Why Americans should not hold their assets in U.S. dollar deposits

As the excerpt below sets out, Americans will soon discover that Mr Obama is stealing them from you. Inflation is the silent thief. Obama will fund his spending from your savings. The more dollars he prints, the less your dollars will buy. Even the Mexican peso could well hold its value better than the U.S. dollar in the near future.

So? Invest now in the shares of companies not likely to go under in the panic to come. Or spend your money now on something you want: A reliable new Japanese car? An extension to your house? Something income-producing? The Chinese are ditching greenbacks for gold but that's a gamble.

Or maybe in a worst case scenario (galloping inflation COULD trigger an economic collapse akin to the Great Depression) a cellar full of canned food and bags of rice? I could live for a long time on canned food and boiled rice. Canned chili con carne is not great but it makes a reasonable meal when tipped on top of cooked rice. In my student days I once lived for 6 months on a big paper sack of skimmed milk powder. Oats for making porridge breakfasts are cheap and sustaining too. Maybe keep a goat for the milk. You don't even have to cook rolled oats. Just soak it for a while and it becomes muesli.

I myself have always kept a relatively small cash float -- even though I live in Australia and Australian governments have never been as irresponsible as Mr Obama. Australian dollars have already risen substantially against the American dollar as the smarties realize what is happening. Australia is run on the old-fashioned monetary principles that America USED to follow.

The US is hurtling toward out-of-control inflation while the political class tries to convince the hoi polloi that inflation is not a problem. Government-generated CPI data show tame inflation. Federal Reserve Chairman Ben Bernanke claims deflation, not inflation, is the danger to the economy.

Despite government propaganda every shopper knows inflation is already a serious problem. The Financial Times presented annual price increases for various items, which included the following:

* heating oil +41%
* copper +59%
* silver +91%
* palladium +212%
* corn +91%
* wheat +79%
* cotton +143%

These data indicate that inflation is upon us. The magnitude of these numbers suggests hyperinflation.

The effects of inflation are not limited to the US and not limited to rising prices. Spiraling food costs have been cited as a factor in political upheaval in several countries, including most recently Egypt. The US Federal Reserve, although it may be argued to be a primary driver, is not alone as a producer of inflation. As pointed out by the Daily Bell there is plenty of blame to go around:

"Central banks have pumped something like US$20 to US$50 TRILLION into the world's economy to try to reinflate economies that collapsed in 2008".

The divergence between what governments want you to believe regarding inflation and what is painfully obvious grows larger with time. In the US obvious anomalies in government reports, especially unemployment and claims that an economic recovery is underway, make the reports incredible. Few citizens believe that the recession ended 19 months ago. That claim contradicts what they experience every day.

The Federal Reserve has tripled the money supply in an effort to protect the banking system and the economy. Currently, most of this money sits in the banking system as excess reserves which could be lent out, potentially at ten-fold leverage. At some point, these banks will lend these funds out. Then, via the Daily Bell, the Fed must take decisive and rapid action:

As this currency begins, finally, to circulate, price inflation must result, unless such money is quickly removed. Central bankers have continuously claimed that excess currency can be removed from the larger economy before it does its inflationary damage ...

Inflationary damage is already evident as per the numbers above. Unless the removal of these excess funds occurs in a timely fashion, the country runs the risk of hyperinflation.

Mr. Bernanke has stated on many occasions that he is prepared to withdraw these funds before they can create damage. It is not clear what Mr. Bernanke considers damage, but one might think that rising food and energy costs might qualify. Surely uprisings in Tunisia and Egypt should qualify, if in fact they can be attributed to Central Bank policies.

The reality is that Mr. Bernanke is unable to reverse the time bomb he has placed in the banking system. To suggest otherwise reflects either duplicity or unlikely ignorance on the part of Mr. Bernanke. He will not be able to withdraw the funds he put into the banking system


No comments:

Post a Comment

All comments containing Chinese characters will not be published as I do not understand them