The 52-year-old victim is still traumatized after burglars intruded into his house where he had stored his life savings in silver bars. Based on the current silver price at the New York Comex, the silver was valued at about US$750,000.
Two burglars entered the house and attacked the man with a knife before tying him up. One of the thieves also carried a gun. The intruders were dressed in fake police uniforms and told the victim that they were investigating a crime and needed to ask him some questions. Once inside the house, they attacked the man and forced him to provide the combination for his vault. They then headed directly for the vault, which contained several thousand ounces of silver. After they had emptied the vault of the silver bars, the two robbers disappeared without a trace.
The victim is now wondering who could have provided the intruders with hints about the silver bars stored at his house. Friends, neighbours and relatives are the main suspects. Someone might have mentioned something to the wrong people, thereby letting the burglars find out about the silver bars, or they might have been informed by a third party.
Silver and particularly gold rose sharply on the release of the higher than expected UK inflation data. It showed that UK inflation quickened to 26 month highs at 4.0%. Currency debasement and higher food and energy prices are leading to an inflation surge in both developed and emerging markets.
Gold in British Pounds – 1 Day (Tick)
The extent of the surge is being masked as the figures in the UK and internationally underestimate real inflation. Increasingly many economists are concerned that official statistics are misleading and hide the true increase in the cost of living (seeÃÂ Ã¢â¬ËOfficial statistics hide true increase in cost of living’ in News today). A double-digit jump in food prices pushed China’s inflation higher in January – seeing consumer prices rise 4.9 percent, driven by the 10.3 percent jump in food costs.
The Chinese inflation data appears to be even more misleading and manipulated than that in western economies. Many governments are attempting to manage consumers perceptions regarding the significant increase in the cost of living as fiat currencies are debased.
Ã¢â¬ÅHyperinflation accompanied by a housing collapse is simply impossibleÃ¢â¬âby definition.Ã¢â¬Â Ã¢â¬âNone-too-clever financial blogger.
Most people in the advanced economiesÃ¢â¬âincluding most economistsÃ¢â¬âreally donÃ¢â¬â¢t have any idea what inflation and hyperinflation is. They donÃ¢â¬â¢t have a clue because they havenÃ¢â¬â¢t lived through it, or were children when it happened in the States and in Europe during the Seventies.
They think itÃ¢â¬â¢s nothing more complicated than a rise in prices that ripples through the economyÃ¢â¬âlike a spectator in a football stadium who stands up, obliging the people sitting behind him to also stand up, so that they too can see the action on the pitch, which in turn forces the people behind them to stand up too, until finally, the whole stadium is up on its feet.
ThatÃ¢â¬â¢s what these people seem to think: InflationÃ¢â¬âand the more severe hyperinflationÃ¢â¬âaffects all goods and services and asset classes equally, in a rippling effect. Sort of like a rising tide.
Because of this very foolish fallacy, many economists and interested observers think that real assetsÃ¢â¬âcommodities, land, buildings, factories & machineryÃ¢â¬âall rise in price equally during an inflationary spell, whereas financial assetsÃ¢â¬âbonds, stocksÃ¢â¬âuniformly fall.
But this is wrong: It is at best sloppy thinking, at worst dangerously stupid.
InflationÃ¢â¬âand hyperinflationÃ¢â¬âaffects two things immediately: Near-term necessities (such as food and fuel), and credit.
The effects on basic necessities is obviousÃ¢â¬âbut the effects on credit are more subtle and complex.
How does inflation and hyperinflation affect credit? By driving up interest ratesÃ¢â¬âobviously. But what is the effects of rising interest rates in an inflationary/hyperinflationary environment?
Real estate price collapse.
LendersÃ¢â¬âon seeing prices rising and purchasing power deteriorating in an inflationary economyÃ¢â¬ânaturally raise the interest rate they charge, on the future expectation of inflation during the period of their loan. Obvious: If I lend money for a year, and expect the inflation rate to be 10% for that year, IÃ¢â¬â¢ll naturally lend out my money at 15% interestÃ¢â¬âor more, if I think inflation is accelerating.
Borrowers on the other handÃ¢â¬âon seeing interest rates rise, while their wages and salaries are at best playing catch-up to rising pricesÃ¢â¬âcurtail their borrowing: They either borrow less, or donÃ¢â¬â¢t borrow at all.
Therefore, real estate sellersÃ¢â¬âwho depend on lenders to provide their buyers with credit in order to sell their propertiesÃ¢â¬âare forced to lower their prices, in order to attract buyers. Law of supply and demand: They cannot force up the price of their real estate to match the pace of inflation, because if they do, they will simply not have any buyers.
In the late 1920s, the economy of the Weimar Republic was beset by numerous fiscal troubles. The global depression spread quickly to Germany, undermining the governmentÃ¢â¬â¢s ability to make its reparation payments from the Great War.
Fearing a return to hyperinflation, many Germans who had spent the last decade building up a small fortune during the Weimar RepublicÃ¢â¬â¢s own Ã¢â¬ËRoaring 20sÃ¢â¬â¢ decided to pack up and leave; they remembered the days when banknotes were used as wallpaper and had no desire to repeat the experience.
In 1931, Chancellor Heinrich Bruning imposed a Ã¢â¬Ëflight taxÃ¢â¬â¢, which levied a 25% tax on the value of all property and capital for Germans leaving the country.
Total revenue collected from this tax amounted to roughly 1 million Reichsmarks (RM) in its earliest days ($56 million today). By the late 1930s under HitlerÃ¢â¬â¢s rule, flight tax revenue soared to RM 342 million ($21.5 billion today) as more people headed toward the exits.
This flight tax constitutes one of the earliest modern examples of capital controls.ÃÂ TheyÃ¢â¬â¢ve evolved substantially since the days of Hitler, but the end goal is the sameÃ¢â¬â governments controlling the flow of capital across borders.
Governments impose these for a variety of reasonsÃ¢â¬â rapidly developing nations may want to restrict the flow of capital into their country, preventing Ã¢â¬Ëhot moneyÃ¢â¬â¢ from pumping up prices and affecting local markets. We see this today in places like Brazil and Thailand.
In other instances, bankrupt governments seek to trap capital within their borders, maximizing the amount available for subsequent taxation or other forms of confiscation. This tactic is usually employed when lost confidence has impaired the governmentÃ¢â¬â¢s capability to borrow.
WeÃ¢â¬â¢re seeing strong indications of both examples today, though the latter isÃÂ the most alarming.ÃÂ As I scan the headlines and hear from colleagues in the US and Europe, itÃ¢â¬â¢s clear to me that the march towards stricter capital controls is quickening its pace.
The British government, for example, just announced an increase to its bank levy that taxes UK-domiciled banks on their worldwide balance sheets.ÃÂ In response, HSBC has indicated that it may move its headquarters elsewhere.
I suspect the British government will enact legislation to discourage or prevent this from happening, likely with a modern day corporate flight tax (albeit with a more patriotic sounding name).
Capital controls can take a variety of other formsÃ¢â¬â including taxation on outward remittances, restrictions on the movement of financial instruments, bureaucratic approval processes for foreign transactions, reporting requirements for foreign assets, and government control over banks.
This last is importantÃ¢â¬â when politicians and bankers are in bed with each other, banks can be compelled to loan a portion of their deposits to the treasury at unrealistic terms, sticking bank customers with sub-optimal yields below the rate of inflation.
In the US, I think retirement accounts will be the first to go.ÃÂ TheyÃ¢â¬â¢re the easiest to grab because most people hold their retirement accounts domestically with a large financial institution that will happily sell every customer down the river when the government comes calling.
The way theyÃ¢â¬â¢ll do this is simpleÃ¢â¬â the next time thereÃ¢â¬â¢s a market meltdownÃÂ (bear in mind that insiders are selling like crazy right nowÃ¢â¬Â¦), the government will step in with new legislation that requires these institutions to invest a portion of their accounts in the Ã¢â¬ËsafetyÃ¢â¬â¢ of government securities.
President ObamaÃ¢â¬â¢s proposed 2012 budget will cut several billion dollars from the governmentÃ¢â¬â¢s energy assistance fund for poor people, officials briefed on the subject toldÃÂ National Journal.
It’s the biggest domestic spending cut disclosed so far, and one that will likely generate the most heat from the president’s traditional political allies. Such complaints might satisfy the White House, which has a vested interest in convincing Americans that it is serious about budget discipline.
One White House friend, Sen. Chuck Schumer,D-N.Y., said earlier today thatÃÂ a Republican proposal to cut home heating oil counted as an “extreme idea” that would “set the country backwards.” Schumer has not yet reacted to Obama’s proposed cut. Sen. Jeanne Shaheen, D-N.H., declared: Ã¢â¬ÅThe PresidentÃ¢â¬â¢s reported proposal to drastically slash LIHEAP funds by more than half would have a severe impact on many of New HampshireÃ¢â¬â¢s most vulnerable citizens and I strongly oppose it.” A spokesman for Rep. Edward Markey, D-Mass., declared similarly: Ã¢â¬ÅIf these cuts are real, it would be a very disappointing development for millions of families still struggling through a harsh winter.Ã¢â¬Â
In a letter to Obama, Sen. John Kerry, D-Mass., wrote, “We simply cannot afford to cut LIHEAP funding during one of the most brutal winters in history. Families across Massachusetts, and the country, depend on these monies to heat their homes and survive the season.”
After all of my years of life and my decades long study of economic systems, social systems, financial systems, and political systems, I have concluded the they are all based on one primary false assumption. The false assumption that we can always depend on an infinite supply of earthly resources. The world is like a fish tank with 6 billion inhabitants and the water is getting murkier by the year if not month.
When the Ã¢â¬ÅInfinite Supply ParadigmÃ¢â¬Â smashes into the Ã¢â¬ÅFinite Resource RealityÃ¢â¬Â, it will be a sustained collision of epic proportions! One that mother earth herself (and ALL of her incredible biodiversity) will be in grave danger of contamination so severe it could take hundreds if not thousands of years for her to cleanse herself. Yes, if we managed our worldwide resources with an eye toward a healthy state of equilibrium things could definitely be much more sustainable, but from my observations, that is not going to happen any time soon.
Throughout history Reigning empires (aka Superpowers) that are economically faltering, either collapse outright (i.e. the Soviet Union) or they go to war (10,000 years of history verifies that).ÃÂ All of the Ã¢â¬Ëstate ismsÃ¢â¬Â that are now primarily controlled by global corporate entities, which IÃ¢â¬â¢ll remind the unacquainted -are economic machines driven towards short term profit and have no regard for anything that impedes them from attaining their objectives. The corporation is a legally protected entity that is allowed to engage in profit making endeavors that are not clearly identifiable as harmful to mankind in the short term, but in the long term, common sense cries out to us and tells us they are rotten to the core!ÃÂ They are so powerful, they literally control governments!!!
The RealtyTrac organization predicted earlier this month that home foreclosures in 2011 will likely exceed the record 3.8 million reported in 2010.
CBS News correspondent John Blackstone reports one group of mortgage defaulters seems to be bucking the trend. In wealthy communities like La Jolla, Calif., living near the ocean is a privilege that many homeowners are willing to pay millions for.
For Darren Thomas that ocean view was quickly losing its value. He says, “I bought it for [$1.385 million]. It is worth less than [$800,000], maybe less.”
Thomas bought his townhome in 2006 but after seeing its value drop steadily he stopped paying.
“I haven’t made a payment in two years,” he says. “It was business decision. It was an easy decision. I have a property worth six or 700,000 less than when I bought it. I was making payments of 10,000 a month.”
Thomas has gone into strategic default. He could make payments but is refusing to put more money into a home that is worth less than his mortgage. Among luxury homeowners he is not alone.
One in seven homeowners with loans over $1 million are seriously delinquent compared to one in 12 with mortgages below $1 million.
The more you owe, it seems, the better off you may be. Darren Thomas continues to live in his home because banks are often slower to foreclose on million-dollar homes.
Tense and terrible times inevitably summon an odd coupling of two very different and difficult human conditions; honesty, and brutality. Certain painful truths are revealed, and often, a palpable fury erupts. Being that times today are particularly tense, and on the verge of being spectacularly terrible, perhaps we should embrace both conditions in a constructive manner, and become brutally honest with ourselves. This begins by admitting to that which most ails us. It begins by admitting how far we have fallenÃ¢â¬Â¦
Our economy, our culture, our entire world, is built upon debt. No one ever asked us if thatÃ¢â¬â¢s how we wanted it, it is simply how the system was designed when we came into it. Many of us have lived our entire lives under the assumption that debt is a necessary function of daily commerce and a valuable driver of successful society. Most households in America operate at a steep loss, trapped in constantly building cycles of liability and interest. There are even widely held schools of economic thought that are centered completely on the production and utilization of nothing but debt. Only recently have many people begun to ask themselves what the tangible benefits are (if any) in being dependent on debt based finance.
After careful examination, it becomes evident that debt does not fuel economy, it suffocates it. It does not nurture growth, it stunts and poisons it. Extreme debt is not a fundamental organ in a body of commerce; it is an aberration, a spreading cancer which disrupts the circulation of healthy trade. Debt is, in large part, unnecessary.
Of course, debt can be very useful if you are the controller or determining overseer of a system, especially if you wish to centralize and maintain power over that system. The tactical wielding of debt has been used by elites for centuries as a means to imprison the masses, or to create an atmosphere of endless dependency. LetÃ¢â¬â¢s take a look at what debt really is, and how it is being used against the average American todayÃ¢â¬Â¦
The Charles Dickens classic Ã¢â¬ËLittle DorritÃ¢â¬â¢ is commonly misinterpreted as a Ã¢â¬Ålove storyÃ¢â¬Â, however, the primary character in the book is not Little Dorrit, or the kindly Arthur Clennam, but the debt system of Britain itself, and its effects on every social class from the street beggar to the elitist socialite. Dickens despised the idea of debt and debtors prisons, being that his father was thrown into one for a good portion of his life, forcing young Charles to work just to support his parents. Dickens understood well the evil intent behind the debt system, and railed against it often in his writings.
One figure in Ã¢â¬ËLittle DorritÃ¢â¬â¢ which fascinated me was the character of Mr. Merdle, a national banking superstar who dominates the investment world with the help of British treasury officials and various political deviants. Merdle is referred to by merchant circles as Ã¢â¬Åthe man of the ageÃ¢â¬Â, a financial marvel who seems to make fortunes in every endeavor he touches. Little does anyone realize that Merdle is a fraud, a Ponzi scheme artist who takes money from unwary speculators and sinks it into increasingly more tenuous investments. In order to continue hiding the fact that all his financial ventures are ending in ruin, he lures more and more depositors to pay off previous debts. The problem is that Merdle is creating debt to chase debt. Eventually, his insolvency, and that of all those who trusted him, will catch up and overtake the lie he has carefully projected. All economic instability is invariably revealed, no matter how expertly it is hidden.
Mr. Merdle, in my mind, is an almost perfect literary representation of todayÃ¢â¬â¢s private Federal Reserve and the global banking syndicates of JP Morgan, Goldman Sachs, Citigroup, etc. The Federal Reserve, with the help of politicians on both sides of the aisle, created a series of illusory incentives (through interest rate cuts) which allowed banks to begin lending almost unlimited fiat at rock bottom prices. America was awash in credit, to the point that it was nearly impossible for the average person to avoid the temptation of borrowing. What we didnÃ¢â¬â¢t understand then, but are beginning to grasp now, is that credit derived from fiat is not Ã¢â¬ÅcapitalÃ¢â¬Â, it is NOT wealth. Credit is the creation of an obligation, to be paid at a later date, if it is paid at all, and because there are no rules to tie the debt to any legitimate collateral (at least for banks), there is nothing to back the obligation if it falters. Therefore, fiat induced credit is not the creation of wealth (as Keynesians seem to believe), but the destruction of wealth!
Because of its lack of tangibility, debt can be packaged and repackaged into whatever form banks like. Derivatives are a perfect example of the phantom nature of debt; securities which have no real value whatsoever yet are rated and traded as if they are a solid commodity. This brand of commerce is, at its very root, a kind of fiscal time bomb. Just as in the literary world of Ã¢â¬ËLittle DorritÃ¢â¬â¢, the Ponzi scheme in our very literal world had to reach a tipping point, and in 2008, it did.
One glaring difference between our troubles and those of DickensÃ¢â¬â¢ fiction is that Merdle actually feels guilt over what he has done (or he at least fears the justice that will be dealt him), causing him to commit suicide towards the end of the novel. In the real world, the Merdles of our era appear fully content to watch this country crumble due to their intrigues, and rarely suffer any consequences for what they pursue. In fact, the modern banking elite are more liable to revel in the searing shockwave of a credit detonation, rather than feel any Ã¢â¬ÅremorseÃ¢â¬Â. The point is, Dickens saw clearly over 150 years ago what many Americans today still do not; debt is an abstract idea, an absurd game which confuses and ensnares innocent people. Debt based systems con the citizenry into trading away their tangible wealth and labor for the promise of future settlements that will never come. Debt serves only to weaken the masses, and empower creditors.
The Consequences Of Debt
How has debt based economics served us so far?
The credit card debt of the average American household ranges from $8000 to $15,000. Total household debt including mortgage and home equity loans has hit an average of 136% of annual household income:
Approximately 80% of mortgage loans issued to subprime borrowers over the past decade were Adjustable Rate Mortgages (ARM), meaning 80% of mortgages in the U.S. have reset or are ready to reset at much higher interest rates. There were approximately 1.4 million bankruptcy filings in 2009, and 1.5 million in 2010. One in every 45 homes in America received a foreclosure filing in 2010:
Keep in mind that in 2005, new government regulations were implemented making filing for bankruptcy much more difficult. In 2006, filings collapsed. Now, despite stringent obstacles, filings are up again over 100%.
The Ã¢â¬ÅofficialÃ¢â¬Â national debt now stands at over $14 trillion, which is around 100% of U.S. GDP (with entitlement programs like social security included, this number is probably closer to 400% of GDP) . The 100% mark is often cited as the breaking point for most countries struggling to sustain liabilities. GreeceÃ¢â¬â¢s national debt stood at 108% Ã¢â¬â 113% of GDP when it collapsed into austerity. From 2004, to 2010 (a span of only six years) our national debt has doubled. To put this in perspective, it took the U.S. over 200 years to reach its first trillion dollars of debt. Now, we are looking at the accumulation of at least a trillion every year. This is unsustainable.
The much talked about debt ceiling has been raised six times in the past three years. This frequency is unprecedented. International ratings agencies are now openly suggesting an end to AmericaÃ¢â¬â¢s AAA credit rating:
A credit rating downgrade would be devastating to what little foreign interest is left in the U.S. Treasury bond investment.
On the local front, cities and states are on the verge of folding due to the evaporation of municipal bond markets. Cities depend greatly on two sources of revenue in order to continue operations; property taxes, and municipal investment. Property taxes, obviously, are disappearing as property values continue to spiral downwards. This leaves only municipals, which have also unfortunately fallen off the map:
Wall Street analyst, Meredith Witney, recently stated in an interview with 60 Minutes that she believed 50 to 100 American cities would default in the midst of a municipal crisis in 2011. She was promptly lambasted by the rest of the MSM for her prediction. In my opinion, she was rather minimalist in her estimates, especially if the Federal Reserve does not commit to another round of quantitative easing (QE3) for the states (Bernanke denies this policy would be enacted by the Fed, though, which means there is a good chance it will be).
To summarize, the U.S. is swimming in debt. Absolutely nothing has been changed for the better in terms of wealth destruction and liabilities since the credit crisis began, and the situation only looks more precarious with each passing quarter.
Where Is The Debt Roller Coaster Taking Us?
What is the most likely outcome of the conditions described above? The vital factor will be the continued Federal Reserve policy of fiat bailouts as a Ã¢â¬ÅcounterbalanceÃ¢â¬Â to the evolving debt crisis.
As is clearly explored in the Dickens novel we discussed earlier, staving off the effects of debt by creating more debt is a temporary solution that only leads to greater calamity down the road. Anyone who believes that fiat inflation actually Ã¢â¬Åcancels outÃ¢â¬Â debt instability is going to find themselves sorely disappointed. At bottom, government created stimulus is not a solution to corporate engineered debt burdens, but a reallocation of debt away from banks and into the laps of the American taxpayer. The Federal Reserve and our own Treasury have not paid off anything. They merely shifted the responsibility of payment away from the banks that created the problem, and handed that responsibility to us. On top of this, they have also set the dollar up for a crushing blow of devaluation. Here is where the prison bars encloseÃ¢â¬Â¦
If our historic debt is not being diminished, but only moved around while it expands, then this means that eventually our credit worthiness will come into question. In fact, it already has. Foreign investment in long term Treasuries has dwindled. Our own central bank is now the largest holder of U.S. debt, surpassing even China (Note: this news has so far been ignored by almost all mainstream outlets):
So, the question of debt default turns from theoretical to quite imperative. If the Federal Reserve continues buying our debt with fiat, it means that the effects of the debt will only be delayed, the dollar will be dropped as the world reserve currency, and hyperinflation is a certainty. If they do not continue buying, then our government defaults, the countryÃ¢â¬â¢s financial infrastructure ceases to exist, the dollar loses its world reserve status, and hyperinflation is a certainty. The banking elites havenÃ¢â¬â¢t just erected a prison, theyÃ¢â¬â¢ve tossed us in Alcatraz!
The battle over yet another increase of the debt ceiling has obscured the fact that the debt has already done all the damage it needs to do. Freezing the ceiling in place becomes a battle of principle, and an important one, but it would in no way stop the dysfunction and chaos to come. At best, it might shorten the duration of the disaster by a few years. The important thing to remember is that government intervention will only incur greater loss. There is no easy way out, no magic shortcut, no last minute brilliant idea that will wrap up this mess. Years of hard work, determination, honesty, and sacrifice are ahead of us.
Inflation will be the buzzword of 2011. Endless debt facilitates endless Keynesian liquidity. Expect to see commodities double once again this year.
Household debt will probably level off through 2011, as more Americans abandon their credit habits and make more concerted efforts to save. In 2009, Visa lost 11% of its credit use, while MasterCard lost 22%. Over 8 million consumers have stopped using credit cards altogether since the end of 2009:
Will credit use and debt based consumption ever return to levels similar to 2006? Not a chance. One might predict then that savings will rise dramatically as credit use falls, but this too is unlikely. Why? Because over the next year Americans will be spending far more on essential goods due to inflation than they ever have before. Whatever savings they would have accrued will be eaten up by the relentless spike in commodity prices. The term used for the combination of chronic debt, low job growth, and burgeoning inflation, is Ã¢â¬ÅstagflationÃ¢â¬Â. I honestly canÃ¢â¬â¢t think of a worse situation than being subject to exploding costs in light of a dilapidated standard of living. As Dickens points out plainly in Ã¢â¬ËLittle DorritÃ¢â¬â¢, how can a man be expected to settle his obligations when he is imprisoned for them?
Breaking The Cycle In The Midst Of Global Strife
Why after thirty years under the despotic rule of the Hosni Mubarak regime did the Egyptian people suddenly decide to revolt? Why now? The MSM will field a number of political tales, but the key to most popular uprisings, especially in the Middle East, has been the lack of necessities. The last time Egypt saw an uprising of this magnitude was during the Bread Riots of 1977, when the IMF terminated state subsidies of basic foodstuffs. Is it any wonder that turmoil has developed so quickly in the region as grain prices double? This is the devastating power of debt, and the so called Ã¢â¬ÅsolutionsÃ¢â¬Â which merely perpetuate debt.
Tunisia, Egypt, and Yemen, are only the beginning. The sting of inflation will be unbearable as austerity measures take hold in Europe, and the potential for riots in Greece, Spain, Portugal, and Italy looms large. The most volatile environment on the planet to date, however, is the United States, which, as we have shown in previous articles, is being dismantled deliberately and viciously in preparation for IMF regulation and centralization. Today, the IMF is stalking Egypt, ready to pounce as the nation goes mad. Tomorrow, it will be us. I will be very surprised if we are not hearing about IMF intervention in the U.S. economy and the dollar by the end of this year, offering more debt, and more unaccountable governance.
The secret to breaking the circle of debt is to adopt a policy of decentralization, and self sufficiency. To take back control of our local commerce and to establish micro-economies with self contained methods of trade. Debt must be removed from the equation altogether, and systems protected by flexibility and redundancy must be applied. Savings and meaningful production would have to take the place of endless spending and outsourcing. The claustrophobic nurse-maid philosophies of globalism would have to be cast aside and replaced with goals of independence and self reliance. By cutting our dependency on the corrupt establishment, we sever its ability to feed off of us. By building a better system, we make the faulty one obsolete. Whether or not we throw off the trappings of the debt machine is entirely up to us.
Two very important steps are required; the realization that debt is not the only way, and, the realization that debt is the worst way. Prosperity is not achieved at the expense of the future. The society that finally takes this fact to heart will accomplish incredible things indeedÃ¢â¬Â¦
SPECIAL NOTE TO NEITHERCORP READERS: Our Alternative Market Project which is being developed in tandem with Oathkeepers will be officially announced in the next two weeks. I also have been invited to speak at the very exciting Ã¢â¬ËSave America ConventionÃ¢â¬â¢ in Tampa, Florida in March. Keep your eyes out for our announcement, and an article on the details of the convention which should be published shortly.
While nothing new to Zero Hedge readers, the realization that everyone’s purchasing power is about to be yanked from underneath them has gone mainstream. Omaha.com has just come out with a headline that leaves little to the imagination: “Get ready for higher food prices.” The issue is that no matter how Chairsatan Rudolf Vissarionovich von Bernankestein spins this to whatever congressional minions he is supposed to be lying to at any given moment, the undisputed truth is that consumers have just gotten that much poorer, as prices of staples surge, and as a result capital available for discretionary trinkets plunges (here’s looking at you Guitar Hero which has just been discontinued due to lack of interest… Coming to an Apple store near you in 3-5 years). Because no matter what economic voodoo Bernanke, concocts there is little he can do to change the laws of mathematics. So for those who wish to stock up on staples in advance of a price surge (thereby bringing the price jump forward), and still haven’t done so, here is the “mainstream” explanation for why now is a very good time to start doing so.
Shoppers could see higher grocery bills as early as three months from now, though most of the impact won’t be felt for another six months, said Scott Irwin, an agricultural economics professor at the University of Illinois.
Chicken prices are among the first to rise because the bird’s life span is so short that higher feed costs get factored in quickly, he said. Price hikes for hogs take about a year and cattle two years. Prices on packaged foods take six or seven months to rise.
Tyson Foods, the nation’s biggest meat company, said chicken, beef and pork prices are expect to rise this year, if only slightly, as producers seek to cover costs.
ConAgra Foods Inc. Ã¢â¬â the Omaha-based producer of brands including Healthy Choice, Banquet and Chef Boyardee Ã¢â¬â is raising prices on some of its products because of higher costs for corn and fuel, said Teresa Paulsen, a spokeswoman.
The price rally has bolstered the financial fitness of America’s crop and livestock operators over the past eight months. Midwestern cropland is yielding record values. Rural banks and equipment makers report record profits.
In the shocking video you are about to watch, Howard Dean declares that it is the job of the government to redistribute our wealth.ÃÂ Not only that, he says it in such a way that indicates that he believes that such a notion should be obvious to anyone with half a brain.ÃÂ Well, while it is true that the United States has become a highly socialized nation, the reality is that this is not what the founding fathers intended.ÃÂ The founders intended for us to live in a land where we would have enough freedom and enough liberty to be able to work hard and enjoy life, liberty and the pursuit of happiness.ÃÂ They did not intend for a gigantic federal government to take huge amounts of money from one group of people and give it to another group of people.ÃÂ In any nation where a large scale redistribution of wealth is happening, the incentive to work goes right out the window.ÃÂ Pretty soon you end up with an entire class of people that have learned how to “make a living” by being a parasite of the government, and that is not good for any economy.
If our founding fathers were alive today, they would be horrified by what we have turned into.ÃÂ In 1816, Thomas Jefferson wrote the following….
Ã¢â¬ÅTo take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it.Ã¢â¬Â
The sad truth is that democracy starts to break down once people start realizing that they can vote themselves money out of the national treasury.ÃÂ In fact, that is a very large part of what politics in America is all about today.ÃÂ Politicians are constantly promising what they are “going to do” for various groups of people.
Ã¢â¬ÅWhen the people find that they can vote themselves money, that will herald the end of the republic.Ã¢â¬Â
Not that our founding fathers were against charity.ÃÂ In fact, they believed in it very much.ÃÂ It is just that they did not believe in repressive taxation by a huge national government and they did not believe in large scale redistributions of wealth.
With all of that in mind, watch this shocking video of Howard Dean declaring that it is the job of the government to redistribute our wealth….
Obviously Howard Dean envisions an “America” that is very different from the one that our founding fathers intended.
But does that mean that all government welfare programs are bad?
Of course not.
In fact, if we were to cut them all off today we would have millions of people starving in the streets.
A very large percentage of Americans today don’t even know how to take care of themselves.ÃÂ If we pulled away all government support all of a sudden there would be chaos and anarchy in the streets.
The sad reality is that we have tens of millions of Americans that are now deeply dependent on the socialist system that we have established.
Unfortunately, this is what socialism does – it turns people into pets of the government.ÃÂ Our society should be teaching people to be self-sufficient, but instead we are teaching people to allow the government to take care of them from the cradle to the grave.
So does that mean that our founding fathers would be in favor of the rampant corporate greed that we are witnessing today?
Of course not.
As I have written about previously, the founding fathers were against all large concentrations of power.ÃÂ During the Boston Tea Party, it was the tea of perhaps the most powerful corporation in the entire world at the time (the East India Trading Company) that our founders dumped into the harbor.
If you study early American history, you soon come to realize that corporations were generally very limited in scope and size for many, many years.ÃÂ The era of the giant corporation is relatively new, and our founding fathers never intended for our society to be dominated by gigantic international corporations.
So when the Democrats argue that we should give more power to the federal government and the Republicans argue that we should give more power to the big corporations they are both wrong.
Our founding fathers did not intend for our federal government to have nearly so much power and they did not intend for big, wealthy corporations to have so much power either.
Fortunately, many Americans today are getting back in touch with those principles.ÃÂ There is a growing dissatisfaction with the size of government, and according to Gallup two-thirds of Americans are now dissatisfied with the size and influence of major corporations in America today.
However, it is one thing to discuss the finer points of political and economic philosophy, but it is another thing altogether to deal with the reality of tens of millions of people that cannot feed themselves.
As I have mentioned many times before, there are over 43 million Americans on food stamps today.
So what are we going to do with all of them?
Allow them to starve?
Almost 53 million Americans receive Social Security payments.
What are we going to do – cut off Social Security and watch millions of elderly and disabled people freeze to death in their own homes?
Of course not.
But we have got to start swinging the pendulum back in the other direction.ÃÂ Right now one out of every six Americans is enrolled in some kind of anti-poverty program run by the federal government.
How many Americans being taken care of by the federal government will be too much?
One out of five?
One out of four?
One out of three?
Eventually the entire system crumbles when there are too few people still willing to work hard.
If you ever get the chance to visit a communist country you should.ÃÂ You will notice that nobody really works very hard.ÃÂ That is because there is no incentive to work hard.ÃÂ Very little real wealth gets produced and everyone suffers for it.
So does that mean the U.S. system works?
Of course not.
What we have in the United States today is not real capitalism.ÃÂ It is more aptly called “corporatism”.ÃÂ The big corporations and the big financial institutions have accumulated an absolutely stunning amount of economic power and over the decades they have gotten the government to tilt all of the rules of the game in their favor.
In America today, it is really hard for the average person to start a successful business.ÃÂ The big, powerful international corporations that dominate our economy are everywhere.
So most Americans today have to rely on working for an employer.ÃÂ Unfortunately, the big employers have started to realize that they can make much larger profits by shipping our jobs overseas.ÃÂ That is really bad news for the U.S. middle class.
Well, can’t we just tax all of these big corporations like crazy and even everything out?
Unfortunately it just does not work that way in today’s global society.
As I have written about previously, the ultra-wealthy and many of the biggest corporations have figured out how to “minimize” their tax burdens.ÃÂ While you and I are being taxed into oblivion, the global elite have figured out how to move their money around to escape taxation as much as possible.ÃÂ In fact, it is estimated that today approximately a third of all the wealth in the world is held in “offshore” tax havens.
Ultra-wealthy individuals and mega-powerful corporations can call just about anywhere “home” in today’s global economy.ÃÂ That is just the way the world works now.
In order to “tax the rich”, you first must get legal jurisdiction over their money.
Our tax system has become entirely unfair and it simply does not work.ÃÂ The whole thing needs to be scrapped.
But as we discuss tax policy, there are tens of millions of Americans that are living in poverty.
So what are we going to do about the growing number of Americans that cannot even feed themselves without government help?
Well, the truth is that what they really need is not more handouts.
If you give people handouts, they will just need more handouts tomorrow.
No, what all of these Americans really need are good jobs.
Unfortunately, there are a whole lot less good jobs in America today than there were ten years ago.
Our politicians have stood by as the giant corporations have moved thousands of facilities over to places such as China and India where they can legally pay people slave labor wages.
Since 2001, over 42,000 U.S. factories have closed down for good, and that number is going to continue to increase unless someone stops it.
But nobody is.
Virtually all of our politicians are just standing off to the side with their hands in their pockets.
Our entire economic system is breaking down.ÃÂ Millions of Americans families are scrambling to find some way to survive.ÃÂ Over the past two years, U.S. consumers have withdrawn $311 billion more from savings and investment accounts than they have put into them.
Other Americans are going very deep into debt because they don’t have any other options.ÃÂ When they finally can’t keep up with all the debt, many of these families are losing their cars and their homes.
We are in the middle of an economic nightmare that is absolutely unprecedented.ÃÂ “Redistributing the wealth” would just be like rearranging the deck chairs on the Titanic at this point.ÃÂ It would not fix a darn thing.
When our politicians promise that a little “change” here or a little “tweak” there will get our economy back to normal they are lying to you and most of them know it.
What we need is a comprehensive overhaul of our entire economy.ÃÂ Basically what we need to do is to go back to the blueprint (the U.S. Constitution) and essentially start over.
But most Americans are not ready for that.ÃÂ Most Americans are still enjoying the tremendous prosperity that the biggest debt binge in the history of the world has purchased for us.ÃÂ Most Americans still do not believe that an economic collapse is really coming.
But a massive economic collapse is coming.ÃÂ This whole thing is going to come crashing down and it is not going to be pretty.
An asset bubble would suggest that droves of people are buying, driving up the price to a breaking point. This latest video shows that, while gold and silver have approached new record and multi year highs respectively, the panicked buying that usually exists with asset bubbles hasn’t yet hit the precious metals.
The bubble, according to various contrarian analysts, is yet to come.
China’s state-run media has largely avoided commenting on the turmoil sweeping Egypt. Unlike the rest of the world, the strife has been reported as a secondary story. For experts, the situation in Egypt is too similar to that of China, and events in Cairo are too close for comfort to the protest and slaughter of June 1989 in Tiananmen Square.
Chinese media have hardly shown any images of the mass protests or tanks in Egyptian streets, which are too much of a reminder of anti-government protests in Beijing in 1989 (pictured, an Egyptian demonstrator opposing a tank).
Some media sources say that Chinese media have been ordered to relay only stories from the state-owned Xinhua news agency. Some papers have only reported on the special flights that repatriated Chinese nationals.
Chinese websites have disrupted searches for Ã¢â¬ÅEgyptÃ¢â¬Â on micro-blogs, though some comments have been getting through, as well as pictures of the protests and tanks on the streets. Comments include statements like Ã¢â¬ÅThese are the real soldiers of the people,Ã¢â¬Â and Ã¢â¬ÅThe Egyptian army has not opened fire on their fathers or brothers.Ã¢â¬Â
Federal prosecutors have told the city of Oakland, California, that they will prosecute pot farmers operating under the city’s planned marijuana licensing scheme.
A letter from US Attorney Melinda Haag said the city’s ordinance, which city council passed last year, breaks federal law and opens marijuana growers to prosecution.
And in a reference that some have interpreted as a threat to Oakland’s officials and city councilors, Haag also warned that anyone who “knowingly facilitates” marijuana cultivation could also be prosecuted.
“It was unclear whether Haag meant to warn or threaten Oakland’s individual City Council members, or other city employees or property,” the Oakland Tribune reported. “A spokesman for Haag declined to comment Wednesday beyond what was said in the letter.”
Since last weekÃ¢â¬â¢s shock announcement of a fall in fourth-quarter GDP, the Government has found itself unexpectedly on the back foot in the debate over austerity. The news yesterday that service industries rebounded strongly last month, as the snows melted away, will go some way towards evening things out. But it will be at least a year before we can say for sure whether the CoalitionÃ¢â¬â¢s bold experiment in fiscal consolidation is undermining or supporting the process of economic renewal.
Would that this faintly tired debate was all we had to worry about. Behind the all-consuming focus on the ups and downs of the monthly growth surveys, there are much more momentous developments afoot, and they donÃ¢â¬â¢t bode well. After the credit-fuelled excesses of the past decade, a daunting process of transition awaits the British economy, of which the fiscal consolidation is only a part. If, by the end of it, weÃ¢â¬â¢ve managed to limit the decline in relative living standards to 10 per cent, weÃ¢â¬â¢ll have done well. ItÃ¢â¬â¢s much more likely to be closer to 20 per cent. And while the amount that the economy grows in the meantime will obviously affect the size of this squeeze, it canÃ¢â¬â¢t eradicate it.
LetÃ¢â¬â¢s start with prices. According to yesterdayÃ¢â¬â¢s UN figures, world food prices rose to another record high in January, up 3.4 per cent on DecemberÃ¢â¬â¢s. Fed by explosive growth in demand in the developing world, the costs of fuel, metal and other commodities are following a similar trajectory.
The effect is to create what, for the West, is a quite unfamiliar phenomenon. Inflation is rising, even though the Ã¢â¬ÅrichÃ¢â¬Â economies remain profoundly weakened, with abundant spare capacity and surplus labour. For the first time in living memory, America no longer determines the nature of the commodities cycle. The West is out of kilter with the rest of the world, and with little ability to force through wage claims that match inflation, many of its citizens are finding that their living standards are deflating accordingly.