Posts Tagged ‘Economic Collapse’


Dominique de Kevelioc de BailleulBefore It’s News
May 4, 2012

In a riveting interview on TruNews Radio, Wednesday, private investigator Doug Hagmann said high-level, reliable sources told him the U.S. Department of Homeland Security (DHS) is preparing for “massive civil war” in America.

“We have problems . . . The federal government is preparing for civil uprising,” he added, “so every time you hear about troop movements, every time you hear about movements of military equipment, the militarization of the police, the buying of the ammunition, all of this is . . . they (DHS) are preparing for a massive uprising.”

Hagmann goes on to say that his sources tell him the concerns of the DHS stem from a collapse of the U.S. dollar and the hyperinflation a collapse in the value of the world’s primary reserve currency implies to a nation of 311 million Americans, who, for the significant portion of the population, is armed.

Uprisings in Greece is, indeed, a problem, but an uprising of armed Americans becomes a matter of serious national security, a point addressed in a recent report by the Pentagon and highlighted as a vulnerability and threat to the U.S. during war-game exercises at the Department of Defense last year, according to one of the DoD’s war-game participants, Jim Rickards, author of Currency Wars: The Making of the Next Global Crisis.

Through his sources, Hagmann confirmed Rickards’ ongoing thesis of a fear of a U.S. dollar collapse at the hands of the Chinese (U.S. treasury bond holders of approximately $1 trillion) and, possibly, the Russians (threatening to launch a gold-backed ruble as an attractive alternative to the U.S. dollar) in retaliation for aggressive U.S. foreign policy initiatives against China’s and Russia’s strategic allies Iran and Syria.

“The one source that we have I’ve known since 1979,” Hagmann continued. “He started out as a patrol officer and currently he is now working for a federal agency under the umbrella of the Department of Homeland Security; he’s in a position to know what policies are being initiated, what policies are being planned at this point, and he’s telling us right now—look, what you’re seeing is just the tip of the iceberg. We are preparing, we, meaning the government, we are preparing for a massive civil war in this country.”

“There’s no hyperbole here,” he added, echoing Trends Research Institute’s Founder Gerald Celente’s forecast of last year. Celente expects a collapse of the U.S. dollar and riots in America some time this year.

Since Celente’s ‘Civil War’ prediction of last year, executive orders NDAA and National Defense Resources Preparedness were signed into law by President Obama, which are both politically damaging actions taken by a sitting president.

And most recently, requests made by the DHS for the procurement of 450 million rounds of hollow-point ammunition only fuels speculation of an upcoming tragic event expected on American soil.

These major events, as shocking to the American people as they are, have taken place during an election year.

Escalating preparatory activities by the executive branch and DHS throughout the last decade—from the Patriot Act, to countless executive orders drafted to suspend (or strip) American civil liberties “are just the beginning” of the nightmare to come, Hagmann said.

He added, “It’s going to get so much worse toward the election, and I’m not even sure we’re going to have an election in this country. It’s going to be that bad, and this, as well, is coming from my sources. But one source in particular said, ‘look, you don’t understand how bad it is.’ This stuff is real; these people, the Department of Homeland Security (DHS), they are ready to fight the American people.”

TruNews Wiles asked Hagmann: who does the DHS expect to fight, in particular? Another North versus South, the Yankees against the Confederates? Hagmann stated the situation is far worse than a struggle between any two factions within the U.S.; it’s an anticipated nationwide emergency event centered on the nation’s currency.

“What they [DHS] are expecting, and again, this is according to my sources, what they’re expecting is the un-sustainability of the American dollar,” Hagmann said. “And we know for a fact that we can no longer service our debt. There’s going to be a period of hyperinflation . . . the dollar will be worthless . . . The economic collapse will be so severe, people won’t be ready for this.”

Source: Full TruNews interview, May 2, 2012.

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The Economic Collapse
March 9, 2012

Not so fast.  Those that are publicly declaring that an economic recovery has arrived are ignoring a whole host of numbers that indicate that the U.S. economy is in absolutely horrendous shape.  The truth is that the health of an economy should not be measured by how well the stock market is doing.  Rather, the truth health of an economy should be evaluated by looking at numbers for things like jobs, housing, poverty and debt.  Some of the latest economic statistics indicate that unemployment is getting a little bit worse, that the housing market continues to deteriorate, that poverty in America continues to soar and that our debt problem is worse than ever.  If we were truly experiencing the kind of economic recovery that the United States has experienced after every other post-World War II recession we would see a sharp improvement across the board in most of our economic statistics.  But that simply is not happening.  Sadly, this is about as much of an “economic recovery” as we are going to get because soon the economy will be getting much worse.  So enjoy this period of relative stability while you can.


The Obama administration would have us believe that unemployment in the United States has declined, but the truth is that the percentage of working age Americans that are employed has stayed very, very flat for more than two years and now there are some measures of unemployment that are actually getting worse.

For example, according to Gallup the unemployment rate in the United States has risen from 8.5% in December to 8.6% in January to 9.1% in February.  The Obama administration would have us believe that it is actually going the other direction.

Initial unemployment claims are rising again.  For the week ending March 3rd, they increased by 8,000 over the previous week to 362,000.  This is not the kind of good news that people were hoping for.

What the U.S. economy could really use are millions of good jobs.  But those are being shipped out of the country at a staggering pace.

Right now there are millions of Americans in their prime working years that are sitting at home wondering what to do with their lives.  The average duration of unemployment in the United States continues to hover near a record high, and if we were truly experiencing an economic recovery it should have been falling by now.

But a lot of Americans have bought into the propaganda about an economic recovery and they are out running up huge amounts of debt once again.  In January, consumer credit increased by much more than expected.  The following is from a recent Reuters report….

Nonrevolving credit, which includes auto loans as well as student loans made by the government, rose $20.723 billion during the month. That was the biggest increase in dollar terms since November 2001, when credit was surging in the wake of the September 11 attacks in New York and Washington.

Don’t fall into the trap of debt slavery.  During the last recession millions of Americans lost their homes and most of what they owned because they got overextended.

Don’t do it.

The U.S. housing market continues to deeply struggle as well.  If we were really in an economic recovery housing would be bouncing back.  But that is not happening.  Just consider the following facts….

*The number of new homes sold in the United States continues to hover near a record low.

*U.S. home prices in the 4th quarter of 2011 were four percent lower than they were during the 4th quarter of 2010.

*According to CoreLogic, 22.8 percent of all homes with a mortgage in the United States were in negative equity as of the end of the 4th quarter of 2011.  That was an increase from 22.1 percent in the third quarter.

Why are things still getting worse for the U.S housing market?

That is a really good question.

We should have seen some improvement by now.

But it isn’t happening.

Also, poverty in America continues to explode.

For example, the number of Americans on food stamps has increased to 46.5 million – a brand new all-time record.

If we really were in an economic recovery, wouldn’t that number be going down?

We should be thankful that the U.S. economy is not declining as rapidly as it was during 2008 and 2009.  But what we are experiencing right now is not an economic recovery.  It is simply just a bubble of false hope.

The big problem is that our nation is covered in an ocean of constantly expanding debt.

U.S. consumers are drowning in debt, U.S. businesses have pushed debt levels to the red line, and the U.S. financial system is massively overleveraged.

Of course government debt is our biggest debt problem of all.

All over the nation, state and local governments are on the verge of financial ruin.

If we were in the middle of an economic recovery, so many states would not be in crisis mode.  A recent article in the Los Angeles Times declared that “California could run out of cash in March“.  As the economy continues to crumble we are going to hear a lot more of this kind of thing.

A lot of local governments around the nation are on the verge of total financial collapse.  Stockton, California has announced that they will be defaulting on some debt payments, and Suffolk County in New York recently declared a fiscal emergency after discovering that it would rack up more than 500 million dollars of debt between 2011 and 2013.

Keep your eyes open for more news items like this in the months ahead.

Of course the biggest problem of all is the U.S. national debt and it continues to rapidly get worse.

According to the Congressional Budget Office, the U.S. government had a budget deficit of 229 billion dollars in the month of February.  That is the worst one month budget deficit in the history of the United States.

The Congressional Budget Office also says that the U.S. government is now borrowing 42 cents of every single dollar that it spends.

Ouch.

The U.S. national debt has gotten more than 59 times larger since 1950.

The U.S. national debt is now more than 22 times larger than it was when Jimmy Carter became president.

Are there any words in the English language that are strong enough to describe how foolish we have been?

Of course we won’t be able to accumulate so much debt indefinitely.  At some point the trillion dollar deficits will stop and our false prosperity will disappear.

If you want to get an idea of what happens then, just take a look at Greece.

But Barack Obama and most members of the U.S. Congress don’t really care about what they are doing to our future.

What they care about is winning the next election so that they can continue living their fabulous lives.

Barack Obama is supposed to be taking care of the American people, but instead he has been very busy taking care of the people who helped him get elected.  Politics in America is all about money.  Just check out the following very short excerpt from a recent article in the Washington Post….

More than half of Obama’s 47 biggest fundraisers, those who collected at least $500,000 for his campaign, have been given administration jobs. Nine more have been appointed to presidential boards and committees.

At least 24 Obama bundlers were given posts as foreign ambassadors, including in Finland, Australia, Portugal and Luxembourg. Among them is Don Beyer, a former Virginia lieutenant governor who serves as ambassador to Switzerland and Liechtenstein.

Washington D.C. is deeply corrupt and if you are waiting for our politicians to fix our problems you are going to be deeply disappointed.

The federal government is not going to save you.

Our politicians are not going to save you.

You better figure out how you are going to take care of yourself and your family in the years ahead because this is about as good as things are going to get.

This “economic recovery” is about to end and more pain is about to begin.

 


The Economic Collapse
Wednesday, February 15, 2012

Any financial system that is based on debt is doomed to fail.  Today, we are living in the greatest debt bubble that the world has ever seen, and if all of a sudden people could not use credit to buy things our economy would immediately ground to a halt.


Unfortunately, no debt bubble can last forever.  When this current debt bubble finally bursts, faith in the financial system is going to disappear, credit is going to freeze up and there is going to be a massive wave of bank failures.  Right now, Greece is a warning sign for the world.  Nobody wants to lend money to Greece, the Greek banking system is dying, one out of every four businesses has already shut down, unemployment is soaring and the Greek economy has now been in recession for five years in a row.  Sadly, the economic implosion in Greece is rapidly accelerating.  The Greek economy shrunk at a 7 percent annual rate during the 4th quarter of 2011.  That wasn’t supposed to happen.  Things were supposed to be getting better in Greece by now.  But instead the Greek depression is getting even worse, and very soon the rest of the world is going to be going through what Greece is currently experiencing.

Unfortunately, most in the mainstream media are treating what is happening in Greece as an “isolated incident” rather than as a very serious warning sign for the world.

Thankfully, there are at least a few reporters out there that are realizing the gravity of the situation.  The following is how one reporter from the New York Times recently described what life is like in Greece now….

By many indicators, Greece is devolving into something unprecedented in modern Western experience. A quarter of all Greek companies have gone out of business since 2009, and half of all small businesses in the country say they are unable to meet payroll. The suicide rate increased by 40 percent in the first half of 2011. A barter economy has sprung up, as people try to work around a broken financial system. Nearly half the population under 25 is unemployed. Last September, organizers of a government-sponsored seminar on emigrating to Australia, an event that drew 42 people a year earlier, were overwhelmed when 12,000 people signed up. Greek bankers told me that people had taken about one-third of their money out of their accounts; many, it seems, were keeping what savings they had under their beds or buried in their backyards. One banker, part of whose job these days is persuading people to keep their money in the bank, said to me, “Who would trust a Greek bank?”

Can you imagine?

Greece is experiencing a full-blown economic collapse and nobody can see a light at the end of the tunnel at this point.

As I have written about previously, the overall rate of unemployment in Greece has now risen above 20 percent and the youth unemployment rate in Greece has soared to an astounding 48 percent.

Deleveraging can be an extremely painful process.  Greece has been forced to try to reduce the size of its budget deficit, but every time it cuts government spending that causes economic activity (and thus government revenues) to slow down as well.

Now the EU and the IMF are demanding that even more very painful austerity measures be implemented in Greece even though Greece is already experiencing a full-blown depression.

The EU and the IMF are demanding that Greece fire 15,000 more government workers immediately and a total of 150,000 government workers by 2015.

The EU and the IMF are demanding that wages for government workers be cut by another 20 percent.

The EU and the IMF are demanding that the minimum wage be slashed by more than 20 percent.

The EU and the IMF are also demanding significant reductions in unemployment benefits and pension benefits.

Of course all of those cuts are going to make the short-term economic conditions in Greece even worse.

The rioting, looting and burning of buildings that we are witnessing right now in Greece is likely to continue for quite some time as exasperated citizens attempt to express their frustrations to politicians that simply do not seem to care.

According to the National Confederation of Greek Commerce, recent rioting resulted in damage to 153 businesses in Athens.  45 of those businesses were totally destroyed.

You can view some stunning footage of the current rioting in Greece right here.

Despite all of the austerity measures that have already been implemented, the truth is that Greece is very likely to default soon anyway.

There is a very good chance that the new austerity agreement that the Greek parliament just approved will never be implemented.  There are new elections scheduled for April and the current party in power is polling in the single digits.

The new Greek government is likely to look much different from the current one, and nobody knows for sure if the new government will follow through on any of the promises being made by the current government.

In addition, the German parliament must approve this new deal with Greece, and the German parliament is not scheduled to vote on it until February 27th.  Considering the mood in Germany right now, approval is not guaranteed.

So there are all kinds of things that could go wrong with the “deals” that are currently being discussed.  The truth is that a Greek default in the coming months seems to become more likely by the day.

Some in the financial world almost seem eager for a Greek default.  The following is what Jon Moulton, the chairman of Better Capital, recently told CNBC….

“If I was Greek, I wouldn’t be going for these measures, I’d be going for default and getting it over with. Would you like two to three years of pain or 20?”

But a disorderly Greek default would not be a pleasant thing for the global economy at all.  A recent article in the Guardian detailed what some of the consequences of a Greek default and exit from the eurozone might be….

But default and “re-drachmatisation” would be a costly and chaotic process. In the long term the euro might be strengthened if some of its weaker members headed for the door. But in the short term banks across the eurozone might have to be closed to prevent a run on the single currency as investors speculated about which country might be next. A new wave of bank nationalisations would be likely to follow as lenders counted their losses on now worthless Greek debt.

Capital controls would have to be imposed and borders shut to stop money flooding out of Greece. Portugal, Italy and Spain would come under intense pressure from investors wary about the risk of another victim. Banks everywhere, already reluctant to lend, would cut back hard, nervous about their exposure to the bonds of all Europe’s crisis-hit states.

And the financial crisis in Europe is going to continue to spread well beyond Greece.  Moody’s Investors Service just downgraded the credit ratings of six European nations.  The following is how Bloomberg described the downgrades….

Spain was downgraded to A3 from A1 with a negative outlook, Italy was downgraded to A3 from A2 with a negative outlook and Portugal was downgraded to Ba3 from Ba2 with a negative outlook, Moody’s said. It also reduced the ratings of Slovakia, Slovenia and Malta.

Countries such as Italy, Spain, Portugal, Ireland and Hungary are heading down the exact same road that Greece has gone.  Greece was the first one to experience a full-blown depression, but soon Greece will have a lot of company.

Greece is most definitely a warning sign for the world.  If you keep recklessly piling up debt, eventually a day of reckoning comes.  It is inevitable.

But Barack Obama does not seem to understand this.  He continues to pile another 150 million dollars on to our national debt every single hour.  He knows that cutting spending significantly right now would hurt the economy and that would significantly hurt his chances for another term.

Needless to say, Barack Obama is not likely to do anything that is going to significantly hurt his chances for another four years in the White House.

So we continue to roll on toward disaster.

The U.S. financial system is like a car with no brakes that is heading straight toward a 5,000 foot drop at 100 miles an hour.

It is all going to seem like fun and games to some people until we hit the canyon floor.

Once that happens, nobody will be laughing.

 


Kurt Nimmo
Infowars.com
December 29, 2011

Earlier this month, Federal Reserve boss Ben Bernanke told senators the cartel has no intention of bailing out European banks. Bernanke told lawmakers that “he doesn’t have the intention or the authority” to bail out countries or banks.

Former Fed official Gerald O’Driscoll says Federal Reserve is covertly bailing out Europe.

Now we learn that the Fed is indeed in the business of bailing out European banks. It is secretly using a “temporary U.S. dollar liquidity swap arrangement” with the ECB and the central banks of Canada, England, Switzerland and Japan.

“The Fed’s latest actions in cooperating with foreign central banks to undertake liquidity swaps of dollars for foreign currencies is another reason why Congress needs enhanced power to oversee and audit the Fed,” writes Ron Paul. “Under current law Congress cannot examine these types of agreements.  Those who would argue that auditing the Fed or these agreements with central banks harms the Fed’s independence should reevaluate the Fed’s supposed independence when the Fed bails out Europe so soon after President Obama promised US assistance in resolving the Euro crisis.”

The Fed has a reputation for secrecy. Bloomberg News sued the cartel to obtain information on its emergency programs during the 2007 to 2009 financial crisis. Bloomberg, however, excluded foreign-currency liquidity swaps because names of commercial banks that borrowed under the program were disclosed to the public.

The latest action by the Fed reveals that fiat money created out of thin air is the problem. “Fiat money caused this European crisis and the financial crisis before it.  More fiat money is not the cure. The global fiat currency system has proven itself a failure, we need real monetary reform. We need sound money,” Ron Paul concludes.

Bernanke refuses to tell the American people where the money went:

 


FEMA Continuity of Government Plans Prep Total Takeover of Society, Dispatching Military Domestically Under Economic Collapse Emergency

Aaron Dykes and Alex Jones
Infowars.com
December 21, 2011

UPDATE: Government censors document revealing plans to wage war on Americans. READ HERE.

NOTE: Within an hour of posting this article and linking to the pertinent document, the feds at FBO.gov have pulled the link and implied that it was a classified posting. We believe this was public and of interest to American citizens, taxpayers and peoples of the world and are in the process re-establishing an archive link of the material. Obviously, however, this information is revealing and certain parties do not wish it to be widely known. If you believe this material is important, please archive it and share it with your contacts. In the meantime, here are links to many of the pages: Page 1, Page 2, Page 3, Page 4, Page 5, Page 6, Page 7, Page 8, Page 9, Page 10, Page 11

Infowars has discovered new FEMA documents that confirm information received from DoD sources that show military involvement in a FEMA-led takeover within the United States under partially-classified Continuity of Government (COG) plans. It involves not only operations for the relocation of COG personnel and key officials, population management, emergency communications and alerts but the designation of the American people as ‘enemies’ under a live military tracking system known as Blue Force Situational Awareness (BFSA).

Further, this Nov. 18, 2011 FEMA-released plan National Continuity Programs (NCP) Program and Mission Support Services (PAMSS) [PDF] linked at the FedBizOpps.gov website outlines a scenario that overlays with eerie accuracy the bigger picture sketched out by concurrent calls for troops to keep order in the streets of places like New Orleans, as well as other bombshell documents like those released from KBR seeking to activate contracted staff for emergency detention centers and for services like fencing and barricades, as well as numerous agencies and think tanks who’ve prepared for civil unrest and economic breakdown in America.

Hold onto your seats. The plan for the takeover of the United States has not only been drafted, but activated. Our sources and independent research make this abundantly clear. Martial law scenarios preparing for a breakdown of order under the ongoing economic collapse are underway, even as pretexts for control are initiated in locales across the country. Bold individuals like Ron Paul have warned that dangerous legislation like the NDAA designate the American population as potential enemies. Now, there is more evidence this targeting of the people is sadly taking place.

A laundry list of operations organized under FEMA’s National Continuity Programs (NCP) provides a base of technical support for the deployment of national emergency plans and the logistical tracking of all personnel incorporated under what Homeland Security chief Janet Napolitano has lovingly termed the big “federal family.”

“Friendly” military and FEMA personnnel, along with their contracted employees and those of other federal agencies, will carry transponder ID badges, like those described here, to designate their “blue” inclusive status. As our military sources have confirmed, under the Blue Force Situational Awareness (BFSA) all other American citizens and civilians are designated under the “red” category and treated as an enemy or potential unfriendly. Throughout his past investigative work including witnessing numerous military drills, Alex Jones has also witnessed the technology and the use of this alarming code branding ordinary Americans as battlefield enemies. The plan includes drone and other high-tech tools to monitor and target individuals designated under the “enemy” status.

Military's Blue Force Tracking Technology Pings The military’s blue force tracking technology has been adopted since 2003 in Iraq and used in theaters like Afghanistan to quickly distinguish “Blue” friendlies (including U.S. forces and allies like tribal forces) from “Red” enemies. However, on the U.S. homeland battlefield, it is the American people who will be designated under “red,” whereas cleared occupying personnel are tracked as “blue” friendlies by their ID transponder badges. The designation was set-up to reduce “friendly fire” incidents.

Blue Force and other related programs like Geospatial Information Systems (GIS), Continuity Analysis and the Command, Control, Communications and Computing (C4) operations named in the document electronically track and verify the location and clearance of COG-related personnel, the usage of emergency shelter facilities and their components as well as the military’s friendly/enemy designations– creating a matrix for live monitoring and control coordinating with FEMA databases during martial law or national emergency scenarios.

For instance, FEMA acknowledges in its documents the use of Blue Force tracking systems and other geospatial information systems to monitor the capacity and usage of its facilities under the National Shelter System and other programs. Preparations for the orderly control of the masses have already been put into place.

In particular, the Mt. Weather Emergency Operations Center outside Washington, D.C. is empowered to “coordinate, track, and synchronize the relocation of key leadership and staff from the DHS and FEMA Emergency Relocation Groups (ERG) members to perform their essential functions” during a declared national emergency using the Blue Force and other related tracking programs managed under the established joint relocation operations control center and emergency relocation programs referenced in the document. Section 1.3.4 further details the minimum ID requirements for contractor employee identification and verification.

FEMA Shelter Support

The FEMA National Shelter System (NSS) is a comprehensive, Web-based database created to support Federal, State and local government agencies and voluntary organizations responsible for Mass Care and Emergency Assistance. The FEMA NSS allows users to identify, track, analyze, and report on data for virtually any facility associated with the congregate care of people and/or household pets following a disaster.

FEMA has also outlined detailed support for its vast Integrated Public Alert and Warning System (IPAWS), proscribed under Executive Order 13407 for the federal takeover of communications. It details the continuity of emergency communications and the issuance of warnings to the public, including public-private partnerships concerned with issuing alert messages through cellular providers– a program that only recently caused panic when it was publicly tested without forewarning in New Jersey. It is designated in the document under the Commercial Mobile Alerting System (CMAS).

As we have mentioned here and detailed in the past, this is part of larger COG government takeover– not part of any ordinary natural disaster response as the media has been told. The elite have initiated worldwide economic collapse and prepared their power-grabbing response as currencies and markets fall across the globe. All the experts we’ve talked to over the years concur with this basic analysis.

To put it simply: once the economic depression has sunken in completely, the population will willingly head in droves to government centers for basic requirements like food. As Henry Kissinger bluntly quipped, “Control oil and you control nations; control food and you control the people.” FEMA’s response will in hinge, in part, on just that– encouraging people sign up for their own enslavement.

 


The U.S. Government Still Has The Power To Issue Debt-Free Money

The Economic Collapse
Monday, December 19, 2011

Most Americans have no idea that the U.S. government once issued debt-free money directly into circulation. America once thrived under a debt-free monetary system, and we can do it again. The truth is that the United States is a sovereign nation and it does not need to borrow money from anyone.


Back in the days of JFK, Federal Reserve Notes were not the only currency in circulation. Under JFK (at at various other times), a limited number of debt-free United States Notes were issued by the U.S. Treasury and spent by the U.S. government without any new debt being created. In fact, each bill said “United States Note” right at the top. Unfortunately, United States Notes are not being issued today. If you stop right now and pull a dollar out of your wallet, what does it say right at the top? It says “Federal Reserve Note”. Normally, the way our current system works is that whenever more Federal Reserve Notes are created more debt is also created. This debt-based monetary system is systematically destroying the wealth of this nation. But it does not have to be this way. The truth is that the U.S. government still has the power under the U.S. Constitution to issue debt-free money, and we need to educate the American people about this.

Posted below are pictures of the front and the back of a United States Note printed in 1963 while JFK was president….

Notice that there is a red seal instead of a green seal on the front, and it says “United States Note” rather than “Federal Reserve Note”.

According to Wikipedia, United States Notes were issued directly into circulation by the U.S. Treasury and they were first used during the Civil War….

They were originally issued directly into circulation by the U.S. Treasury to pay expenses incurred by the Union during the American Civil War. Over the next century, the legislation governing these notes was modified many times and numerous versions have been issued by the Treasury.

So why are we using debt-based Federal Reserve Notes today instead of debt-free United States Notes?

It seems rather stupid, doesn’t it?

Well, that is what Thomas Edison thought too.

Thomas Edison was once quoted in the New York Times as saying the following….

That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt.

Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 — that is what it amounts to, with interest. People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work. That is the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost, on that account. Under the present system of doing business we simply add 120 to 150 per cent, to the stated cost.

But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good.

Our current debt-based monetary system was devised by greedy bankers that wanted to make huge profits by creating money out of thin air and lending it to the U.S. government at interest.

Sadly, the vast majority of the American people have no idea how money is actually created in this nation.

In a previous article about money and debt, I explained how more government debt is created whenever the U.S. government puts more money into circulation….

When the government wants more money, the U.S. government swaps U.S. Treasury bonds for “Federal Reserve notes”, thus creating more government debt.  Usually the money isn’t even printed up – most of the time it is just electronically credited to the government.  The Federal Reserve creates these “Federal Reserve notes” out of thin air.  These Federal Reserve notes are backed by nothing and have no intrinsic value of their own.

When each new Federal Reserve Note is created, the interest owed by the federal government on that new Federal Reserve Note is not also created at the same time.

So the amount of government debt that is created actually exceeds the amount of money that is created..

Isn’t that a stupid system?

The U.S. Constitution says that the federal government is the one that should actually be issuing our money.

In particular, according to Article I, Section 8 of the U.S. Constitution, it is the U.S. Congress that has been given the responsibility to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.

So why is a private central banking cartel issuing our money?

As is the case with so many other issues, we desperately need to get back to the way the U.S. Constitution says that we should be doing things.

The debt-based Federal Reserve system is literally stealing the future from our children and our grandchildren.

Back in 1910, a couple years prior to the passage of the Federal Reserve Act, the national debt was only about $2.6 billion.

A little over 100 years later, our national debt is now more than 5000 timeslarger.

So why don’t we just admit that this system simply does not work?

Our current debt-based monetary system also requires very high personal income taxes to pay for it.

In fact, it is no accident that the personal income tax was introduced at about the same time that the Federal Reserve system originally came into existence.

Our children, our grandchildren and many generations after that are facing a lifetime of debt slavery because of us.

As I have written about previously, if the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

Neither the Republicans or the Democrats are proposing any solutions to this problem.  Rather, both parties are only trying to slow down the rate at which we are going into even more debt.

But the truth is that the federal government does not have to go into a single penny of additional debt.

How could this be?

It is not too complicated.

If Congress took back the power over our currency and started issuing debt-free money a lot of our problems could be fixed.

A basic plan would look something like this….

#1) The U.S. Congress votes to take back all of the functions that it has delegated to the Federal Reserve and begins to issue debt-free United States Notes.  These United States Notes would have the exact same value as existing Federal Reserve Notes, and over time all existing Federal Reserve Notes would be taken out of circulation.

#2) The U.S. Congress nationalizes all debt held by the Federal Reserve.  That would instantly reduce the national debt by 1.6 trillion dollars.  In fact, there are a few members of Congress that have already proposed this.

#3) A Constitutional amendment is passed limiting future U.S. government deficits to a reasonable percentage of GDP.  Any future deficits would not be funded by borrowing.  Rather, future deficits would be funded by newly created Federal Reserve Notes.  Therefore, the federal government would never again accumulate another penny of debt.

And it would be important to inject new money into the economy from time to time.  When existing money is destroyed or when the population grows it is important to inject a certain amount of new money into the system in order to avoid deflation.

#4) The existing national debt would be very slowly paid off with newly created United States Notes.  The U.S. government spent over 454 billion dollars on interest on the national debt during fiscal year 2011, and over time this expense would go to zero.

If the national debt is paid off slowly enough, it would not create too much inflation.  I believe that it could be paid off gradually over 50 years without shocking the economy too much.

There are some that would object to any measure that would ever cause a small amount of inflation, but my contention is that we have created a $15 trillion dollar debt mess for future generations, and it would be absolutely criminal to pass that legacy on to them.

We created this mess, and it is our responsibility to clean it up.

While there is certainly a danger that we would have a limited amount of inflation under a debt-free monetary system such as the one described above, the reality is that we are absolutely guaranteed inflation under the Federal Reserve system.

Most Americans believe that inflation is a fact of life, but the sad truth is that the United States has only had a major, ongoing problem with inflation since the Federal Reserve was created back in 1913.

If you do not believe this, just check out this chart.

Sadly, the U.S. dollar has lost well over 95 percent of its value since the Federal Reserve was created.

So, yes, there would be a need for strict monetary discipline under a debt-free monetary system, but it would be hard to do worse than the Federal Reserve has already been doing.

And Congress could always slow down inflation using other methods.  For example, raising the reserve requirements for banks (which should be done anyway) would help keep inflation in check.

If the above proposals were adopted, the end result would be something that we could all live with.  The Federal Reserve system would be abolished, the national debt burden on future generations would be wiped out, the economy would not have to go through a devastating economic collapse that could last a decade or longer, and we could eventually make a fairly smooth transition to “hard money” if we wanted to after the national debt is gone.

Is there any other proposal out there that does all of those things?

There are many out there that would dispute some of the points above, and debate is good.  By engaging in debate, we can hopefully help educate the American people about the nature of money.

The key is to get rid of our current debt-based Federal Reserve Notes and replace them with debt-free United States Notes.

The American people need to understand that it is a lie that the U.S. government “must” borrow money from somebody else.

When the U.S. government borrows money, it slowly transfers wealth from the American people to those that borrowed it.

At this point, we have created a financial nightmare for future generations that is unlike anything the world has ever seen before.  We owe it to future generations to eliminate the debt problem without destroying the United States economy.  Adopting debt-free money would allow us to do that.

But sadly, neither political party is even talking about debt-free money.  In fact, most of the politicians in both political parties probably do not even know what debt-free money is.

So we need to get the American people educated about these things.  Because if we stay on the course that we are currently on, an economic collapse is inevitable.

 


The Economic Collapse
July 15, 2011

Financial Hell

For decades, the U.S. government has had a AAA rating.  On the scales used by the big three credit rating agencies, that is the highest credit rating that a government can get.  Moody’s scale actually uses lettering that is a little different from the other two big agencies (“Aaa” instead of  “AAA”), but you get the point. Right now, the U.S. government is closer than ever to losing its AAA rating.  The threat of a rating downgrade is going to continue to grow regardless of how the political theater that we are watching unfold in Washington D.C. plays out.   The truth is that the federal government has accumulated a debt that is so vast that it will never be paid back.  In fact, we are rapidly approaching the point when this debt will no longer be serviceable.  If the credit rating of the U.S. government is not slashed right now, it will be soon enough.  In fact, the truth is that the U.S. government is such a financial mess that it should have been done long ago.  But whenever the United States does lose its AAA rating, we could potentially see financial hell unleashed because it will also mean that there will almost certainly be a wave of credit rating downgrades from coast to coast.

As I have written about previously, government debt becomes more painfulthe higher that interest rates go.  When the big credit agencies downgrade the credit rating of a government, that is a signal to investors that they should ask for higher interest rates on debt issued by that government.

This does not always play out in practice (just look at Japan), but nations such as Greece, Portugal and Ireland sure are going through financial hell right now as they deal with reduced credit ratings and soaring interest rates.

Right now, the U.S. government is able to borrow gigantic quantities of money at ridiculously low interest rates. This is the primary reason why the debt disaster predicted by so many in the past has not arrived yet.

If the credit rating of the U.S. government is downgraded, it could finally get investors all over the world to realize that the game is over and that they should be demanding much higher returns on debt issued by the U.S. government.  The truth, as U.S. Representative Ron Paul put it recently, is that the U.S. government is already “insolvent” and at some point we are all going to have to face reality….

“Ultimately, the fundamentals show this country is bankrupt.”

So whether or not it happens right now, the truth is that at some point the credit rating of the U.S. government is going to go down and interest rates are going to go up.

Unfortunately, it appears that this might happen sooner rather than later.

Earlier this week, Moody’s Investors Service publicly announced that it would be reviewing our Aaa bond rating for a possible downgrade.

On Thursday, S&P actually went so far as to announce that there is a “50 percent chance” that it will downgrade the credit rating of the U.S. government within the next three months.

S&P has been warning of trouble for some time now.  Back on April 18th, Standard & Poor’s altered its outlook on U.S. government debt from “stable” to “negative” and warned that a downgrade was likely at some point soon if nothing changed.

If the credit rating of the U.S. government gets slashed and if that results in higher interest costs on the national debt, that is going to make it much harder to balance the budget.

The U.S. government will take in somewhere around 2.2 or 2.3 trillion dollars this year.  It will spend somewhere in the neighborhood of 3.5 or 3.6 trillion dollars this year.

Included in that spending is about 400 billion dollars that goes for interest onthe national debt.

As I explained in a previous article, if our interest costs double or triple it is going to make it basically impossible to balance the budget under our current system.

If interest rates on U.S. government debt were to rise to moderate levels, we could soon be easily paying a trillion dollars a year just in interest on the national debt.

If interest rates on U.S. government debt were to rise to the levels that Greece, Portugal and Ireland are now facing, it would be beyond catastrophic.

But a reduced credit rating and higher interest rates would not just hurt the finances of the U.S. government.

Any financial institution that is linked to the U.S. government in any way would also probably be downgraded.

This fact was noted in the announcement put out by Moody’s this week….

In conjunction with this action, Moody’s has placed on review for possible downgrade the Aaa ratings of financial institutions directly linked to the government: Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks.

We have also placed on review for possible downgrade securities either guaranteed by, backed by collateral securities issued by, or otherwise directly linked to the government or the affected financial institutions.

Just think of the financial carnage that would cause.

Also, check out what one Bloomberg article had to say about the potential cascading effects of a credit rating downgrade for the U.S. government….

At least 7,000 top-rated municipal credits would have their ratings cut if the U.S. government loses its Aaa grade, Moody’s Investors Service said.

An “automatic” downgrade affecting $130 billion in municipal debt directly linked to the U.S. would occur if the federal level is reduced, Moody’s said yesterday in a report. Additionally, top-rated securities with no direct links to the national government will be reviewed for similar action.

But the nightmare would not end there.  The truth is that the credit ratings of large numbers of state and local governments from coast to coast would likely be reviewed and downgraded as well.  Right now, many state and local governments are scratching and clawing in a desperate attempt to survive financially, and a significant rise in interest costs would be enough to wipe many of them out.

The ripple effects of a U.S. government credit downgrade would be endless.

A lot of people argue that if the federal government ran a balanced budget from now on none of this would matter.

Unfortunately, that is not true.

At this point, a very high percentage of U.S. government debt is short-term debt.  That means that gigantic amounts of debt must be “rolled over” each year in addition to any new debt that we take on.  So even if interest rates rise significantly on just the existing debt that we have it is going to be a total nightmare.

And make no mistake, whether it happens now or later a collapse of U.S. government finances is coming.

David Murrin, the chief investment officer at Emergent Asset Management,recently told CNBC the following….

“It’s inevitable that the U.S. will default—it’s essentially an empire which is overextended and in decline—and that its financial system will go with it”

Right now it is being projected that the U.S. national debt will hit 344% of GDPby the year 2050 if we continue on our current course.  We are on a runaway train that is heading straight for a brick wall.

Europe is also a complete financial wreck.  The sovereign debt crisis over in the EU continues to grow worse by the day and there is no end in sight.

If the U.S. collapses, Europe is not strong enough to save it.  If Europe collapses, the U.S. is not strong enough to save it.

We really are entering an unprecedented time in world history.   We are on the verge of the first truly global financial disaster.

It is going to be interesting to see which major currency crashes and burns first.  Some think that it will be the euro.  Others think that it will be the dollar.

In any event, the reality is that the current global financial system is not sustainable.  The folks that are in charge can try to keep things together for as long as possible, but at some point the dominoes are going to start to fall and the house of cards is going to crash.

We have entered a time when there is going to be financial crisis after financial crisis.  Even if the EU and the U.S. government can somehow fix things for the moment, more problems are going to be just around the corner.

The world has become incredibly unstable and the entire globe is going to be shaken.  Most people cannot even conceive of the kind of financial hell that is coming our way as a nation.

Yes, it can be a bit sad to think about what is happening, but it is much better to be armed with the truth than to be totally clueless and totally unprepared.

 


The Economic Collapse
June 7, 2011

The global economy has become so incredibly unstable at this point that it is not going to take much to plunge the world into a horrific economic nightmare.  The foundations of the world economic system are so decayed and so corrupted that even a stiff breeze could potentially topple the entire structure over.  Over the past couple of months a constant parade of bad economic news has come streaming in from Europe, Asia and the United States.  Signs of an impending economic slowdown are everywhere.  So what “tipping point” will trigger the next global economic downturn?  Nobody knows for sure, but potential tipping points are all around us.

Today, the global economic system is even more vulnerable than it was back in 2008.  Virtually none of the systemic problems that contributed to the 2008 collapse have been fixed.

Mark Mobius, the head of the emerging markets desk at Templeton Asset Management, was recently was quoted in Forbes as saying the following….

“There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis.”

The “financial reform” law that Barack Obama and the Congress passed a while back was a complete and total joke.  They might as well have written the law on toilet paper for all the good that it is doing.

We did not learn from our mistakes and our future economic lessons are going to be even more painful.

The world is drowning in a mountain of debt, the global financial system is packed to the gills with toxic derivatives, everyone is leveraged to the hilt and the dominoes could start falling at any time.

I am not the only one that is warning that another financial collapse is coming.  In fact, a whole lot of people have been warning about the next financial collapse lately.

So what will the tipping point for the next collapse be?

The following are some potential nominees….

Tipping Point #1: Syria

Syria is a situation to watch very, very closely.  The Syrian government is in a lot of trouble right now.  Sadly, the instability inside Syria probably makes war with Israel even more likely.

Make no mistake – a war between Israel and Syria has been brewing for a long, long time and at some point it will happen.  When it happens, the entire Middle East may erupt in warfare.

Just the other day, a very troubling incident happened in the area around the Golan Heights.  The following is an excerpt from a report by The Daily Mailabout the incident….

“About 20 pro-Palestinian demonstrators were killed and 325 injured yesterday when Israeli forces opened fire on them as they crossed the border from Syria into occupied territories, according to reports.”

At this point, the Syrian government is probably glad that the attention has been taken off of them at least for a while.  The Syrian government has been getting a lot of bad press lately.  The following is an excerpt from a recent report by Human Rights Watch about the treatment of protesters inside Syria….

“The methods of torture included prolonged beatings with sticks, twisted wires, and other devices; electric shocks administered with Tasers and electric batons; use of improvised metal and wooden ‘racks’; and, in at least one case documented by Human Rights Watch, the rape of a male detainee with a baton.

“Interrogators and guards also subjected detainees to various forms of humiliating treatment, such as urinating on the detainees, stepping on their faces, and making them kiss the officers’ shoes. Several detainees said they were repeatedly threatened with imminent execution.”

 

So in light of the “precedent” that we recently set in Libya, does this mean that we will be “forced” to conduct a “humanitarian mission” inside Syria as well?

Syria is one tipping point that we all need to keep a close eye on.

Tipping Point #2: Iran

The Iranian nuclear program is in the news again. A new report by RAND Corporation researcher Gregory S. Jones claims that Iran could have a nuclear weapon within 2 months.  His report is based on recent findings by the International Atomic Energy Agency.  According to Jones, airstrikes alone would be incapable of stopping Iran’s nuclear weapons program at this point.  Instead, Jones says that a “military occupation” would be required.

It is a minor miracle that a war with Iran has not erupted yet.  It seems almost inevitable that at some point either the United States or Israel will use military force to try to stop Iran’s nuclear program.

When that happens, it is going to cause a major shock to the global economy.

Tipping Point #3: Libya

NATO has made it abundantly clear that Moammar Gadhafi will no longer be tolerated.  In fact, NATO apparently plans to reduce Tripoli to a heap of smoking ruins if that is what it takes to bring about the fall of Gadhafi.

What a “humanitarian mission” we have going in Libya, eh?  It turns out that NATO believes that the United Nations gave it permission to bomb television stations and to make attack runs with helicopters.

Russian Deputy Prime Minister Sergei Ivanov recently said that by using attack helicopters, NATO has moved dangerously close to turning the Libya operation into a ground invasion….

“Using attack helicopters, in my view, is the last but one step before the land operation.”

So why is Libya a potential tipping point?

It isn’t because Gadhafi is a threat.  He is toast.

It is because the rest of the world is watching what is happening in Libya, and that is raising global tensions.

Even if Gadhafi falls, the Libyan operation will still be a failure because it has brought us all significantly closer to World War III.

Tipping Point #4: More Revolutions In The Middle East

The revolutions throughout the Middle East earlier this year sent oil prices absolutely skyrocketing and they have remained at elevated levels.

And in case you haven’t noticed, revolutions continue to sweep the Middle East.

Have you seen what has been happening in Yemen lately?

Yemeni President Ali Abdullah Saleh has burns over 40% of his body and he has suffered a collapsed lung as a result of a recent attack.

If violence and protests throughout the Middle East become even more intense as the weather warms up this summer that could have a very significant impact on world financial markets.

Tipping Point #5: Fukushima

The mainstream news has gotten a bit tired of covering it, but the situation at Fukushima is still a complete and total disaster.

Japan’s Nuclear Emergency Response Headquarters admitted on Monday that three reactors experienced “full meltdowns” in the aftermath of the earthquake and tsunami in March.

Did it really take them nearly three months to figure this out, or were they lying to the rest of the world all of this time?

The truth is that the nuclear disaster at Fukushima is far worse than the mainstream media has been telling us.  If you doubt this, just check out this excellent article or this article by Natural News: “Land around Fukushima now radioactive dead zone; resembles target struck by atomic bomb“.

The economic impact of the Fukushima disaster is going to continue to unfold over an extended period of time.  It turns out that Japan is now officially in a recession.  Their economy contracted at a 3.7 percent annualized rate during the first quarter.

Look for more bad economic numbers to come out of Japan for the rest of the year.  Considering the fact that the Japanese economy is the third largest economy in the world, the fact that they are struggling so badly right now is not a good sign for the rest of us.

Tipping Point #6: Oil Prices

The price of oil is going to continue to be one of the biggest economic stories for the rest of this year and for 2012 as well.

The last time U.S. energy expenditures were over 9 percent of GDP was in 2008 and we quickly plunged into the deepest economic downturn since the Great Depression.

Well, we have reached the significant 9 percent figure once again in 2011, and many fear that once again high oil prices will cause another major economic decline.

Tipping Point #7: Government Austerity

In the United States, it is not just the federal government that is drowning in debt.

All over America, there are state and local governments that are financial basket cases.

I don’t always agree with the time frames that Meredith Whitney puts out there, but she is absolutely correct that we are going to see a massive municipal bond crisis. The following is an excerpt from a recent report about Whitney’s predictions on CNN….

“Meredith Whitney is issuing a fresh warning to mutual funds, banks, and politicians: The state of state finances is far worse than what you think, or at least than what you’ve been willing to tell the investors and taxpayers who will eventually carry the burden.”

Many state and local governments are attempting to get their budgets balanced by making huge budget cuts.  But most of the time these austerity programs also include the elimination of a lot of government jobs.

UBS Investment Research is projecting that state and local governments will combine to slash a whopping 450,000 jobs by the end of next year.

So where will the half a million good jobs come from to replace all of those lost jobs?

Tipping Point #8: The European Sovereign Debt Crisis

Greece is just the tip of the iceberg in Europe.

Moody’s downgraded Greek debt again last Wednesday.  This time Moody’s downgraded Greek debt by three levels all the way down to Caa1.  At this point, the yield on 10-year Greek bonds is over 15 percent.

The EU has been going crazy trying to deal with the Greek debt crisis.  The truth is that a default by the Greek government would be absolutely catastrophic. If you do not understand the kind of chaos a Greek default would set off on world financial markets, just read this editorial.

But Greece is not the only major European nation with a massive debt problem.

The government of Ireland is already indicating that they may need another bailout.

Portugal, Spain and Italy are also on the verge of collapse.

So will the EU bail all of these nations out for years and years to come?

At some point will the whole house of cards come crashing down?

Everyone needs to keep watching what is going on in Europe.  The status quo is not sustainable and it cannot go on forever.

Tipping Point #9: The Dying U.S. Dollar

The euro is not the only major currency that is in trouble.

The U.S. dollar is also slowly dying.

On April 18th, Standard & Poor’s altered its outlook on U.S. government debt from “stable” to “negative” and warned that the U.S. could soon lose its prized AAA rating.

The sad truth is that faith in the U.S. dollar and in U.S. Treasuries is rapidly declining.  The mainstream news is not reporting on it much, but right now the Chinese are rapidly dumpingU.S. government debt.

As the dollar declines, so will the purchasing power of average Americans.  We are already seeing a tremendous amount of inflation in 2011.

But this is just the beginning.

A lot worse is going to be coming down the road.

Tipping Point #10: Drought

A lot of people that read my articles doubt that we will ever see a major global food crisis.

But one is coming.

It is just a matter of time.

Even now, many areas of the world are experiencing very serious droughts.  The following is from a recent  Bloomberg article….

Parts of China, the biggest grower, had the least rain in a century, some European regions are the driest in 50 years and almost half the winter-wheat crop in the U.S., the largest exporter, is rated poor or worse. Inventory is dropping 8.8 percent, the most in five years, Rabobank International says. Prices will advance 20 percent to as high as $9.25 a bushel by Dec. 31, a Bloomberg survey of 14 analysts and traders shows.

Are you concerned yet?

You should be.

But if you prefer some mindless pablum that will make you feel better, we have some of that for you too.

Larry Summers, the former director of the National Economic Council under Barack Obama, recently told CNBC the following….

“We definitely hit a slower patch, but I think the basic fact that the terrible financial strains we had are abating, remains in place, and I expect this recovery to continue for a substantial period of time.”

Does that make you feel better?

Larry Summers says that everything is going to be okay.

It would be great if Summers was actually right, but sadly he is not.

In fact, the worst economic times that America has ever seen are ahead.

The following is a brief excerpt from a recent interview with Dmitry Orlov about the coming economic collapse that was posted on shtfplan.com….

First you have financial collapse, which is basically the volume of debt that has to be taken on in order for the economy to continue functioning, cannot continue. We’re seeing that right now in Greece, we’re probably going to see that in Japan, we’re definitely at a point now in the United States where even if you raised the income tax to 100 percent, there’s absolutely no way of covering the liabilities of the U.S. federal government. So, we’re at that point now but the workout of the financial collapse is not all quite there. We don’t quite have a worthless currency but that’s in the works.

That, of course, is followed by commercial collapseespecially in a country like the United States that imports two thirds of its oil. A lot of that is on credit and if a little bit of that oil goes missing then the economy starts to fall apart because nothing moves unless you burn oil in the United States and, of course, a lot of goods that are sold everywhere are imported again, on credit.

When the U.S. dollar dies and our financial system collapses we are not going to be able to get all of the things that we need from the rest of the world so cheaply any longer.

That is going to cause fundamental changes inside the United States.

Right now, the economic news just seems to get worse and worse, but this is just the beginning.

What is eventually going to happen in this country is going to be so nightmarish that most Americans could not even imagine it right now.

So are our leaders doing anything to prepare for the coming economic crisis?

No, they are too busy with other things.

The big political news of the day was U.S. Representative Anthony Weiner finally admitting that he sent out lewd photos of himself over Twitter to women that he was not married to.

We have become the laughingstock of the world and the economic collapse has not even happened yet.

 


The Economic Collapse
April 7, 2011

The following is one statement that you should get used to seeing: “The price of gold set another record today.”  Today, spot gold reached a new all-time record of $1461.91 an ounce before settling back a little bit.  Silver is also skyrocketing.  At one point today silver hit $39.75 an ounce.  It seems inevitable that at some point we are going to be talking about $50 silver.  The price of oil is also continuing to relentlessly march upwards.  At last check U.S. oil was at about $108 a barrel.  All of this is great news for those that are investing in gold, silver and oil, but all of this is also really bad news for the U.S. economy.  Why?  Well, because when these commodities go up in price it is a sign that the U.S. dollar is dying and that our country is getting closer to economic collapse.

Traditionally, there has been an inverse correlation between the price of gold and the value of the U.S. dollar.  Usually when the U.S. dollar goes down, the price of gold goes up.

One of the main reasons why gold has been so strong over the past year is because the U.S. dollar has been rapidly losing value.

So why is the U.S. dollar declining?

Most economists point to all of the quantitative easing that the Federal Reserve has been doing.

So exactly what is quantitative easing?

Well, it is basically like playing Monopoly with someone that reaches under the table and pulls out a bunch of extra money when they are almost broke.

The Federal Reserve has been creating huge amounts of money out of thin air and has been pumping it into the financial system.  It is essentially cheating, and it is highly inflationary.  The rest of the world has not been amused.

But quantitative easing is not the only issue.

The truth is that whenever the U.S. government goes into more debt, more money is created.  The U.S. has been running trillion dollar deficits for several years now, and this has created a lot of new money.

This is another reason why it is so important to get the U.S. government debt situation under control.  The Obama administration is projecting that the budget deficit for this fiscal year will be about 1.6 trillion dollars.  This is highly inflationary and it will continue to destroy the value of the dollar.

In addition, the rest of the world is beginning to have serious doubts about the sustainability of U.S. government debt.  They are starting to lose faith in the U.S. dollar and in U.S. Treasuries.

In fact, investors are losing faith in paper currencies all over the globe.  The euro is on the verge of a massive crisis.  On Tuesday, Moody’s downgraded Portuguese government debt for the second time in a month.  Portugal needs a bailout, but they are far from alone.  A half dozen European nations are experiencing a financial meltdown and the European debt crisis could spiral out of control at any moment.

Because of all of this financial instability, investors have been seeking some place safe to put their money.

For many investors, precious metals and commodities have been the answer.

In fact, silver has been doing even better than gold lately.  On Wednesday, silver set a new 31-year high for the third day in a row.

People are even starting to talk about the possibility of $50 silver.  Most analysts would have considered such talk complete nonsense a year ago.

But now nobody is laughing.

The price of oil is also soaring.  Some of that is due to inflation, but not all of it.  The truth is that when it comes to oil there are other factors at play.

Unfortunately, a high price for oil is far more damaging to the U.S. economy than a high price for gold is.

The U.S. economy has been designed to use massive amounts of cheap oil to transport massive quantities of goods over vast distances.  When the price of oil goes to $100 or $150 a barrel, it fundamentally changes the dynamics of our economic system.

Nobody has ever been able to prove that the U.S. economy can successfully handle a price for oil over $100 for an extended period of time.

Do you remember what happened back in 2008?  The price of oil hit a record high in June and then the entire financial system came unglued just a few months later.

The price of oil affects the price of almost everything else.  Almost all forms of economic activity use energy.  Almost all goods have to be transported a significant distance.

When the price of oil goes too high, some types of economic activity simply become unprofitable.  If the price of oil stays this high from now on, there are many businesses across America that will be forced to close.

A high price for oil is also going to hit U.S. consumers really hard.  According to AAA, the average price of a gallon of gasoline in the United States is now $3.70.

Many are convinced that the average price of gasoline is going to shatter the all-time record of $4.11 that was set back in July 2008.

So how much did a gallon of gas cost a year ago?

One year ago the average price of a gallon of gasoline was just $2.83.

Over the past 12 months the average price of gasoline has gone up about 30%.

So has your paycheck gone up by 30% over that time?

The truth is that wages have been very stagnant in the United States for a long, long time.

That means that U.S. household budgets are being increasingly stretched.  People have to fill up their cars so that they can get to work or to school.  Americans can cut back on pleasure driving to save money, but most of the driving that all of us do is to get to places that we have to be.

So if gas costs more that means that consumers are going to have less to spend other places.  Consumer spending accounts for approximately 70 percent of the U.S. economy, so any slowdown in U.S. consumer spending would be extremely significant.

Already a substantial percentage of the American people are feeling quite stressed about gas prices.

According to a recent Associated Press-GfK poll, approximately two-thirds of the American people believe that rising gasoline prices will cause significant hardship for their families over the next six months.

We are heading for some really difficult economic times.  As I wrote about recently, this economy has millions of Americans feeling depressed, but that is not the appropriate response.

Rather, once we understand how bad our economic problems are we should feel empowered because then we can start focusing on real solutions.

And somebody really needs to start focusing on solutions because panic is starting to abound.  Many top corporate insiders are selling off stock like there is no tomorrow.  The biggest bond fund in the world, PIMCO, has been getting rid of all of their U.S. Treasuries.  When Wall Street big shots start freaking out you know that the hour is late.

It certainly doesn’t help that the Middle East is in a state of chaos and that the Japanese economy is falling apart as a result of the recent disasters.

In these uncertain times investors are seeking something safe.  They are turning to real “global currencies” such as gold, silver and oil.  Paper currencies are rapidly losing favor and rampant inflation is on the horizon.


Bloomberg

U.S. Federal Reserve Chairman Ben S. Bernanke’s two-year fight to shield crisis-squeezed banks from the stigma of revealing their public loans protected a lender to local governments in Belgium, a Japanese fishing-cooperative financier and a company part-owned by the Central Bank of Libya.

Full Story

http://www.bloomberg.com/news/2011-04-01/foreign-banks-tapped-fed-s-lifeline-most-as-bernanke-kept-borrowers-secret.html