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
So says the National Inflation Association (www.nia.us) in edited excerpts from their 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 report’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.
The NIA goes on to say:
NIA’s Proposal to Prevent Rampant Inflation
The only way the U.S. will be able to prevent hyperinflation is if:
1. the U.S. government dramatically cuts spending across the board immediately and if
2. the Federal Reserve raises interest rates from near zero percent (where they have been for nearly two years) to a level that is higher than the real rate of price inflation.
Considering that the Federal Reserve still claims to fear deflation and just announced massive quantitative easing, we see very little chance of any major interest rate hikes taking place during the next six months.
Commission’s Proposal is Too Little Too Late to Avoid Rampant Inflation
Even if the commission’s proposals were implemented [according to their plan] they would be too little too late because it calls for cuts ($100.2 billion in domestic savings and $100.1 billion in defense savings – plus another like amount in increased tax revenues – by fiscal year 2015) to be gradually implemented beginning in early 2012 and it includes absolutely no meaningful cuts to social security. The only proposed major changes to social security are raising the retirement age to 68 in year 2050 and 69 in year 2075. There is absolutely no chance of the U.S. dollar surviving past the year 2020 unless much more drastic spending cuts than the commission has proposed are implemented within the next twelve months.
Commission’s Proposal Under-estimates Interest Payments on National Debt
The commission says that if we fail to implement their proposed spending cuts, we will likely see interest payments on our national debt reach $1 trillion by 2020 based on 5.3% interest rate on our 10-year treasury bills. As the NIA sees it interest payments on our national debt are likely to reach $1 trillion in 2015 because, by 2015, we expect the 10-year yield on U.S. treasuries to be substantially higher then 5.3%.
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During the 1970s, the last time we had an inflationary crisis like the one we are rapidly approaching, the yield on the 10-year bond exploded to a highs of 7.47%. With the Federal Reserve likely to be forced to raise the Fed Funds Rate to around this same level, based on our projected public debt in 2015 of $14 trillion, our interest payments will likely rise to $1.046 trillion or 29% of projected tax receipts, and this is a very conservative estimate.
Food Inflation Crisis Coming in 2011 – and Hyperinflation by 2015
The Federal Reserve’s M2 money supply [will experience an annualized increase of]… 13.25% monetary inflation over the next year. The M2 multiplier, or M2 divided by the monetary base, currently stands at 4.426, compared to a long-term average of 10 and, based on a projected monetary base of $2.5851 trillion and a long-term average M2 multiplier of 10, the M2 money supply has a chance of rising as much as 194% to $25.851 trillion over the next few years.
In the short-term, if the M2 multiplier remains at 4.426, it is likely the M2 money supply could rise to $11.4416 trillion next year, up 30.22% from its current level. With the UBS Bloomberg CMCI Food Index currently up 30.5% from its low in August, it appears as though the market has already factored the upcoming 30.22% increase in the M2 money supply into agricultural commodity prices. Even if food manufacturing companies and retailers agree to accept 2/3 of these rising costs in the form of lower profit margins, Americans will still see about a 10% rise in retail food prices come early 2011.
Washington Politicians Will Cause Rampant Inflation With Their In-Action and Mis-Action!
The upcoming food inflation crisis and eventual hyperinflation will come as a direct result of our representatives in Washington trying to prevent a much needed recession by propping up real estate prices through bailouts, stimulus plans, tax rebates, and other wasteful programs. The only thing that our elected representatives care about is remaining in power. They only see our current problems and not the problems that will arrive next as a result of their actions. Their goal is to make the average American as dependent on them as possible…
Massive price inflation [is just around the corner!]