By June 30, 2011, America will face its toughest decision inmore than 200 years: Either declare our nation insolvent, or send the price of everything you buy through the roof.
It's a situation that you might have thought was long off. But the sad reality is that a global systemic collapse — the likes of which have never been seen — has already started...
The National Inflation Association thinks it's right around the corner:
Even one of the most successful bond investors of all time sees it coming:
And this time, you don't need to study the Weimar Republic or Zimbabwe to see the effects of what happens and how the masses respond when inflation spikes...
All you need to do is tune into the news of virtually every other country.
The poorest ones, naturally were hit first. It started in Tunisia.
For what seems like ever, the people put up with high unemployment, political corruption that makes Blago look like a saint, and living conditions so low that most of us couldn't fathom. But in December 2010, a universal need pushed the people over the edge.
Thanks to recent skyrocketing inflation, the citizens could no longer afford to eat.
The middle class was starting to starve.
There's an old saying that's used to define the temperament of oppressed people: “Bread and Circuses”...
It dates back to just before the fall of the Roman Empire in 100 A.D., and is derived from the observation that people will put up with nearly all sorts of tyranny and injustice, so long as the mob has food and entertainment.
What's happening across the world is a result of their food becoming too expensive.
Feeling the same pain, just days after the first protests in Tunisia, the riot fever spread to Algeria — where protesters hit the streets, carrying signs that read “We Want Sugar!”
Next to fall, for the same reasons, was Egypt... Then Libya.
You get the point. You hear about it every day.
But what many in the mainstream press fail to realize, is that these protests and riots aren't simply because of a harsh dictator.
Anyone over the age of 30 knows that people like Gaddafi and Mubarak have been in power for decades.
No — what's pushing countries in the Middle East and North Africa over the line is the skyrocketing cost of food, thanks to rampant inflation.
And it's not just the prices of food, oil, gold, silver, and other popular commodities, either...
It's all of them. And it's world-wide.
Over the past year...
- Corn is up 76%
- Wheat is up 44%
- Soybeans are up 24%
- Sugar is up more than 55%
And the list goes on...
It's a similar story right now in India, as thousands risk their lives and take to the streets to show their disgust against rising food prices.
And in China, thanks to skyrocketing inflation, the Jasmine Revolution has ignited in at least 13 major cities.
All over the streets, the Wall Street Journal reports protesters carrying signs saying,“We want food!”
Inflation's so out of control that the BBC reports that regular citizens can't even afford basic vegetables.
The Chinese government is claiming to do all that it can to keep skyrocketing prices at bay. To combat the rising price of food, the Middle Kingdom's raised interest rates three times in the past four months, but with hardly any luck...
According to the National Inflation Association...
China this morning reported 4.9% price inflation for the month of February, exceeding analyst expectations of 4.8%. With China now mimicking the U.S. Bureau of Labor Statistics and taking steps to artificially manipulate their consumer price index (CPI) numbers as low as possible, it is likely that real price inflation in China is now closer to 10%.
And things are only getting worse.
The military stepped in to stomp out the protesters. They're censoring information any way possible to keep the uprising from turning into an Egyptian-style revolution.
But it's too late. The rising prices have spread globally. And no one is safe.
All over Europe, governments are preparing for an uprising as inflation hits record levels, driving food prices and unemployment to new heights.
It's an out-of-control spiral that's destined to worsen. And if you don't think these massive riots, starvations, and all-out panic over the ability to afford something as basic as food can't happen to the United States...
Then You've Fallen for the Most Destructive Sleight of Hand of All Time
It's no secret that the U.S. dollar — or Federal Reserve Note — is the world's reserve currency. It's been that way since 1944, when the dollar was backed by gold...
A time when the United States held more than 50% of the world's gold reserves.
A time when the U.S. produced more than 55% of the entire world's manufactured goods.
Of course, times have changed...
Since 1971, our dollar hasn't been backed by anything other than the fact that it is the world's reserve currency.
Today, we only produce 27% of the world's manufactured goods. America also holds less than 25% of the world's gold reserves.
And on September 30th, 2011, our national debt will exceed more than 102% of our GDP.
Still, for now, everything from oil pumped in Nigeria to soybeans produced in Brazil is priced and traded in dollars.
An auto manufacturer in Korea importing steel from Japan must first convert Korean won into U.S. dollars, pay for the transaction in dollars, and the Japanese exporter — upon receiving the payment — must then convert the dollars into Japanese yen.
The need for dollars to buy international goods is the only thing that gives the dollar any strength at all.
And with an additional $80 billion flooding the money supply every month, the price of everything inevitably skyrockets...
It's a Mad Hatter monetary system that's literally crippling our very livelihoods.
And it's rapidly driving the middle class' and retiring baby boomers' purchasing power to poverty level.
Of course, the Fed — the guys who invented this Ponzi scheme — will never admit it.
In fact, recently Chairman Bernanke was asked on Capitol Hill if the Fed's policies were responsible for the skyrocketing costs of goods across the world...
He was quick to reply that higher prices have nothing to do with the Fed's pumping of more than $3.7 trillion into the global economy.
He states, “Clearly, what's happening [to food prices] is not a dollar effect. It's a growth effect.”
In other words, that's too bad that they can't eat... but it's not my problem. And to an extent, he's right...
So long as you don't drive a car, use electricity, heat your house, or need food to survive.
What Bernanke danced over, however, is that — thanks to the Fed's out-of-control policies — it's not just food prices that are surging.
It's commodity prices across the board — everything. In fact, over the past year...
- Coal is up 33%
- Gold is up 30%
- Silver is up 118%
- Oil is up 45%
- Cotton is up 148%
- Corn is up 76%
- Wheat is up 44%
- Rubber is up 86%
I could list these skyrocketing price increases for 20 minutes. The point is, these drastic price increases aren't due to a sudden surge in consumption.
Rather, it's the Fed's constant devaluation of your dollar — killing your purchasing power with each passing day.
You might not see it reflected in your grocery store right away. Marketers have been very clever at passing on these soaring costs to you in smaller packaging and fewer goods inside...
- Tropicana orange juice reduced the volume of their containers from 64oz to 59oz
- Ivory dish detergent went from a 30oz to a 24oz container
- Kraft Singles dropped the amount of cheese in each package from 24 to 22 slices
- Chicken of the Sea salmon reduced their content from 3oz to 2.6oz
- Hebrew National franks reduced the size of each frank from 12oz to 11oz
- Even your “1 pound” bag of coffee is now only ¾ of a pound
Again, I could go on all day. But the next time you're in the store, take a look at the weight and cost of virtually any item. Chances are, within a month or two, it's either going to be much more expensive, or the amount of goods in each package will get smaller... or both.
The truth is, if you want to take a real look at how the Fed's been causing skyrocketing inflation, all you need to do is take a quick look at the Thomson Reuters/Jefferies CRB Index.
Started in 1958, the index was created to accurately gage the health of commodities we use most often across the globe.
In order to keep it up to date, the number and type of commodities reflected in the index are constantly updated. It also takes into account which commodities we use most often.
And amazingly, since its inception, it's been used my traders and long-position investors as the most accurate reflector of real inflation and purchasing power. Its track record has been near perfect for over 54 years.
And since the second round of QE flooded the market the index has launched 15%!
Not surprisingly, the value of the dollar over the same period has also lost 10% of its value.
Read that again: The dollar's dropped 10% in value since the Fed began its second round of money pumping.
Meanwhile, wages and retirement benefits haven't budged. And as prices creep higher and higher, people are already taking to desperate measures.
Just over the past month, stories of otherwise everyday people are popping over the news, stealing heating oil from houses...
Siphoning gas tanks...
They've even reverted to stealing metals from buildings, air conditioning units and streetlights...
And it's only on the rise. But unlike last time, when commodity prices surged and crashed, there's no end in sight.
The Illusion of Wealth
You see, our entire system's been based on the illusion of wealth.
If you've watched, listened to, or even simply read highlights from presidential press conferences lately, you'll notice they've stricken a word from their vocabulary...
Recession.
Not once in the past several weeks has the administration used the term to describe our current economy. Instead, they've replaced it with recovery.
And with the first accusation that things aren't better yet, they'll instantly point out the strength of the Dow and other indexes across the financial spectrum as proof that what they're doing is working.
Sure. The Fed's made up “Quantitative Easing” and QE2 “worked”. Just take a look at what happened to the Dow:
It looks good... until you take a look at how our money supply's skyrocketed over the same period:
This isn't a coincidence.
The entire past two years of gains... the rise of the market from March 2009 until now... has been a result of little more than the Federal Reserve injecting $3.7 trillion into the system — out of thin air.
What you are witnessing isn't a recovery. For proof, all you need to do is look at the deteriorating situation happening to state and city governments since the first round of Quantitative Easing started.
Not a day goes by in this “recovery” in which another announcement hits the waves of cities and states in more and more financial trouble.
The New York Time reports:
Cities as varied as Duluth, Phoenix and Atchison, Kan., have had to cut back and, in some cases, make drastic reductions that affect the quality of life for their residents.
All over the country, parks are being sold, fees for routine services are going up and city workers are being laid off.
In fact, more than 92% of cities across the country are in serious financial trouble, and are already making some downright frightening cutbacks.
- Camden, New Jersey — a city with one of the highest crime rates in the nation — was forced to lay off half of its police force. Law-abiding citizens are now either fleeing the crime-ridden community, or have decided to put the protection of their families into their own hands.
- Colorado Springs, Colorado, recently shut off 1/3 of their street lights — and that was the easy part. The city also canceled trash removal in many public places and has asked citizens to volunteer to cut the grass at public parks. To top it off, they continue to layoff dozens of firefighters and police investigators. It even has the official police helicopters grounded; they're currently for sale on the Internet. Without the police to keep order, reports of violent crimes and looting are naturally soaring...
- Baltimore, Maryland, isn't fairing much better. In June, 2010, the notorious city alerted more than 250 police officers and 90 firefighters that they were being laid off in a desperate attempt for the city to meet its skyrocketing deficits. In addition, the entire state has more than $19 billion in unfunded liabilities, making Maryland dwarf Wisconsin's budget shortfalls.
- This year, Harrisburg, Pennsylvania's interest payments will be larger than the city's entire annual budget. And without federal funny money, it will be forced into bankruptcy.
- In Menasha, Wisconsin, the city already hit the “reset” button and defaulted.
- And in Michigan, a law is being passed that essentially declares financial martial law — giving the governor the power to declare a "financial emergency" in towns or school districts. He could then appoint a manager to fire local elected officials, break contracts, seize and sell assets, eliminate services, even eliminate whole cities or school districts without any public input.
You get the point.
What you're witnessing isn't a recovery; it's downright theft from an out-of-control government.
In fact, CNBC just reported that in the face of this “recovery” with so many people in financial turmoil, either from skyrocketing debts or unemployment, the cost of living has NEVER BEEN HIGHER!
The truth is, aside from major banks like Goldman Sachs, the only people profiting from this mess are a handful of very wealthy investors who knew it would happen and the major hell storm that lies ahead.
I'll show you exactly what these elites are doing in just a minute. And you're going to want to follow their advice to the 'T'. Because with Bernanke's $600 billion QE2 (that's already done more damage than we could have possible imagined) set to run out on June 30th, the Fed recently announced it was prepared to inject ANOTHER $11 TRILLION into the system!
Let me say that again...
The Federal Reserve has already agreed to inject into the system an additional eleven trillion dollars.
Just so that you could picture it a little better, $11 trillion is a stack of crisp $100 bills 7,465 miles high...
Or a stack of $1 bills that could reach 1/3 the way to the moon.
If that happens, you'll see our national debt skyrocket from the already unpayable $14 trillion to more than $25 trillion. The interest payments alone will be more than one trillion dollars every single year.
The situation isn't a unique one...
In February of 2006, in order to make the interest payments to the IMF, one country resorted to paying off their debt by simply printing their way out of it. The country's reserve bank was ordered to print trillions of dollars to buy foreign currency to pay off their debts.
The result of the extra currency pushed prices of consumer goods through the roof...
A few months later, to make up for skyrocketing costs, the government ordered trillions more to be printed to pay for salary increases to government employees. It was a desperate effort to help the people keep up with the surging costs of goods.
The pattern of printing their way out of debt created a rapid downward spiral.
Printed money surged food costs, so they printed more money so people could pay for the surging food costs, which only launched the costs of good higher.
And 18 months later, the government was forced to implement price controls that forced stores to sell goods at government controlled prices.
It lead to a nation in chaos, as people raced to load up on as much food as their money could buy before prices would increase just a week later.
The solution, according to the president, was to simply print MORE money.
All it took was three years for the currency to officially be declared useless. And the ONLY form of currency accepted — aside from a pure barter system — was trade by gold.
NO OTHER FORM OF MONEY WAS ACCEPTED.
The people painfully realized that gold, unlike fiat money, couldn't be printed out of thin air.
The country was Zimbabwe. And their run of hyper-inflation was hardly an isolated incident. Just take a look at these other countries that experienced the same pains in recent years...
Make no mistake — it can and will happen to us, too.
Other countries across the world already see it coming. They know that in order to even keep the government running for another day, we're already committed to a vicious cycle of printing our way to oblivion.
The last time we saw a serious inflationary crisis looming was in 1980.
Back then, Fed Chairman Paul Volcker was able to keep it from getting too out of control by raising the interest rates to an astonishing 21.5%.
Of course, back then we were also the world's largest creditor nation. Today, we're currently the largest debtor nation.
And with a national debt of more than $14 trillion, if Bernanke raised rates to 21.5%...
The interest we would have to pay on our debt would exceed $2.5 trillion.
It's a move that the American tax payers could never handle. And it's precisely why we're rapidly being forced to print our way out of our debt.
It's a situation that has other countries running from us screaming — even countries like China and Japan, formerly our biggest debt buyers, are calling it quits.
It's not just a theory or talk anymore. They want out.
Our good buddies in China don't want anything to do with us anymore. And while they've based their yuan on our dollar for decades, that relationship is rapidly coming to a close.
In fact, with each passing day, China is quietly implementing more and more steps that expand the yuan's use in cross border trade, in order to position the yuan as the world's next reserve currency.
They're already putting a halt to buying our debt at Treasury auctions.
Just about everyone has.
Over the years, the rule used to be that foreign central banks would be responsible for purchasing more than 50% of our debt at auctions; American investors would purchase about 40%; and the Fed would buy about 10%. But since the Fed started monetizing our debt, something terrifying has happened...
American investors no longer have any faith in the U.S. Dollar. In fact, according to a recent poll, most investors in America don't think we're even close to a recovery. And they're not even accounting for a single percentage of bonds purchased at auctions anymore.
In fact, the Fed alone is responsible for purchasing more than 70% of the Treasury Bills at auctions now.
That means that the rest of the world — countries that used to buy more than 50% of our Treasuries — now buy only 30%.
And that number is dropping by the month.
In other words, they know our reign is over. They're fed up. They're not buying our debt anymore.
And it's starting to create...
The Biggest “Run on the Bank” the World has Ever Seen
The talk is nothing new.
Nations holding our currency have been threatening to ditch our dollar since the 70s, when we first dropped the gold standard.
In fact, recently declassified documents from the Freedom of Information Act prove that even the Saudis promised to leave our dollar, if inflation started getting too high...
That's right — OPEC's gorilla threatened to ditch our dollar if inflation goes too high. And that threat is now being implemented...
It sounds unfathomable that we could be broadsided like this.
But the truth is, a few months ago, a group of the world's most powerful leaders met with the heads of OPEC — leaders from countries like China, Russia, Japan, and France made an interesting proposition...
In an effort to keep prices stable, they suggested the oil cartel ditch the devaluing dollar and instead move to a basket of currencies, a basket of currencies that would constantly be readjusted to keep its value stable.
The benefit to countries like Saudi Arabia meant that their purchasing power — and purchasing power of goods all over the world — would stabilize, instead of handing their fate over to America's monetary policy.
The meeting, which took place without any U.S. participation, went over all too well.
And if oil ditches the dollar... everything ditches the dollar.
Almost immediately after the meeting, with QE2 announced, the coup began:
But perhaps what's most shocking is the U.S. government, by slip of the tongue, admitted our dollar was doomed...
I know it's hard to believe.
Scratch that — it's downright shocking... But it's true.
As I write this, the IMF is rapidly in the process of printing as much as $34 trillion worth of their new international currency.
In fact, the National Inflation Association believes our dollar could come to an end under its own inflation at any minute...
You might think the government declaring martial law is a stretch. And I don't blame you. It's something I find terrifying.
But the sad truth is, in early 2011, the U.S. Army started a year-long war game called “Unified Quest 2011”.
According to a live CNBC broadcast, the goals of Unified Quest 2011 are to study and prepare for:
- Large-scale economic breakdown inside of the United States
- How the Army would keep and maintain order in the face of domestic civil unrest
- How to deal with fragmented global power and drastically lowered budgets
Everyone knows that our whole economy is about to come crashing down...
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