The corporate controlled media is finally starting to talk about the economic problems that the alternative media and assorted precious metals advocates have been talking about for years now. We are facing a potential inflationary depression. Independent estimates of the M3 money supply show that we are seeing an annual increase in the M3 money supply by around 16 to 17 percent. The Federal Reserve chose to stop producing this report right around the time when these figures began going parabolic on their chart showing a massive increase in the money supply. An increase in the money supply results in a devalued currency and that’s one of the primary reasons why we are seeing the price of gold flirt with the $1,000 an ounce mark and silver explode past the $20 an ounce mark. The U.S. Dollar Index is now treading water around the 72 to 73 mark and it is becoming increasingly clear that the role of the world’s reserve currency is shifting from the U.S. Dollar to the Euro. Some ask how low the U.S. Dollar could go and that answer is simple. The U.S. Dollar could go to zero because it is a fiat currency with no real tangible backing. Every fiat currency in the history of man has been replaced or collapsed and there is nothing fundamentally different between the U.S. Dollar and these other fiat monetary systems of the past.
The people who are in control of the private central banks that fix the value of the U.S. Dollar through their policies are monopoly men. The Federal Reserve consolidated much wealth during the Great Depression by intentionally making money scarce following the excesses of the roaring 1920s. Prior to the Great Depression there were many local community banks. Following the Great Depression the vast majority of banks were under the Federal Reserve’s umbrella. The Federal Reserve was assisted by FDR who had the nerve to blame gold hoarders for the economic problems even though the gold hoarders were only attempting to protect their hard earned wealth. As FDR used the gold hoarders as a scapegoat for the economic problems that were created by the Federal Reserve’s policies, he issued Executive Order 6102 which made any significant amount of gold ownership illegal. The government confiscated a large portion of the American people’s gold and in return issued them paper notes. Following the confiscation, the price of gold was revalued from $20 an ounce to $35 an ounce. The confiscated gold was melted down and hauled off to Fort Knox, KY. Bluntly, what took place during the Great Depression was a giant scam by FDR and the assorted controllers of the Federal Reserve to consolidate more wealth and power under this criminal banking system.
History is repeating itself. Instead of destroying the economy and consolidating wealth through monetary deflation, it looks as if the bankers have decided that they will use monetary inflation as their weapon of choice. Alan Greenspan encouraged member banks to loan out large quantities of money and encouraged individuals to get these loans by setting interest rates at absurdly low levels in the early part of this decade. By making money cheaper, more people went out and got loans and the bankers accommodated the increased demand for loans by providing all sorts of creative financing packages. These packages included adjustable rate mortgages, interest only loans and other risky financial instruments. The bankers knew that this would eventually create a major financial calamity later when interest rates moved higher. The Federal Reserve’s policies is what primarily created the crash in the U.S. housing market and it is disgusting that people are looking to this same institution for a solution to the mess they created in the first place.
There is no doubt that the Federal Reserve is the culprit behind the current housing market collapse. Instead of questioning Alan Greenspan for his mishandling of interest rates in the early part of the decade, Congress decided to hold hearings with mortgage company CEOs. These hearings were nothing more than a dog and pony show designed to place the blame of the housing crisis on these mortgage companies. Although these CEOs do have some responsibility in this mess, the primary responsibility rests with Greenspan because his policies encouraged this market behavior. Greenspan should have been at these hearings especially after he encouraged Arab nations to drop their pegs to the U.S. Dollar. Greenspan actually had the nerve to tell these Arab states that they are having inflation because they are pegged to the U.S. Dollar. This is a criminal act on the part of Greenspan and has undoubtedly played a role in the sharp decline of the U.S. Dollar.
It is entirely insane that we continue to put up with a private central bank that manipulates the value of our money. It is absurd to believe that we have a free market if there is a monolithic private bank fixing the price of our money. The free market should dictate what money is and what money isn’t and if the government issues legal tender it should be gold or silver as the Constitution demands.
As a result of the housing market crash created by the Federal Reserve, smaller banks are failing and being bought out by larger financial institutions. Ben Bernanke has even stated that there will be bank failures as this crisis continues to unfold. This engineered crisis will be used to consolidate more wealth and power amongst fewer corporations. The crisis is also destroying the American middle class financially as an increase in the supply of homes coming on to the market has resulted in a deflationary environment. This has made it more difficult for home owners to use their homes as piggy banks.
The collapse of the U.S. Dollar in the past couple of weeks has been spectacular. In fact, each day this week we saw the U.S. Dollar reach new consecutive new lows. At this point, global confidence in the U.S. Dollar is eroding and it cannot be considered a tangible investment vehicle. Many highly respected economists are predicting further problems for the U.S. Dollar with some predicting that an inflationary depression is right around the corner.
Weakness in the U.S. Dollar has further accelerated due to poor economic data. Generally statistics from the Federal Reserve and the U.S. government understate economic problems so some of this new data that is coming out is fairly disturbing. According to data released by these two institutions, home owner equity is at its lowest levels since 1945, consumer debt has grown to $2.52 trillion and employers slashed more jobs in February than in any other since 2003 These are not good signs at all and the figures are likely understating how bad it really is.
The Federal Reserve and the U.S. government will never be honest about what’s really happening in an economic downturn because these are the two institutions that people look to first when there are economic problems. The U.S. economy has conservatively been in a recession since 2006 and it has taken George W. Bush and Ben Bernanke until now to finally admit that we are having difficulties. These guys are a little late to the party. Of course, if these two men actually told the truth about the monetary system, the U.S. Dollar would likely collapse and millions of folks would descend on Washington DC demanding their heads on a platter. Either way, you aren’t going to get the truth from the Federal Reserve or the U.S. government on the economy. It isn’t in their interest to provide the truth.
In terms of gold and silver, we are likely going to see an increasing amount of price volatility with these two metals on a day to day basis. Short term, central banks are likely going to dump more gold into the marketplace in order to prevent gold from hitting the $1,000 an ounce mark. This is exactly what happened on Friday when a slew of bad economic data came out that would normally be bullish for gold. Instead, gold dropped sharply. The $1,000 an ounce mark represents a key psychological barrier that will likely be broken in the very near future. The central banks want to keep it under this mark as long as they can, because once it goes over this mark it is likely to move much higher. Long term, these two metals will see substantial gains in U.S. Dollar denominated terms. It is not out of the question to see a $5,000 an ounce gold price or a $100 an ounce silver price in the next several years.
The Federal Reserve is stuck between a rock and a hard place. If they raise interest rates to the point where holding U.S. Dollars can outpace inflation they would need to raise them to around 20%. This would hurt not only the American people but the elite financial interests as well. As a result, the Federal Reserve is attempting to manage a slow inflationary decline of the U.S. Dollar which will allow the financial elite to more easily reposition themselves. Inflation hurts the poor and the middle class far more than the financial elite where as a deflation like what we saw during the Great Depression would hurt everybody across the board.
As this financial calamity continues, the corporate controlled media will likely say we are in a recession even though it will resemble more of a depression. Gold and silver remain good hedges against inflation and their price will rise in U.S. Dollar denominated terms. There continues to be more upside to silver but there will also be more short term volatility in silver. There is no doubt that an inflationary depression is a very likely scenario and there is always the chance that the U.S. Dollar could go to zero. This is why having physical gold and silver is always a smart move.
03-09-2008 Lee Rogers RogueGovernment.com