3,000+ By mid-2012

Our work with Gold is based on a “Model” off the late 70’s Gold Bull that has been replicating nicely since we started the Fractal Work with Gold back in 2002 and 2003. Short-term volatile moves in Gold, as we have seen over the past weeks, do not affect our projections based on the model, leaving the expectation of a move in Gold up to $3,000 into mid-year intact as outlined in our previous article entitled Gold Tsunami: on the Cusp of $3000+? Words: 996

16. Alf Field: Gold Going to $4,500/ozt. in Next Wave Towards Parabolic Peak

Once this present correction in gold has been completed it should [undergo] the largest and strongest wave in the entire gold bull market…to around $4,500 with only two 13% corrections along the way. [Let me explain how I came to that conclusion.] Words: 1900

17. Gold: Will it Go to $12,500 – $24,000 – or $39,000/ozt. – by End of Decade? Here’s the Rationale for Each

From questions whether gold is in a bubble to predictions that soaring prices are just around the corner, one thing is clear: a new phase of awareness for gold is upon us. How far might it move before these troubling times are over? [Let's take a close look at a variety of factors and scenarios before coming to a conclusion.] Words: 5717

18. Gold Will Reach $3,000/$4,000/$5,000 Before This Bull Market Is Over! Here are 12 Factors Why

I believe that the price of gold will… reach… $3,000, $4,000, and even $5,000 [per troy] ounce…during the course of this long-lasting bull market, a bull market that still has years of life left to it…[although] prices will remain extremely volatile – with big swings both up and down along a rising trend…The future price of gold is a function of past and prospective world economic, demographic, and political developments [and in this article] I review some of these developments and trends – so that you can come to your own “golden” conclusions. Words: 3800

19. New Analysis Suggests a Parabolic Rise in Price of Gold to $4,380/ozt.

According to my 2000 calculations, if interest rates and inflation stay constant over the next 2 years, we could expect to see (with 95.2% certainty) a parabolic peak price for gold of $4,380 per troy ounce by then! Let me explain what assumptions I made and the methods I undertook to arrive at that number and you can decide just how realistic it is. Words: 740

20. $10,000 Gold is Coming in 2012/13! Here’s Why

I am increasingly confident that the consequences of fragile sovereign debt, precious metals market manipulation, insufficient physical supply, and the need for a safe haven investment refuge, will contribute to rampant price inflation and drive precious metals bullion and mining stock to a parabolic peak price of $10,000 sometime in 2012 or 2013 at the [...]

21. Is Gold On Its Way to $3,000, $5,000, $10,000 or Even Higher? These Analysts Think So

140 analysts maintain that gold will eventually reach a parabolic peak price of at least $3,000/ozt. before the bubble bursts of which 100 see gold reaching at least $5,000/ozt., 17 predict a parabolic peak price of as much as $10,000 per troy ounce of which 12 are on record as saying gold could go even higher than that. Take a look here at who is projecting what, by when and why. Words: 676

True Money Supply Is Already Hyperinflationary! What’s Next?

Editor — Mon, 16 Jan 2012 02:45:34 +0000

Economists are telling central banks to accelerate monetary growth even faster…to avoid a bank balance sheet implosion with all the deflationary consequences that implies. [As such,] the prospects for 2012, and thereafter, are for Total Money Supply to continue its hyperbolic trend – and when such a trend becomes established it becomes almost impossible to stop because the whole debt-based economy and the banking system would collapse. [Let me explain further.] Words: 550

So says Alasdair Macleod (www.FinanceAndEconomics.org) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Macleod goes on to say, in part:

Here is the one chart which defines the background to all events in the coming years. It is the Mises Institute’s True Money Supply (TMS) for the US dollar. TMS consists of cash, checking accounts and no-notice deposit accounts, as well as a few other minor cash balances. It represents the actual cash and electronic cash in the system that is instantly available for purchases of goods and services, and the chart goes back to 1959.

The dotted line is the exponential growth trend, in other words the maximum rate of growth that can continue for ever. This trend was valid until mid-2002, since when TMS has accelerated at a faster rate, telling us that TMS growth entered a hyperbolic phase when the Fed eased rates in the wake of the dot-com collapse. Put another way TMS is already hyperinflationary.

The second chart [below] shows gold’s established hyperbolic course. This chart was put together by Armand Koolen… In Koolen’s words, the hyperbola fits in with the official gold price in the early 1900s, the revaluation to $35 in 1934, the onset of the secular bull market in 2001, the bottom in October 2008 and its approximate track since then.

Koolen’s discovery is interesting. Singularity for this curve, or the point where the gold price goes to theoretical infinity, is in February 2014, only 26 months away. Unless this long-term trend is somehow broken, gold is also telling us the dollar is heading for hyperinflation.

It would be a mistake to vest magical powers in such an extraordinary discovery, but given TMS itself is showing signs of going hyperbolic we must sit up and take notice and we know how difficult it is to stop printing money at an accelerating rate: after all, the ECB’s reluctance to do so is threatening to collapse the eurozone. Will the Fed pull the trigger on the U.S. economy or chicken out? The answer is clear.

Conclusion

We can expect a further escalation of money-printing in 2012…followed by unexpected and accelerating price inflation. Nominal interest rates will then rise at the market’s behest, bringing a sovereign debt crisis for the dollar with it as the cost of borrowing for the government escalates.

Why spend time surfing the internet looking for informative and well-written articles on the health of the economies of the U.S., Canada and Europe; the development and implications of the world’s financial crisis and the various investment opportunities that present themselves related to commodities (gold and silver in particular) and the stock market when we do it for you. We assess hundreds of articles every day, identify the best and then post edited excerpts of them to provide you with a fast and easy read.

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*http://www.financeandeconomics.org/Articles%20archive/2011.12.17%20TMS-hypo.htm

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1. 2012: More Money-printing Leading to Accelerating Inflation, Rising Interest Rates & Then U.S. Debt Crisis! Got Gold?

2. Alf Field’s 7 “D’s” of the Developing Disaster Revisited

When the supply of something is increased sharply relative to demand, the value of that commodity will decline. If the supply continues to increase rapidly and indefinitely, then that item will become worth less and less, with the potential to finally become nearly worthless. This is the Developing Disaster facing the US Dollar and the world. This is the factor that could become the single most important criterion in investment allocation decisions and possibly even for individual financial survival…[Let me explain this further by reviewing the 7 major problems facing the U.S. (and thus the world) and how they all will lead to problem #7 - devolution.] Words: 1520

3. Why Hyperinflation is Not Likely – Let Alone Imminent

The National Inflation Association (NIA) has just posted an article* which makes a number of interesting arguments for the advent of hyperinflation and, while I agree with the conclusion that we could potentially face such an event, I see it as just one of a few possible outcomes. Let me comment on the specific points in the NIA article. Words: 1666

4. Continuing High Unemployment = More Money Printing = Higher Gold & Silver Prices

5. Where Is This Unprecedented Global Financial Crisis Headed? A Retrospective from Alf Field

6. Egon von Greyerz Interview on Future QE, Hyperinflation and the Price of Gold

7. Why Negative Real Interest Rates + Stimulative Money Supply = $10,000/ozt. Gold

Gold is NOT a Perfect Inflation Hedge! Here’s Why

Editor — Sun, 15 Jan 2012 05:12:54 +0000

Almost any traditional inflation hedge [such as gold, silver as well as real estate, stocks or whatever,] has difficulty in reaching the break-even point on an after-inflation and after-tax basis when we take into account the pervasive problem of hidden “inflation taxes”…If our future is one of high inflation, then whether and how you deal with inflation taxes may be one of the biggest determinants of your personal standard of living for decades to come… Why? Because government fiscal policy destroys the value of our dollars and government tax policy does not recognize what government fiscal policy does, and this blindness to inflation means that attempts to keep up with inflation generate very real and whopping tax payments, on what is from an economic perspective, imaginary income. [Let me illustrate that fact with three examples and suggest some remedial measures.] Words: 3085

So says Daniel R. Amerman, CFA (www.danielamerman.com) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Amerman goes on to say, in part:

A time of severe monetary crisis could be the most dangerous time in our lifetimes to be uninformed [and those] investors who are unaware of this profoundly unfair tax, or who choose to ignore it,…[will] become helpless victims of the government. When investors become aware of perhaps the number one danger to long term precious metals investment, and adapt their strategies to deal with this danger – then they can unlock the true investment power of gold during times of currency crisis and turn potential $10,000…an ounce gold prices into the once-in-several-generation wealth creation opportunities that they should be.

Illustration #1: $2,000 An Ounce Gold

In the first step of our illustration, we will consider a situation and how it affects the life savings of two investors. [In this] situation… 50% of the value of the dollar gets destroyed by inflation. This is not a radical assumption [because] with modern…fiat currencies the value of money is always destroyed by inflation. The only question is one of speed. If we look at the United States, 80% of the value of the dollar was destroyed by inflation between 1972 and 2007 as measured by official government statistics. For this illustration we will assume there is a smaller loss in value of the dollar, but that it happens much faster – because the U.S. is in much worse shape right now than it was in 1972 in some key ways.

Kate is well educated, keeps up with the newspapers, and is concerned that the global financial crisis may get worse. [As such,] she liquidates her riskier investments, and to play it “safe”, moves her money into a $100,000 money market account.

For our illustration we will assume Kate’s money is safe – but the value of her money is not protected. Inflation destroys 50% of the value of the dollar. Kate still has her full $100,000, but it will now only buy what $50,000 used to. Kate has lost 50% of the value of her investments to inflation (for simplicity, we’re leaving out assumptions on interim money market interest payments).

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Jack also reads the mainstream media, but reads more widely as well, and believes that high inflation is the logical outcome of the financial crisis. Jack, therefore, takes his $100,000 and buys 100 ounces of gold at $1,000 an ounce (using round numbers for ease of illustration).

We will assume that gold performs exactly like many investors hope it will, that is, it acts like “real” money and maintains its purchasing power in inflation-adjusted terms. Now, if the dollar is only worth half of what it used to be, and gold does maintain its purchasing power, there is only one way for gold to do so, and that is for gold to sell for twice the number of dollars per ounce than it did before. Therefore, gold goes from $1,000 an ounce to $2,000 an ounce. Those dollars are only worth fifty cents (in today’s terms), so we multiply $2,000 times 50%, and we end up with $1,000. Jack’s 100 ounces of gold at $2,000 each will buy exactly same amount of real consumption, of real goods and services, as gold used to buy for him at $1,000 an ounce. Some would say that this is an example of a perfectly successful inflation hedge, where gold has performed exactly like it is supposed to.

The powerful advantages of having your money in an inflation hedge when entering a period of substantial inflation, can be seen in the chart below, which compares what happened with Jack and Kate.

By placing her money in what is conventionally considered one of the safest possible investments, during a time of high inflation, Kate has lost 50% of her net worth…yet, when it comes time to fill in her tax return she starts with $100,000 in her money market fund and ends with $100,000 in principal in her money market fund, as far as the government is concerned, there is no loss to be deducted. Kate still has every dollar she started with.

Jack decides to lock in his gains by selling his gold investment…When it comes time for Jack to fill in his tax return, it shows that he bought his gold for $100,000 and he sold it for $200,000, thereby generating a $100,000 profit. Effectively, the government looks at Jack’s having dodged the destruction of the value of the nation’s money, and says “Great move Jack, you made a lot of money! Now give us our share.”

In bullion form gold is currently taxed as a “collectible” in the U.S., with a 28% capital gains tax rate, or almost twice the long-term capital gains tax rate on investments that the financial industry and government prefer. We’ll call it 30% to allow for some state capital gains taxes, and to keep the numbers round. However, this rate is not sufficient to cover government spending as… [all the various levels of government federal, state and municipalities are] currently running enormous deficits [and, as such,] it is reasonable to expect potentially much higher taxes in the not-too-distant future, both in the U.S. and other nations. For illustration purposes then, we will assume a 50% future combined capital gains tax rate on gold – which is not unrealistically high from a historical perspective.

So for Jack, as shown in the chart below, paying a 50% tax rate on $100,000 in profits means $50,000 in required tax payments, and subtracting those taxes leaves Jack with $150,000.

Our final step is to adjust for a dollar being worth 50 cents, so we multiply $150,000 by 50%, and we find that Jack’s net worth after-inflation and after-tax has fallen to $75,000. When it comes to what matters, the purchasing power of what our money will buy for us, then Jack didn’t double his money, instead he lost a quarter of what he started with. Jack just encountered inflation taxes – and they ran him over.

Turning Gold Into Lead

From a gold investor’s perspective, $2,000 an ounce gold may seem like a dream come true and when we look at the results, $100,000 turning into $200,000, gold does look like a great investment [- that is] until we remember that the reason gold went to $2,000 an ounce was because of inflation and [when] we adjust our investment results for inflation, we [only] break even. [That being said,] while not a net improvement relative to today, this outcome is highly desirable compared to what happened to Kate. Gold did indeed act as “real money”.

Unfortunately, we then run into one of the most deeply unfair and little understood aspects of inflation and investing in anticipation of inflation.

Government fiscal policy destroys the value of our dollars
Government tax policy does not recognize what government fiscal policy does
Government blindness to inflation means that attempts to keep up with inflation generate very real and whopping tax payments, on what is from an economic perspective, imaginary income
These inflation taxes turn gold from a shimmering dream to a lead weight around one’s neck, and mean even a successful inflation hedge can lead to a devastating loss in net worth in after-tax and after-inflation terms.

Illustration #2: $5,000 An Ounce Gold

What if gold goes much higher than $2,000 an ounce? What if the dollar falls in value to twenty cents, and we assume that gold again performs as a perfect inflation hedge, and keeps its value? If the dollar drops to 1/5 its value, then the only way gold can keep up is to rise to 5X the dollar price, which means $5,000 an ounce gold.

First let’s take a quick look at Kate. She still has $100,000 in her money market account, each of those dollars are now worth twenty cents, and the real value of Kate’s “safe” investment is now down to $20,000. Kate has taken an 80% hit to the purchasing power of her net worth.

Meanwhile, Jack has enjoyed some fantastic investment results from his investment acumen. With 100 ounces of gold at $5,000 an ounce, Jack is now half way to being a millionaire! Jack is ecstatic, at least until he tries to spend some of that half million dollars, and finds out what it will buy for him after he has paid his taxes.

Let’s repeat our chart from above, but with gold at $5,000 an ounce. When it’s time to file his tax return, Jack now has a $400,000 profit to report. Jack therefore has to write the government a check for $200,000 for taxes due, leaving him with $300,000.

When we adjust for a dollar being worth twenty cents, then Jack’s real after-inflation and after-tax net worth, what he can buy in today’s dollar terms after paying the government, is down to $60,000.

The difference between gold going to $5,000 an ounce, and gold going to $2,000 an ounce, is that Jack loses more of his real net worth. Jack loses 40% of the purchasing power of his net worth at $5,000 an ounce instead of 25%. The lead weight of inflation taxes is still around Jack’s neck, heavier than ever…

Illustration #3: $100,000 An Ounce Gold

Let’s explore what happens if there is hyperinflation and a dollar becomes worth a penny. For Kate, the situation becomes even bleaker as the $100,000 in her money market account will now only buy what $1,000 used to. Kate has lost 99% of her net worth to inflation. Instead of a comfortable nest egg for retirement, she is impoverished, as are the many millions of others who were not prepared for hyperinflation.

If gold (or silver) serves as “real money”, and maintains its purchasing power even as paper money collapses, then to offset a dollar becoming worth 1/100th of what it used to, gold must climb to a dollar value that is 100X greater than what it was. [Therefore,] gold must go to $100,000 an ounce in order to maintain the same purchasing power as $1,000 an ounce gold today. Once again, we’re assuming that gold acts as a perfect inflation hedge.

Jack’s 100 ounces of gold are now worth a cool $10 million! Jack decides to sell his gold locking in his $9.9 million in profits, as illustrated below, then the government looks at his profit and demands its $4,950,000 share. This still leaves Jack a millionaire multiple times over, as he has $5,050,000 in after-tax proceeds until we adjust for that technicality of a dollar only being worth a penny and [then] we find that instead of entering the ranks of the ultra-wealthy, Jack’s net worth on an after-tax and after-inflation basis has fallen by almost 50%, from $100,000 to $50,500.

Jack has made one of the most brilliant market timing moves of all time but the end result is that he loses almost half of his starting net worth in purchasing power terms. What’s going on?

What’s Wrong Here?

Something seems seriously, seriously wrong here. Jack bets his net worth that inflation will skyrocket, and he buys an inflation hedge in the form of gold. His prediction comes true, a high rate of inflation does occur, and his gold investment does perform as a perfect inflation hedge. Yet the ending bottom-line is that Jack loses a big chunk of the value of his starting net worth, and the better that the gold performs and the more spectacular his returns, the bigger the chunk of his real net worth that Jack loses.

This relationship is summarized in the chart below. When Jack earns a 100% profit — he loses 25% of his net worth. When Jack earns a 400% profit — he loses 40% of his net worth. When Jack earns a 9900% profit — he loses 50% of his net worth. [Get the picture? The more profit he generates, the more net profit he loses!]

Inflation Taxes: A Pervasive & Difficult Problem

Inflation taxes are a basic fact of life which investors pay every year when there is inflation. These taxes are entirely real and are deeply painful when we look at the world in terms of what really matters – which is not the dollar amount of our savings, but what our savings will buy for us.

Real as they are, however, inflation taxes are not a line item on our tax returns. There’s no box that we check that says go to form “30236 IT” to calculate our inflation taxes. There is no check we write that’s specifically made out to inflation taxes. There’s never any discussion in the newspapers or magazines about how much money the average investor pays every year in inflation taxes... but inflation taxes are irrefutable.

Whenever you look at investment results on an after-tax and after-inflation basis in an environment of inflation, then inflation taxes make their ugly appearance. However, while our illustration of Jack and Kate was not all that complicated to follow, the numbers involved are just sophisticated enough where they are rarely acknowledged in conventional personal finance. That combination of just a slight bit of sophistication, while never explicitly appearing on a tax return, means that likely in excess of 99% of the general population is blissfully unaware of inflation taxes and, as such, represents a major opportunity for governments…even if the average senator, representative or member of parliament has no better understanding than the general public.

Indeed…when we take inflation taxes into account, then the real tax rate on investments in the U.S. has historically been about 256% higher than the statutory rates.

History is bad enough, but as we illustrated with Jack and Kate, the higher the rate of inflation – the worse inflation taxes get. Staying ahead of inflation is hard enough but even trying to tread water, to stay even with inflation, becomes extremely difficult when you have the lead weight of inflation taxes around your neck, pulling you down. The higher the rate of inflation, the heavier the weight of inflation taxes and the more difficult they are to overcome…

Reversing Inflation Taxes & Creating Wealth

There are two very sad aspects to what we covered in this article.

Unlike most of their peers, millions of responsible, knowledgeable people are seeing through the soothing, complacent illusions created by the government and Wall Street. They understand the grave threat to the value of their money and their investments. They are moving to the real tangible protection of gold and other precious metals. Unfortunately, in the process, they are setting themselves up for victim status as illustrated in this article. Yes, the “Jacks” of the world are likely to do far, far better than the “Kates”, but despite the dizzying numbers involved with how high gold can go [Read These 8 Analysts See Gold Going to $3,000 – $10,000 in 2012! Here’s Why] with a truly high rate of inflation — when we look to what our investments will buy for us after we’ve paid our taxes, our status is still that of a victim.
The other sad aspect is that this simply doesn’t have to be. There are two things that gold does spectacularly well during times of financial and monetary crisis. Using these properties of gold, with a monetary crisis of historic proportions, a gold investor can come to the crisis not just with their net worth intact but possibly even having built wealth on a multigenerational scale…

Let gold do what gold does best. Let gold provide safety and security for you. Unleash the wealth creating abilities of gold during peak inflation to multiply your real wealth – but don’t rely on gold as an inflation hedge and don’t ignore inflation taxes.

To have a chance of beating inflation taxes, we not only have to realize they exist, but we need to thoroughly understand our opponent. Our opponent is an enormously powerful government that is deliberately blind to the effects of inflation. Government fiscal policy destroys the value of our money. Government tax policy is officially blind to inflation. So a crushing hidden tax is created that keeps us from maintaining the purchasing power of our savings, with our attempts to survive the deadly effects of inflation merely acting to increase government tax revenues. [Read Stealth Taxation in the Form of Financial Repression is Coming! Here’s Why – and How]

Conclusion

The key to prospering in a world of inflation taxes is to understand that regardless of its strength, a blind opponent is ultimately a weak opponent. Through careful study and by focusing very closely on the intersection between taxes, net worth and inflation, we can discover how to turn inflation into gains in real wealth, to which the government is entirely blind. We can learn to reverse inflation taxes, so that instead of paying real taxes on imaginary gains, we are paying imaginary taxes on real gains [which would be] entirely legal - with every cent of taxes due paid in full – because remember, inflation taxes don’t appear on your tax return, and neither does their reversal!

*http://danielamerman.com/articles/GoldTaxes1.htm

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11. Another Economic Collapse and Great Depression are Coming! Here’s Why

It really is hard to find the words to describe the true horror of the national debt of the U.S. The U.S. government has been on the greatest debt binge in all of human history, and a day of reckoning is coming that is going to be so painful that it is going to shock America to the core. We have lived so far above our means for so long that none of us really has any concept of what “normal” is like anymore. The United States has enjoyed the greatest party in the history of the world, but now this decades-old party is ending and the bills are coming due. Our current system is headed for an inevitable collapse. There is no way of getting around it – a horrific economic collapse is coming [and] it is going to change the world. You better get ready. [Let me explain further.] Words: 1771

12. 2012: More Money-printing Leading to Accelerating Inflation, Rising Interest Rates & Then U.S. Debt Crisis! Got Gold?

13. Alf Field’s 7 “D’s” of the Developing Disaster Revisited

14. How Likely Will Hyperinflation Occur in the U.S.?

These 5 Apocalyptic Engines Causing Hyperbolic Growth in US Money Supply

Editor — Sat, 14 Jan 2012 05:33:01 +0000

I recently wrote an article showing how the U.S. True Money Supply (TMS) appeared to be growing at a hyperbolic rate [see here], and that gold was also on a hyperbolic course…Hyperbolic growth in the quantity of money ends with hyperinflation… [and] both TMS and the dollar price of gold are pointing to a hyperinflationary outcome. This article explains why this might be so. Words: 764

So says Alasdair Macleod (www.FinanceAndEconomics.org) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Macleod goes on to say, in part:

There are five apocalyptic engines pushing the growth in US money supply:

the government’s budget deficit,
the government’s debt trap,
the financial condition of the banks,
the delusion of Keynesian solutions and, lastly,
simple compounding arithmetic.

1. The U.S. government collects only 55c in taxes for every dollar spent. It is relying on economic recovery to reduce welfare payments and increase tax revenue to close the gap. This prospect is receding and establishment economists advise against cutting government spending.

2. The US government’s debt trap is concealed by the exceptionally low interest cost of funding. The only reason this cost is not higher is the Fed maintains a zero interest rate policy. However, as surely as night follows day, price inflation will start rising as monetary inflation feeds through, forcing the Fed to allow interest rates to rise long before any economic recovery occurs. The rise in interest costs will escalate the budget deficit, which will be financed, directly or indirectly by further monetary expansion.

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3. The banks’ balance sheets are considerably weaker than stated, because of unrealised losses on assets, loan collateral and write-downs on their own debt. Real estate collateral write-downs alone probably exceed bank equity of $1,400bn. On an honest analysis the US commercial banks are collectively bankrupt. To simply survive the banks have no alternative other than to reduce loan exposure while requiring continuing monetary support from the Fed.

4. Keynesian economists, aware of the banks’ difficulties are terrified of bank credit contraction. For this reason, the macroeconomic establishment strongly promotes the expansion of narrow money to buy off a deflationary depression.

5. As the purchasing power of the dollar falls - the result of past monetary expansion – [even] more dollars have to be issued to cover increased government costs. Past inflation becomes a compounding factor behind price rises.

Conclusion

Essentially, money will be printed at an accelerating rate to buy time rather than face the three realities of:

government default,
an over-indebted private sector and
a bankrupt banking system.

The Keynesians are belatedly aware of the dangers and see no alternative to printing as much money as is required to defer these problems. The monetarists in the central banks are hesitant, torn between Keynesian fears of outright deflation and worries about the rate of monetary expansion so far. [Nevertheless], the history of monetary inflation confirms that once it enters a hyperbolic phase, it is almost impossible to stop. Armchair critics have derided the stupidity of central banks and economists in past hyperinflations, such as in Weimar Germany, Argentina and Zimbabwe.

The truth is that when hyperinflation has become visible at the price level, it has already gone past the point of no return at the monetary level.

*http://www.24hgold.com/english/news-gold-silver-gold-price-set-for-hyperbolic-increase.aspx?contributor=Alasdair+Macleod&article=3749038912G10020&redirect=False

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Related Articles:

1. 2012: More Money-printing Leading to Accelerating Inflation, Rising Interest Rates & Then U.S. Debt Crisis! Got Gold?

2. Alf Field’s 7 “D’s” of the Developing Disaster Revisited

3. Why Hyperinflation is Not Likely – Let Alone Imminent

4. Continuing High Unemployment = More Money Printing = Higher Gold & Silver Prices

5. Where Is This Unprecedented Global Financial Crisis Headed? A Retrospective from Alf Field

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2012: Is This How U.S. Financial Crisis Will Unfold Later This Year?

Editor — Sat, 31 Dec 2011 07:59:58 +0000

As economic and political matters become more desperate in the U.S., so will what the government considers acceptable. If a debt default cannot be engineered via continuous inflation as the Fed’s current money-printing is attempting to do, it will occur via a direct repudiation of obligations or a quasi-surreptitious one such the hypothetical one I present in this article. Here is… a look (not a prediction) at a series of not improbable events that could develop [and which] would change our economic world overnight [ - and your financial well-being too]. Words: 1365

So said Monty Pelerin (pseudonym) (www.EconomicNoise.com) in edited excerpts from an earlier article* which became the most highly read article to appear on www.munKNEE.com in 2011.

Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) edited the article below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Pelerin goes on to say, in part:

If just some of the following situations occur in 2012:

1. Official unemployment numbers approach 14% with unofficial estimates of unemployment ranging from 30 -35% – with no signs of a turnaround in employment.

2. The Dow-Jones average hovers around 4,500.

3. Official GDP declines for four consecutive quarters. Independent analysts estimate the true numbers have been declining for two years.

4. Tax collections continue to drop while Federal spending accelerates. The deficit is expected to exceed $3 Trillion. Federal debt exceeds $16 Trillion.

5. The rate of foreclosures double from the previous high…

6. Personal and corporate bankruptcies reach levels thought impossible.

7. Major companies leave or announce intentions of leaving the U.S. [in record numbers] to avoid confiscatory taxes and regulations.

8. College students, unable to find jobs, emigrate to more favorable economies.

9. California, Illinois and several other states plus thousand of municipalities are in bankruptcy court with many states and municipalities using IOUs for payments.

10. Welfare and unemployment checks are two months behind on average.

11. Social Security checks and Medicare reimbursements are delayed.

12. Some private pension funds reduce their payments by 10 – 25%.

13. Hospitals and doctors refuse to see Medicare patients until Federal reimbursements, already eight months behind schedule, are paid.

14. Public unions across the country are on strike. Large areas are without teachers, police, firemen or hospital staff.

15. Food stamps are rejected at grocery stores because of slow reimbursement and government default risk.

16. Martial law has been imposed in several cities to counter rioting and looting.

17. Isolated runs on banks have occurred. Many withdraw funds from the banking system in fear of its collapse with mattress-stuffing considered less risky than zero interest returns from banks.

18. The dollar is being rejected by local merchants around the world.

19. The price of oil is priced in a weighted basket of currencies of which only 20% represents dollars.

20. Foreign disinvestment in Treasuries has been accelerating as a result of trade wars, concerns of default and the desperate need for funding at home.

21. Gold is selling at $2,800 per ounce.

22. The economy continues to deteriorate despite QE on a scale not even Paul Krugman would have recommended.

23. Treasury and toxic asset purchases have swelled the Fed’s balance sheet from $800 billion in 2008 to $6 Trillion.

24. The deflationary spiral continues despite incredible money-creation.

25. Banks continue to add more excess reserves.

26. Creditworthy borrowers refuse to borrow.

[Bottom line:] People and businesses everywhere have hunkered down, waiting for the next shoe to drop.

… then I can just imagine what might hypothetically unfold politically and what possible (likely?) emergency measures might be imposed to remedy the situation, as follows:

The President of the United States Joe Biden (in office for six months after former President Obama resigned “to spend more time with his family”) appears, along with Treasury Secretary Chris Dodd and Fed Chairman Barney Frank, and issues the following short, terse message:

“The Federal Government, as a result of our national economic emergency, has passed new legislation which will:

recall all U.S. dollars effective immediately
replace U.S. dollars with new currency known as the JohnLawDollar
exchange each old dollar for three JohnLawDollars i. e. 1 for 3
automatically convert all amounts in checking accounts and savings accounts by 10AM tomorow
require all currency in circulation domestically be taken to a bank and converted at the new exchange rate into the new JohnLawDollar within the next 48 hours. Dollars in foreign countries will have 72 hours to convert
All old dollars will be unredeemable and no longer legal tender after the deadlines
All future contractual obligations will be honored in JohnLawDollars.

This action is necessary in order to revive our economy from a downturn nearly as severe as the Great Depression.

Your new dollars are triple what your old dollars were. With your larger amount of money, we encourage you to go out and buy stuff, lots of it. Your cooperation will revive the economy.”

The Intented Solution – and Reality – of Such an Emergency Measure

[Such an] announcement [would] represent a (undeclared) U.S. default on 67% of its contractual obligations – including Treasuries, Social Security, Medicare and welfare payments [effectively reducing] all debt…by 2/3rds. The debt problem (public and private) is what is killing the economy [and] with one short proclamation [as put forth above,] the debt problem [would be] reduced dramatically.

Tripling the money supply would eventually triple prices and wages. Home prices would soar while mortgage obligations would remain fixed and payable out of incomes that would be three times what they are now. The government would have cut its obligations dramatically and be able to pay its bills.

The government’s gain would come at the expense of Social Security, Medicare and welfare recipients. Borrowers would gain only what lenders lose…There would be no net value added. Every gain would be someone else’s loss. Only the amounts “stolen” from foreign investors might be claimed to help the U.S. The rest would be nothing more than a redistribution of wealth.

The Likelihood of Such An Emergency Measure

Many believe that the government would never do such a thing. The reality is that this has been their proposed solution for the past couple of years. It is exactly the policy they have tried to implement. There are only two differences between the current policy and the hypothetical one – effectiveness and timing.

Fed Chair Ben Bernanke has clearly been trying to inflate the economy. He and other supposed experts regard inflation as the way out. It is only Mr. Bernanke’s ineffectiveness as to why we don’t have inflation. The hypothetical measure [outlined above] is nothing more than the preferred strategy compressed in time. The effects, other than timing, would be identical. Lew Rockwell’s thief analogy is appropriate. What is the difference between a thief that breaks into your house every night and steals a little versus the one who backs up a moving truck and takes everything? Eventually you end up with an empty house. Only the timing differs.

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As economic and political matters become more desperate, so will what the government considers acceptable. If a debt default cannot be engineered via continuous inflation, it will occur via a direct repudiation of obligations or a quasi-surreptitious one like the hypothetical one presented. Viewed from this perspective, I don’t think such a move or something approximating it is out of the question.

The political class’ survival is at stake. Eventually anything that extends their rule will be tried. It is not concern for you or the economy that is driving policy, but the preservation of power of an increasingly wounded power elite. Their survival is now driving policy. Unfortunately what benefits them is generally harmful for the economy.

It is improbable that Bernanke’s strategy will gain enough traction, i.e., inflation fast enough…[and, as such,] a home-run somewhat like the one discussed becomes more likely. It will be a surprise when it comes.

Conclusion

Nothing discussed here or tried by the Administration will solve the economic problems of the country. What I have suggested is what I think could happen. It is not to be confused with good economic policy. Both the hypothetical measure and the more conventional inflationary strategy will lead to hyperinflation…

Protect yourself, your family and your wealth in that order. Do not expect any help from Washington. The political class is not your friend, especially when their survival is at stake.

*http://www.economicnoise.com/2010/08/10/desperate-economic-action-ahead/

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2. 2012: More Money-printing Leading to Accelerating Inflation, Rising Interest Rates & Then U.S. Debt Crisis! Got Gold?

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8. Global Money Printing Is A Recipe For A Global Economic Nightmare

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9. Coming Inflation to Make U.S. Dollar Not Only Worth Less – But Worthless!

10. Remedies to Fiscal Gap Guarantee Hyperinflation!

11. Coming Hyperinflation Will Make You A Billionaire By 2020!

The National Inflation Association (NIA) believes that if the Federal Reserve doesn’t reverse course immediately, we are on a direct path to all Americans becoming billionaires by the year 2020, if not much sooner. Being a billionaire in dollars won’t mean anything. The wealth of Americans later this decade will be calculated based on how much gold and silver they own. We are at the beginning stages of a massive worldwide rush out of the U.S. dollar and into gold and silver. Words: 1021

12. News Flash! The Fed Has Declared That It MUST Create Inflation! Got Gold?

13. Warning Signs Suggest U.S. Headed for a Complete Societal Collapse!

There are now countless warning signs all around us on a daily basis that the U.S. is headed for a complete societal collapse. Words: 573

14. Williams: U.S. Can Not Avoid Coming Financial Armageddon

15. The Fed MUST Inflate Away Debt or Default So MAJOR Inflation IS Coming!

16. Investors Should Prepare Now for Coming Inflationary Depression – Got Gold?

17. Major Changes in Inflation, Interest Rates, ‘Taxes’ and U.S. Dollar Coming

18. NOTHING Can Stop Coming Inflation: Bank for International Settlements Report

A recent research paper* by the Bank for International Settlements, entitled “The Future of Public Debt: Prospects and Implications” paints a terrifying prospect for the inhabitants of most of the developed world with deficits spiralling out of control for every western industrialized country under study and inflation a foregone conclusion as a result. Words: 1128

19. The Dollar is Doomed!

I would prefer a scenario in which rates rise slowly, and the dollar — as well as the economy — stabilize gently; while the alternative makes me wealthy, unfortunately, its actualization necessarily means I will be forced to watch everyone around me suffer – and that’s a troubling thought. Words: 1480

20. U.S. Dollar In A Race To The Bottom With Other Currencies And The Winner Will Be Gold

[What we are experiencing these days] is a race to the bottom among global currencies. Whenever any nation wants to gain a little bit more of an edge in global trade they push the value of their currency down just a little bit more so that the products and services produced by that nation will be less expensive for other nations [and, as such,] other nations will buy more of those products and services. When exports go up, employment goes up and more wealth flows into the country. Who is the winner in all of this? Well, that is easy. Gold, silver and other precious metals will continue to be the winners as fiat currencies all over the globe continue to decline in value. Words: 1430

21. Stealth Taxation in the Form of Financial Repression is Coming! Here’s Why – and How

22. We Have Reached the End of the Road and are Staring into the Abyss! Got Gold?

With most of the world’s major economies as well as the financial system bankrupt…most people will rely on governments and central banks to save us but how can anyone possibly believe that totally incompetent and clueless politicians and central bankers could solve the problem they created in the first place… The main objective of governments is to stay in power and thus to buy votes, therefore they are incapable of taking the right decisions and the opposition, aspiring to power, is even less suitable since they will lie through their teeth and promise the earth in order to be elected. So what is the solution? Read on! Words: 2391

23. Niall Ferguson: U.S. Playing “Russian Roulette” Assuming Interest Rates Will Remain Low

Countering Krugman’s argument that today’s low interest rates show that no one is worried about lending money to us and, therefore, that we should borrow and spend our way to prosperity, Ferguson argues that today’s interest rates are irrelevant. When countries get into trouble, he says, they get into trouble quickly – the way Greece and…

24. These 10 Charts Illustrate America’s Disastrous Fiscal Condition – Take a Look (and Weep)!

By now nobody should have any doubts as to just how disturbing America’s fiscal debacle is. For those naive and innocent few who still think there is a Hollywood ending with a pot of gold awaiting everyone at the end of the rainbow, we present the following “10 essential fiscal charts” from the Pew Policy Institute.

Nothing Has Changed: The Smart Money is STILL Bullish on Gold

Editor — Tue, 08 Nov 2011 07:10:02 +0000

With continued strong investment demand for physical gold in the face of heightened macro uncertainty and unprecedented, globally-coordinated monetary stimulus and a US dollar that will continue its path lower, the best performing assets at present are gold, emerging market equities denominated in local currencies, and commodity related stocks. [Let me explain why that is the case.] Words: 560

So says Matthew T. Schroeder (www.anomalousinvestments.com) in an article* that highlights aspects of a report from Paul Tudor Jones of Tudor Investment Corporation which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

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Schroeder goes on to say, in part:

US Dollar
Jones believes that the US dollar will continue its path lower as global flows seek high yielding assets and sovereign reserve managers diversify their growing US dollar-based reserves. Reserve accumulation and diversification trends will be persistent and mutually reinforcing with the direction of the dollar.

Gold
Jones maintains that during times of overt monetization, hyperinflation, or when questions arise about the stability of the banking system, gold prevails as a more reliable store of value.

Compared to the long-run average, gold [still] appears to be [relatively] cheap. Gold’s value should increase as its scarcity relative to printed currencies increases.

On the demand side, much of the recent move to record prices in gold reflects continued strong investment demand for physical gold in the face of heightened macro uncertainty and unprecedented, globally-coordinated monetary stimulus.

Gold Price Outlook
In Jones’ opinion…the scope for increased investment demand [in gold] over the coming years will continue much stronger than the potential for new supply. As a result, incremental new demand must buy gold from current holders.

With a macro backdrop that suggests gold is undervalued, the transfer of gold from current holders to its new owners will likely not occur at, or near, current prices.

Summary & Implications
The views of Tudor Investment Corporation are similar to those heard…from other prominent hedge fund managers and institutional money managers such as John Paulson of Paulson & Co., and David Einhorn of Greenlight Capital who are all of the opinion that, in this environment, investments in liquid gold securities and exchange-traded funds are, and will continue to be, in high demand…[In addition,] because the investable gold sector is relatively small, and because there is a scarcity of quality, liquid, gold mining companies, some are even willing to venture into Africa-focused miners…

In summary, in The Great Liquidity Race, the smart money is clearly increasingly bullish on the prospects for gold.

*http://www.anomalousinvestments.com/documents/Paul_Tudor_Jones_The_Great_Liquidity_Race.pdf (Matthew T. Schroeder is the President of Anomalous Investments, an independent advisory service focused on uncovering select, under-researched Special Situations in gold, silver, oil, natural gas and agriculture.)

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2. The Dollar is Toast! The Future is Silver

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Paul Volcker’s View on Inflation Not Right for These Times – Here’s Why

Editor — Sun, 18 Sep 2011 07:40:46 +0000

Paul Volcker has written an Op-Ed for The New York Times entitled “A Little Inflation Can Be a Dangerous Thing,” in which he argues – and we really won’t dispute it – that allowing inflation above institutionally accepted levels of say, 2 percent, can indeed be a slippery slope, and a very bad thing, but times have changed since Mr. Volcker decided that he would do whatever it took to slay inflation. [These days a little inflation might be a very good thing. Let me explain.] Words: 1636

So says Dr. Stephen Leeb (www.leeb.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Leeb goes on to say, in part:

As far as we can tell, Volcker’s argument doesn’t really break any new ground nor does it change the fact that he was, in many ways, the most courageous and perhaps best central banker we’ve ever had. (He was the Chairman of the Federal Reserve under Presidents Jimmy Carter and Ronald Reagan from August 1979 to August 1987, and is widely credited with ending high levels of U.S. inflation during the 1970s and early 1980s.)

There is strong evidence, for example, that the median income of the bottom 70 percent of the population is no higher today than it was at the end of the ‘70s. The fruits of the last 30 years, in other words, have gone almost exclusively to the top 30 percent. What’s striking is that over the past 12 years, census data shows that median income for all households has dropped something on the order of 5 percent and these numbers do not include the disproportionate pain associated with higher prices for basic essentials such as energy, nor do they take into account the difficulty we’re facing in creating solutions for even a modicum of growth.

Last week, another article in the NY Times noted that China is solidifying its near-monopoly on rare earths, and that as a result, even prices for products like compact fluorescent lights have been going up sharply. It’s not clear whether or not such energy-saving fluorescent lights are even worth it anymore, so great have been the increases in the price of rare earths.

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We think the country is at a difficult point, and believe that Charles Evans, President of the Federal Reserve Bank of Chicago and voting member of the Federal Open Market Committee (FOMC), probably does have a point when he asserts that we have to focus on growth and unemployment, and be willing to tolerate somewhat higher inflation over the near term. Volcker obliquely refers to this in his Times Op-Ed piece.

What’s noteworthy here is that it’s one thing when liberal Economist Paul Krugman advocates tolerating some inflation, quite another when it is central banker Charles Evans. We realize the risks but this is a situation better known as a Morton’s Fork, which is a choice between two equally unpleasant alternatives, each road leading to a different sort of hell.

Opting for [no more than] 2 percent inflation virtually cedes control of our world to the Chinese, and virtually assures an ever-declining standard of living for the broad range of the public. On the other hand, letting inflation rise reduces some of our debt burden and may buy us the kind of time we desperately need to catch up.

We can count any number of initiatives akin to the Manhattan Project this country needs to engage in, perhaps in concert with other countries from Europe or even from the developing nations. For example, drilling in ultra-deep water for oil; finding minerals and other vital commodities in hard to find places, such as the bottom of the ocean; and massive research efforts in areas like nano-silver, graphene and other materials.

These are tough times. Inflation could get out of control [but] one point we want to emphasize is that not every instance of inflation – even, in the worst case, hyperinflation – has an unhappy ending. Virtually every member of the Clinton administration involved with Latin American policy in the ‘90s had his or her own experience with hyperinflation in that region. One of those countries, Brazil, which in 1990 alone had an inflation rate of 30,000 percent (shades of the Weimar Republic), has become a world economic leader.

Conclusion

The point we’re stressing here is that inflation could buy us time that we otherwise could not have. If you don’t believe us, again, check not just the price of gasoline, but compact fluorescent light bulbs and anything else having to do with rare earths, which includes [a] panoply of products. You have to wonder how we are going to solve these problems without spending, or how the vast majority of our population is going to tolerate continuous declines in their standard of living…

We’ve been talking about this razor’s edge for more than a decade, arguing that Goldilocks was dead and buried, and sooner or later, we’d have to choose between inflation and deflation. We hope that Charles Evans, who has suggested what might be a slippery slope, rules the day – not out of any enthusiasm for inflation, but just in recognition of the stark choices we face.

A bet on inflation, which may be the most rational policy decision, continues to inform our belief that currencies will continue to be devalued. It therefore follows that gold, which has been in a more than decade-long upturn, along with silver and other precious metals, will remain the best investment you can make to protect yourself and your family…

In closing, we should note that we are not approaching this challenge in political terms, i.e., from some kind of ideologically-driven perspective of a liberal bent, but rather from a pragmatic standpoint of finding the best solution to our terribly serious current circumstances. If someone like Ron Paul or any other free-market advocate can convincingly show us how we could arrive at an effective solution to the problems we face purely through the operation of the private sector and the free market, he would have my vote. We’re concerned with what works for us as Americans, not as proponents of this or that political position.

*http://www.leeb.com/long-term-growth/paul-volcker%E2%80%99s-warning-09-19-11

Related Articles:

1. Any Way You Look At It – Inflation Is On The Rise!

We can make some inferences about how inflation is impacting our personal expenses depending on our relative exposure to the individual components [and any way you look at it inflation is on the rise - so let's take a look at the particulars.] Words: 769

2. Inside The Consumer Price Index: What Inflation Really Means To You

The Fed justified the last round of quantitative easing “to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate”. In effect, the Fed is trying to increase inflation, operating at the macro level but what does an increase in inflation mean at the micro level — specifically to your household? [Let's take a look.] Words: 1555

3. Higher Lumber Costs Today = Higher Housing Costs Tomorrow = Higher Inflation in 2012/13

Housing makes up 42% of the Consumer Price Index (CPI) with the rest of it – food, energy, clothing, recreation, education, transportation, toys, cosmetics, etc. – making up the other 58%. [The current] softness of housing prices is artificially suppressing the growth of the CPI inflation rate [but with the coming increase in lumber costs that is about to change. Let me explain] Words: 772

4. Environment is Inflationary, NOT Deflationary – Here’s Why

While it is true that the average consumer isn’t (and won’t soon be) spending as much as he used to, it’s not because he’s waiting for bargains. No, it’s because he’s out of credit, he’s unemployed, his house, car, motorcycle, boat, and plasma television have all either been repossessed or foreclosed upon, and his wife just left him. He’s not exactly in the mood for shopping. He’s not waiting for bargains. He’s waiting for a miracle – and I don’t think they sell those at the mall. Words: 1582

The CPI, TIPS and Protecting Yourself From Inflation: What You Need to Know

Many investors are worried about inflation and, as a result, are considering buying inflation indexed bonds and other inflation protected investment vehicles. They may be setting themselves up for significant losses, however, because of the way the government is now calculating the CPI, and the further changes being proposed. In the opinion of this writer, the CPI calculation appears to be inaccurate and, as a result, such investments may not be appropriate inflation hedges. [Let me explain.] Words: 1533

6. Real-time Inflation Data is Now Available – Finally

Inflation is a significant measurement for the economic health of countries around the world but rates are often reported weeks after data is collected. To address this problem, two professors at MIT Sloan School of Management have launched the Billion Prices Project which is the first website to publish daily price indexes and provide real-time inflation estimates around the world. Words: 825

7. These Indicators Say Inflation to Go to 4% Soon – and 6% by 2014