With a new decade upon us one cannot help but ponder the direction we are heading in as a whole. It seems like we are in a relentless circle of repetition doomed to repeat the same mistakes our previous generations fought to overcome. As we step into this new day and age we need to open our eyes to the reality of things versus the illusions we have been made to believe. When you turn on the television today you are inundated with the constant smoke and mirrors used to shield us from the truth. Allow me to remove the smoke and mirrors from you and share the reality of our economy as we step into this new decade.
Last year we saw many events unfold that have crippled our economy and contributed to the unavoidable reality we will all soon face which is inflation. Inflation has been caused by fiat money and is an underestimated effect that has resulted in the death of many nations which in more recent times includes the Wymore Republic and Former Soviet Union. It is the catalyst for economic uncertainty and if not handled correctly could render a currency useless launching a nation into complete financial meltdown. Here are the top 3 events unfolding in the US that are leading us down the path of hyper inflation:
1. The Banking Crisis
The banking crisis alone is a burdensome situation that could ignite hyper inflation in the coming times. Since 2008 we have had 195 banks file for bankruptcy. In 2009 over 140 banks failed and included the 6th and 10th largest bank failures in the United States history abducting billions in assets and drying up the FDIC insurance fund. FDIC is down to less than $10 billion in assets promising to insure over $6.2 trillion in deposits. How deep does this thing go? Well let’s just say that Neil Borofsky who is heading up TARP said the banking crisis alone could cost us $27.3 trillion to fix. Ronald Fricke president of Regal Assets says this number is more than the cost of all the wars the US has ever fought combined and is the most that has ever been spent on a single effort in American history which amounts to $80,000 for every US citizen. To make matters worse last year Citigroup reported a second quarterly profit of 4.3 billion but the figure included the $6.7 billion after tax profit from its sale of Smith Barney. If you exclude this onetime event the bank lost 3.4 billion. Similarly BofA showed a profit of $2.42 billion but this figure included the $5.3 billion from its sale of shares of China Construction Bank without this BofA would have reported a massive loss. To make matters worse over 515 banks are on the troubled list and could face bankruptcy this year as well as 35 ongoing criminal and civil investigations of suspected account, securities and mortgage fraud is taking place. You would think with this kind of pressure the banks would be walking on egg shells… that is far from the case. In lieu of such a horrendous year the banks decided to hand out over $587 billion in bonuses to their executives. Is this AIG all over again? These bonuses alone could have paid off every state in the US debt including California or saved mortgages for another 2 years. Needless to say the government has applied pressure to the banks in revealing where the money went and have been struggling to receive answers. The banks know that this fiat money is doomed to fail and according to them there is nothing in the constitution that requires them to reveal this information
2. Rising Unemployment
It is no surprise that unemployment is at the highest it has been in over 26 years. From September to December 2009 over 538,000 jobs were lost taking unemployment to over 10% nationwide. We all know that 10% is the public number and the reality of the situation is more like 17%. With over 1 million Americans on unemployment it will not be long before they start getting cut off. In fact this year alone we could see as many as 200,000 Americans cut off from unemployment because their pay period has come to an end. This event will muscle thousands of unemployed citizens to cash out of their retirement plans thus pulling money out of the stock market forcing another major drop in the markets. To make matters worse a slew of mortgages are about to renew on houses that are already worth half their value. Mix that in with the increasing unemployment numbers and you get a surge of individuals abandoning their properties and mortgages triggering another wave of the mortgage crisis guaranteeing hyper inflation. The current debt the mortgage crisis is sitting at is around $1.75 trillion.
3. Unaccounted For Bailout Money
Since 2008 copious institutions and companies have been lining up to receive government bailout fiat money. We have seen AIG, Chrysler, GM, Ford and major banks come to Uncle Sam in an attempt to keep things afloat. The result has lead to multiple stimulus packages including a $787 billion package followed by a $1 trillion package. Where does that lead us to today? Over 90% of the money being unaccounted for! The government has been scrambling to figure out who has what and has spent close to $25 million in an attempt to receive answers. We all know that the $152.8 billion given to AIG was used to hand out over inflated bonuses to their executive and treat themselves to lavish days out on the town including a day at the St. Regis Hotel and a hunting trip in Europe. With the banks we know over $537 billion has been handed out in executive bonuses and substantial amounts sent oversees to various institutions in an attempt to invest money in foreign entities and recover their losses. It safe to say that over $600 billion has been dedicated to compensating the lousy executives that helped create this problem in the first place. The already $1.8 trillion that has been dedicated to placing scotch tape and band aids on the holes of the economy is only going fend off the inevitable for so long.
To summarize everything, with the banking crisis, rising unemployment and government bailouts alone we are looking at well over $30 trillion just to keep things afloat not even chipping away at our deficit as a whole. This is the catalyst for an unavoidable expansion of the money supply which will result in hyper inflation. It is time to look back at all the civilizations and nations that have tried to use fiat money as a monetary exchange and you will see that it has never worked. Having a useless paper currency backed by absolutely nothing is the primary reason why so many great nations have failed including Rome. In the history of our world not one nation has made fiat currency work and the US will face a similar fate. With gold prices where they are today you could not be in a better time to transfer your wealth into the only honest money the world has ever had.
Disclosure: I own Physical Gold