The Beginning of a U.S. economic collapse and hyper-inflation? (part 5)

Will the United States dollar collapse?

In February, Obama signed an executive order to create the National Commission on Fiscal Responsibility and reform, with proposed recommendations designed to balance the budget. When signing this order, Obama created a new definition of a balanced budget which does not include interest payments. The NIA believes this order serves as an admission that the U.S. will never have a real balanced budget again.

With no hope for our budget to ever be balanced again, the question becomes “what policy will the government implement to prepare for the coming crisis and what policies will be implemented once hyper-inflation arrives.”

Hidden in the recently passed $17.5 billion hiring incentives to restore employment act is a provision known as “Foreign Account Tax Compliance.” This provision requires that foreign banks and financial institutions disclose the full details of American account holders to the IRS, and to with-hold 30% of all outgoing capital flows into those accounts if the IRS deems those account holders recalcitrant.

This is considered to be the beginning of capital controls. It wouldn’t be surprising if U.S. citizens are soon forced to invest their saving into U.S. treasuries.

It’s no coincidence that states with the lowest level of unemployment are all farming states. (N. Dakota, S. Dakota and Nebraska) No matter how bad things get in the U.S., Americans need to eat. Our country needs to go back to its roots if we want to survive hyper-inflation.

During the great depression, 27% of those employed in the U.S. worked on farms. Today, less than 2% of workers work on U.S. farms and agriculture makes up less than 1% of our GDP.

In 2009, NIA released an article predicting inflation would appear next in food and agriculture. Since then, wholesale food prices have steadily gone up. Wholesale food prices rose 2.4% in the month of march, the largest monthly increase in over 26 years.

Some of the startling food price increases on a year to year basis include:

1. fresh and dry vegetables: up 56.1%

2. fresh fruits and melons: up 28.8%

3. eggs for fresh use: up 33.6%

4. pork: up 19.1%

5. beef and veil: up 10.7%

6. dairy products: up 9.7%.

Many NIA members ask about the U.S. gold reserves of 8,100 tons and if our gold reserves will be enough to help our country survive hyper-inflation. And although many people claim our gold reserves were audited in 2005, the auditor “KPMG” claims to have only audited the mints fiscal year 2005 financial statements. (they never saw any physical gold and didn’t even go to fort knox) The last real audit of the U.S. gold reserves took place in 1954.

If the U.S. defaulted on its gold obligations when it ended the gold standard in 1971, how do we know our gold reserves of 8,100 tons still exist. If they do, why aren’t they audited on an annual basis like the assets of publicly traded companies.

Assuming our gold reserves still exist at Fort Knox, the value of our gold reserves based on the current price of gold is only around $300 billion. The U.S. budget deficit for the month of February alone was $220.9 billion. The bottom line is our gold reserves, if they still exist are nothing compared to our debts and deficit spending. The U.S. dollar would have to devalued by 80% for our gold reserves to be worth enough to cover our projected budget deficit for the fiscal year 2011 alone. The U.S. dollar would have to be devalued 98% for our gold reserves to be worth enough to pay off our national debt.

Instead of returning to a sound currency backed by gold, politicians in Washington believe adding new regulations will solve the problem. They believe the free market failed, and the financial collapse of 2008 occurred because there weren’t enough regulations.

The truth is, we haven’t had a free market in the U.S. for decades. It is impossible to have a free market when the federal reserve artificially manipulates interest rates. If we had a free market, there would be no bailouts of so-called “to big to fail institutions.” AIG would have defaulted on their credit default swap payments to firms and wallstreet would have lost their bets and wouldn’t have been able to pay out record bonuses.

Wallstreet is able to spend their newly printed dollars before they circulate. By the time those dollars trickle down to the middle class, prices rise dramatically and the middle class sees a rapid decline in their standard of living. Americans have not yet felt the devastating effects of the wallstreet bailouts because it takes years for monetary inflation to result in price inflation.

Moody’s helped fuel the real estate bubble by rating CDO’s as AAA, that were backed by BBB or lower sub-prime mortgage bonds.  Today, Moody’s is fueling the government debt dollar-bubble by rating U.S. treasuries as AAA when they should be rated as junk.

The U.S. dollars day of reckoning is almost here. If you compare GDP growth to our debt growth: back in 1966 $1 worth of new debt would add c90 to our GDP. We are now at a point where $1 worth of new debt adds nothing to our GDP. (it actually subtracts from it)

When will the country wake up and realize inflation does not create jobs and wealth but instead leads to unconstrained government spending and the destruction of small business while punishing savers and fueling the rise of dangerous ideologies that could eventually lead to the complete breakdown of society.

We need to go back to the old days when there were mom and pop stores and Americans bought high quality goods that were produced in the U.S. We can only accomplish this if the government gets out of the way and stops transferring our money to wallstreet through inflation.

The only way our country will survive hyper-inflation is through education. So please share this 5 part article with others. Spread the word about Americas economic problem and make a difference.

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