STOP. READ: Unavoidable Hyperinflation

No cute pictures, today. The graphs below do not relate to immediate text and are from Shadowstats.com.  This entry is an essential read.  Skip it at your peril. This is the ultimate word to the wise. 

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Not long ago, I heard the term "normalcy bias" which is used to describe why people  (a vast majority) don't prepare or don't react intelligently. They refuse to expect their happy, normal life can be different. They merely keep busy like mice in a wheel.   People run to the entrance of a building in a fire rather than to the EXIT door next to them.  They don't think; they die. 

If you do not come to grip with what is about to happen, you risk the welfare of your family and yourself.  I am not talking about some more economic troubles where we can gripe as we eat a steak. So far, Main Street hasn't seen anything. We are in a tempest and the government is raising the sails; there isn't even time to replace the Keystone Politicians. 

The point of this blog has always been to look at the message, not the messenger. I know precious few of us don't do that as I am readily dismissed, even by friends, who, at the same time, will tell you I am usually right, they just don't want to hear what I have to say.

So, if you have to use this messenger system of analysis, instead of thinking for yourself, then consider I often report unusual facts that tend to be based on real data.  I attempt to bring information from real sources, though I like to annoy people with inflammatory stuff so don't hold that against me. Below, I am bringing you severe and clear economic analysis from John Williams.

Take note of events and real data.  Please descend from illusion, your normalcy mindset, and from believing what you hear on TV.  Statistically, you voted for Obama - can you say why? Can you say why you didn't see a useful idiot surrounded by Marxist revolutionaries? Remember how clear you were when you voted. You wanted a black guy and change. Does that make sense, now?

We are not in normal times. Those who fail to plan will suffer - you are the ultimate mark.  Those who prepare will survive. Those who invest outside the norm, will do very well.

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John Williams, aka Walter J. (not E.) Williams, runs the Shadow Government Statistics site where he attempts to assemble useful numbers. I have used the site often; indeed, in the last entries I used his M3 graph. Essentially, he finds government statistics a lie. Even the outfit that calls recessions has abandoned following governmental numbers.

Usually, the lie is by a redefinition of terms to meet political needs, such a need to reduce Social Security payments by altering the basis. To understand this, look at the CPI graph above.  The CPI definition has been changed so there is no longer an apples to apples contract. The 1980's definition tells us there is a 6% inflation (which is not the true meaning  of "inflation") in prices. 

The government said there was no inflation, so there was no increase in Social Security payments in 2010.  This lie stole money from us and it is only the beginning. The gangsters control the game.

If you click on the title, the long, Williams' updated analysis of our economic condition will be found.  I post a small section below. If you click on the "statistics a lie" you will find an interview where Williams explains the how the lying liars lie.  

Essentially, Williams forecasts, without reservation, hyperinflation.  He suggests interruption in the food supply and an inability for banks to keep up, which is a double hit on those who stayed in the dollar.

For those living in the United States, long-range strategies should look to assure safety and survival, which from a financial standpoint means preserving wealth and assets. Also directly impacted, of course, are those holding or dependent upon U.S. dollars or dollar-denominated assets, and those living in "dollarized" countries.

• Get out of the dollar and anything denominated in the dollar. 
• Use foreign accounts and stocks 
• Take any fixed percentage loan you can get
• If you can't bring yourself to jump out of 401 (k)s etc., then invest serious money against the U.S. dollar to protect yourself. (Look into ETFs)
• Stash food in he basement
• Don't rely on you bank or ATM. 
• Junk silver
• TIPS are only something to do, they rely on government CPI stats so inflation will not be properly affected. This is a weak move. 

In his radio interview, Williams says we are at a time when you must think of MAINTAINING your wealth, not investing for profit.  

We are at a crossroad that few still living in the U.S. could even understand. In the hyperinflation of the Weimar, Germany,  you negotiated your meal price before eating, to make sure the price was locked in. It could jump by meal's end.

You are perfectly within your rights to 

assume the government, that is Goldman Sachs, has figured out how to run the Keynes Ponzi scheme without a mathematical end. If you believe that, don't prepare at all.  Perhaps, this is social Darwinism at its most profound. 

If you think juggling chain saws is not a good career more, read on. Study. Do something this week.

...Hyperinflation Nears. Before the systemic solvency crisis began to unfold in 2007, the U.S. government already had condemned the U.S. dollar to a hyperinflationary grave by taking on debt and obligations that never could be covered through raising taxes and/or by severely slashing government spending that had become politically untouchable. The U.S. economy also already had entered a severe structural downturn, which helped to trigger the systemic solvency crisis. 

The intensifying economic and solvency crises, and the responses to both by the U.S. government and the Federal Reserve in the last two years, have exacerbated the government’s solvency issues and moved forward my timing estimation for the hyperinflation to the next five years, from the 2010 to 2018 timing range estimated in the prior report. 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, gross mismanagement, and a deliberate and ongoing effort to debase the U.S. currency. Accordingly, risks are particularly high of the hyperinflation crisis breaking within the next year.  

Numerous foreign governments have offered unusually blunt criticism of U.S. fiscal and Federal Reserve policies in the last year. Both private and official demand for U.S. Treasuries increasingly is unenthusiastic. Looming with uncertain timing is a panicked dollar dumping and dumping of dollar-denominated paper assets. Such is the most likely event to trigger the onset of hyperinflation in the year ahead. 

The U.S. has no way of avoiding a financial Armageddon. Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to cover obligations. The alternative would be for the U.S. to renege on its existing debt and obligations, a solution for modern sovereign states rarely seen outside of governments overthrown in revolution, and a solution with no happier ending than simply printing the needed money. With the creation of massive amounts of new fiat dollars (not backed by gold or silver) will come the eventual destruction of the value of the U.S. dollar and related dollar-denominated paper assets.

What lies ahead will be extremely difficult, painful and unhappy times for many in the United States. The functioning and adaptation of the U.S. economy and financial markets to a hyperinflation likely would be particularly disruptive. Trouble could range from turmoil in the food distribution chain to electronic cash and credit systems unable to handle rapidly changing circumstances. The situation quickly would devolve from a deepening depression, to an intensifying hyperinflationary great depression.

While the economic difficulties would have global impact, the initial hyperinflation should be largely a U.S. problem, albeit with major implications for the global currency system. For those living in the United States, long-range strategies should look to assure safety and survival, which from a financial standpoint means preserving wealth and assets. Also directly impacted, of course, are those holding or dependent upon U.S. dollars or dollar-denominated assets, and those living in "dollarized" countries.

The balance of this special report is broken into the following sections:

• Defining the Components of a Hyperinflationary Great Depression

• Two Examples of Hyperinflation

• Current Economic and Inflation Conditions in the United States

• Historical U.S. Inflation: Why Hyperinflation Instead of Deflation

• U.S. Government Cannot Cover Existing Obligations

• Hyperinflationary Great Depression

• Closing Comments

Tick, tick, tick

Greg sends this warning along.  Note the tag line:  Preparing Americans for Hperinflation.  


The financial players who control countries and banks, not through being wise, think they can keep playing cards that have been described as Keynesian tools, when they are, in fact, attempts to avoid losses to the large banks by taking it from you.


They play these cards mechanically and avoid anything approaching a philosophy or even an understanding of human nature. On top of that, they are grievously mistaken about Keynes.  As much as we can hoot him down for the mess we are in, we must admit he allowed for these cards to be played when the budget was near balance, not trillions in the red.


The normacy bias assures us that we can work things out, that our people work hard, that our businesses are vibrant and flexible. This is a good thought, but it is not an axiom, not when unrestrained bureaucrats and bankers keep doubling down. The world is a Madoff scheme


World powers are literally banking on America's ability to create wealth, all the while its administration is trying to reduce the process, apparently intentionally. 


Our goverment is a confluence of children and Goldman Sachs.  Indeed, we are presented with a Supreme Court nominee who was an advisor to Goldman Sachs from 2005 - 2008, having just had a show trial to show how serious the administration is about reigning them in. She owes her career to Larry Summers.  


Over and over:  Harvard and Goldman Sachs.  Can you see how Hitler played his cards to become a fascist leader?  He turned on the power structure, the self-indulgent oligarchs, and led the people against them.


If anything, Goldman Sachs is letting Mr. Obama play president as it runs the world's economy. As noted in the video I sent out today, kings usually don't exist; they front for oligarchs.  


In Albany today, state union members were protesting, having been asked to work a day without pay, each week because their greed has caused the state to become insolvent. Imagine how these hostile socialists will be when their entitlement nation ends. End it must, one way or the other.


Think Greece has nothing to do with us?


Lest we forget:  buy junk silver

May 10, 2010

The World's Fiat Currency System Risks Collapse

On February 12th, NIA released an article entitled, "Greece Distracting from Real Debt Crisis in U.S." in which we said, "We hope that Greece doesn't get bailed out, because a bailout would cause foreign investors to become more irresponsible than ever and create even greater moral hazards. Unfortunately, not only is it likely that Greece will get bailed out, it's possible our own Federal Reserve will get involved. The U.S. Federal Reserve has the ability to make loans to foreign central banks without disclosure to the U.S. public. European banks have already benefited $50 billion from the U.S.'s bailouts of AIG, so it's not out of the realm of possibility that the Federal Reserve will intervene due to euro-zone countries being key U.S. trading partners."

NIA was right, late Sunday evening the Federal Reserve announced the re-establishment of U.S. dollar liquidity swap facilities with foreign central banks, as a part of the European Union (EU)'s nearly $1 trillion bailout plan. The Federal Open Market Committee has authorized swap lines through January 2011 with the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Swiss National Bank, and the Bank of Japan.

While the Federal Reserve may say these swap lines are necessary "to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and financial centers", NIA recognizes that this is nothing more than another transfer of wealth from the American middle class to bankers around the world through inflation. This program was originally enacted in 2008 when the Federal Reserve loaned $582.8 billion to foreign central banks without any disclosure of which central banks got the money.

NIA believes it is unconstitutional for the Federal Reserve to make loans to foreign central banks. Most likely, the Federal Reserve was pressured by Wall Street to re-establish the swap facilities because Bank of America, Citigroup, JP Morgan, Goldman Sachs and Morgan Stanley have about $2.5 trillion in exposure to Europe, and Wall Street doesn't want to see their bets go bad.

Not only will Americans now be exposed to the European debt crisis through the Federal Reserve's swap lines, but the U.S. will be giving money away to Europe through the IMF. The IMF is contributing up to 220 billion Euros as a part of the bailout, which equals $283.1 billion at the latest exchange rate. The U.S. represents approximately 20% of IMF funding, which means the bailout is costing U.S. taxpayers $56.7 billion, not including the potential losses from loans made by the Federal Reserve and the inflation it will create.

The moral hazards of the EU bailout are immeasurable. It sets a dangerous precedent that the ECB won't allow any eurozone nations to fail, just like the Federal Reserve won't allow any major financial institutions on Wall Street to fail. Eventually, if you don't allow the free market to punish countries and financial institutions that recklessly speculated and made poor financial decisions, the financial crisis we are preventing will turn into a currency crisis that the western world will never be able to recover from. Although NIA still believes the U.S. dollar will win its race to the bottom with the Euro, we are now at risk of a total collapse of the world's fiat currency system.

Imagine if baseball teams weren't allowed to fail. You probably remember playing t-ball as a kid and at the end of every game, both teams were declared the winner. Think about what would happen if Major League Baseball declared there will no longer be losers at professional baseball games, both teams will be declared the winners of every game. Would you still pay $300 for a ticket to see a Major League Baseball game? Of course not, the value of the tickets would collapse to nothing, similar to how fiat currencies will soon lose their purchasing power if we don't allow countries and financial institutions to fail.

NIA is almost done producing its nearly hour-long documentary 'Meltup'. We spent quadruple the time and money producing Meltup than we did producing our previous critically acclaimed documentary 'The Dollar Bubble', which has already surpassed 710,000 views since November 23rd. We believe Meltup will be the best economic documentary ever produced in world history and a must see for yourself, your friends, and your family.

Last week, NIA conducted an hour-long interview with Gerald Celente, founder of the Trends Research Institute. We can honestly say that our interview with Mr. Celente was the single most shocking, insightful and informative interview we have ever witnessed or heard. NIA will be using footage from our interview with Mr. Celente in Meltup. We highly recommend that you visit Mr. Celente's Trends Research Institute and subscribe to his Trends Journal. We just got done reading his latest Trends Journal and it is one of the most compelling pieces of journalism we have ever come across.

If you would like your friends and family to be the first to see Meltup, please tell them to become a member of NIA for free. 

150 and 40%

Two Items:

I have lived with PE ratios as bedfellow since I was 18.  It is a fine snapshot of price of a stock vs. earnings in the last year.  It could go off in the next year, but you know what you are looking at with a PE ratio. It is a thermometer. You have to guess about next year.

I don't care if you have no idea what a PE ratio is, just look at the graph. You know something BIG is happening. It would be great if this were a picture of your bank account, but I doubt it is.  Rather, it is an average of the PE ratio of the entire S&P 500 bundle of stocks. 

OK, you may say. What? Why are you turning red?

If a stock has a PE ration of 10, this is great because recent history shows the price of the stock divided by earnings is 10, which means the stock price is really low.  If you can find a low PE ratio in a solid company, that is great. A good buy, especially if it has a nice dividend. That is the old days.

If you find a PE ration over, say, 25, that company had better be really hot, like MS or GOOG, back in the day. Hot companies, in the sense of growing sales like crazy, not attracting investors. Like when computers were a new industry. 

Once you hit 75, you are in idiot range. If you buy a 75 PE you are betting the company will come out with the next iPod, if not, you are an idiot.  I recently bought a put (a bet down) on a silver mine, CDE, a tough thing to do these days of panic buying, because it has a PE of 82. I don't care how popular silver is, you still have idiots distorting things. If gold falters, as I think it must, crash goes the speculative balloon. On the down side, the market has more liquidity than I do. So, I have to hope this happens soon. Anyway, I digress. 

Now, take all 500 S & P companies and average them together. Essentially, this is America.

You can see the resulting PE zone broke apart in the 1990s. The average tried to come back, but this year, the ink is off the page.  I have never seen anything like this except for the money supply numbers, for the last year, and the Mann global warming hockey stick, both real bizarre distortions of reality. Both dangerous beyond understanding. Trust me, this is terrifying. 

What the graph means is idiots are pushing up the market without any concern for value. They are ignoring earnings. The PE ratio, if there is any mathematical laws in the universe, has to collapse. It won't be nice.  If you have a 401 (k), move over to metals.  Now.  

I look at this graph and sell every stock I own.  Actually, I did already, but you know what I mean. I am in a double impact EFT putting the index. (HUH) Bascially, when everything collapses, I make twice as much money on the collapse.  I don't think this is bad bet. The risk/reward ratio is absurdly tempting. Blood in the streets and all that.

I am putting the dollar and long in silver, though I suspect a correction is at hand (I bet on it). 

So, get out of everything.  I know I sound boring, but I am trying to save a few lives. 

I am not normal, so I making bets to build a nest egg; normal people are being set up for the biggest equity blast of, well, in my knowledge. The government is going to fix its stupidity by creating a massive change in the dollar and in assets. Indeed, there is an argument there is more money in existence than can buy everything, but I digress. 

Do something.

Now for some more pleasant news.  We are candidates for hyperinflation; we graduated to fit the model.  You can thank our government for this, on the way out the door to buy silver.  By the way, for those of you around here, the shop on Caroline sells "junk" silver bags.  Not a bad idea on the next dip. Not a bad idea right now. 

Junk silver is made up of pre-1984 American coins.  Yes, they had value, still do at about 12 times the face value. These will be great if it is the endtime. 

When you go in, notice the silver serving dishes scattered on the floor. They are actively buying anything from anybody.  Now, you know why.

Item 2

Hayman Advisors: History shows Hyperinflation occurs when deficit exceeds 40% of GDP

By Editor's Picks

Published: October 09, 2009

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FY 2009 deficit turned out to be just over 40% of outlays. According to research highlighted by Hayman Advisors in their October Letter, the fact that such a sizeable share of government spending is being financed with borrowed money has, historically at least, been a harbinger of trouble ahead:

There have been 28 episodes of hyperinflation of national economies in the 20th century, with 20 occurring after 1980. Peter Bernholz (Professor Emeritus of Economics in the Center for Economics and Business (WWZ) at the University of Basel, Switzerland) has spent his career examining the intertwined worlds of politics and economics with special attention given to money. In his most recent book, Monetary Regimes and Inflation: History, Economic and Political Relationships, Bernholz analyzes the 12 largest episodes of hyperinflations - all of which were caused by financing huge public budget deficits through money creation. His conclusion: the tipping point for hyperinflation occurs when the government's deficit exceed 40% of its expenditures.