Saturday , 10 December 2016


We Desperately Need Higher Inflation – Here’s Why and 3 Ways It Could Easily Be Accomplished

James RickardsA new IMF report highlights the fact that global debt is now $152 trillion and the global debt-to-GDP ratio is 225%….The fact is there’s no feasible combination of growth and taxes that will make this debt burden sustainable. There are only two ways out — actual default by nonpayment, or de facto default by inflation. [This article analyzes] 3 new ways to get inflation on a national and global scale that have not been tried yet but you can see them coming a mile away if you understand elite jargon and the elite message system.

The comments above and below are excerpts from an article by Jim Rickards (DailyReckoning.com) which may have been enhanced – edited ([ ]) and abridged (…) – by  munKNEE.com (Your Key to Making Money!)  to provide you with a faster & easier read.  Register to receive our bi-weekly Market Intelligence Report newsletter (see sample here , sign up in top right hand corner.)

One of the persistent myths since the Panic of 2008 is that the global financial system has deleveraged and the financial world is now a safer place. Nothing could be further from the truth and this debt exists in a low-rate environment. Even the slightest increase in interest rates would blow up the debt levels even more. The fact is there’s no feasible combination of growth and taxes that will make this debt burden sustainable. There are only two ways out — actual default by nonpayment, or de facto default by inflation.

There are three ways to get inflation that have not been tried yet but you can see them coming a mile away if you understand elite jargon and the elite message system…

  1. “helicopter money,”
  2. special drawing rights and
  3. raising the price of gold.

1. Helicopter money results when governments run larger deficits and central banks print the money to cover the deficits. Central banks have been printing money since 2008. The problem is banks won’t lend it and people won’t spend it.

Helicopter money cuts out the middleman. Governments just borrow and spend the money directly without waiting for the banking system to do the job. Central banks pick up the tab.

2. Special drawing rights (SDRs) are just world money printed by the IMF. The one advantage of SDRs is that very few people understand them, and there’s no political accountability. SDRs can work hand in hand with helicopter money.

If governments want to spend more but legislatures won’t let them, the IMF can hand out SDRs, and governments can spend those without waiting for their own legislatures to act. The IMF acts like the “central bank of the world,” and no one can stop them….

3. Raising the price of gold is the easiest way to get inflation. A higher dollar price for gold is practically the definition of inflation. Governments can do this in a heartbeat.

Investors have often taken the view that governments try to suppress the price of gold, not raise it. That’s true when governments are trying to lower inflationary expectations but today they have the opposite problem – governments are trying to defeat deflationary expectations – and there’s no better way to do that than let the price of gold go up in a convincing way.

The Fed would just declare the price of gold to be, say, $5,000 an ounce and make the price stick using the gold in Fort Knox and their printing press to maintain a two-way market. The Fed could sell gold when it hits $5,050 an ounce and buy gold when it hits $4,950 an ounce. That’s a 1% band around the target price of $5,000 an ounce. The band and the use of physical gold will make the target price stick.

If you don’t believe the above could happen, just check the history books. In 1934, President Roosevelt raised the dollar price of gold 70% and deflation stopped on a dime. The economy took off and so did the stock market. It works.

Conclusion

That’s the elite plan. Helicopter money, SDRs and a higher gold price are the trifecta of how to get inflation when all else fails. These policies can be done individually or in combinations. This will be playing out in the next few years…

Regards, Jim Rickards for The Daily Reckoning

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