Precious metals are your hedge against inflation
Everyone is paying more for less
Inflation is nothing more than legalised theft by our government; it stands at only two percent, at least that is what the Statistics say. But these numbers don’t portray the truth. The real rate is probably closer to 9%, maybe even higher. Who knows? All published inflation data are fabrications, as these numbers are made up to suit the government. Lower inflation numbers in statistics look better, and they don’t show the theft committed by governments.
For example, an inflation rate of 8% annually means that $100,000 in cash today would be worth only $46,319 in 10 years. That’s more than half its value evaporated into thin air. In 20 years, it would only be worth $21,455. In 30 years, it would be worth an abysmal $9,938. What can you do to protect yourself? – The only answer is to buy precious metals for any amount you have deposited in the bank and don’t immediately need.
Central Banks drastically expanded the money supply after the 2008 financial crisis. In simple terms, the continual climb in CPI statistics means everyone is paying more for less. The purchasing power of the major currencies fell officially by 2.93% in May compared to a year earlier, the fastest drop since November 2011.
Nevertheless, over the past ten years despite the reality of tens of trillions of dollars printed and monetised by Central Banks in the U.S. Europe, UK, and Japan most banks remained underfunded and would be insolvent if they had to administer true accounting practices
Two or 3 percent may not sound like much, but increases of this magnitude really start to add up over time. In just five years, you’re looking at a 10% to 15% price increase – or more correctly a 10 to 15% loss in purchasing power, which signifies the debasement of your hard-earned money. The dirty little secret is that prices are going up even faster than the CPI indicates. Governments do all kinds of little accounting tricks to manipulate the CPI numbers lower.
The Cabal-owned Central Banks want an “inflation rate” of 2%. They officially say it’s good as the purchasing power of the currency falls. But for whom is it good? For the banksters themselves and the political class of course, who get the newly issued currency first. For the rest of us, it is not so great at all. when more currency is pumped into the economic system, more money runs after the same amount of goods, which results in a heavy loss of purchasing power for the people down the line, first the middle class and then the poor. The most vulnerable group of people, are hit hardest.
Not enough cash
Market equities, bonds, mortgages, commercial paper and other wealth based on debt and derivatives add up to roughly $337 Trillion. If even a small panic or “run” on the system were to occur, the banks do not have enough cash to cover even 1% of these holdings.
This is one reason why it’s a good idea for you to win the ‘War Against Cash’ by converting a portion of your debased government money into the secure, private ‘store of value’, or in other words real money; gold and silver.
As has been historically proven, precious metals serve as a hedge against inflation. Typically, as the value of a currency drops, the price of gold and silver in dollars should go up – just like the price of bread and gasoline, however, this isn’t the case in today’s market as these same banksters manipulate the precious metal prices down, to camouflage the loss of your purchasing power. They falsely report that the prices have increased through greedy suppliers, which is actually causing the debasement of the money in your pocket, as you need more currency to buy the same goods as before.
Subsequently, since 2012, have Asian and Eurasian economies as Russia, China, India, been preparing for a post Petrodollar world, no longer controlled by Western Central Banks. Even in Europe, Germany, Austria and the Netherlands have made the unprecedented move of recalling their gold reserves back from the U.S. into their own vaults.
Fractional reserve makes the credit bubble even worse
Inflation is a poorly understood financial concept. It has nothing to do with price indexes, such as the consumer- or production- price index. The trust in the reliability of these measurement tools stems from the 1970s, when inflation flowed into hard assets and commodities.
The biggest area of inflation in the last financial bubble was in residential housing. That should have been obvious to everyone, but it was purposely obscured that home prices were rising much faster than incomes, which in actual fact means “inflation.” Instead it is repackaged and branded as a “wealth effect,” which still is inflation. So, what is the proper definition of inflation? Very simple: Inflation is the creation of money and credit beyond the savings rate. The central banksters create trillions of dollars, euro’s, yen, etc. of new money with the click of a computer mouse. These funds, produced without any savings, taxes, or increases in productivity, flow through government spending and mortgage financing.
But the government’s spending on defence contractors, health services, housing complexes, and the handouts and kickbacks to all of the associated “swamp creatures of the beltway” isn’t the real problem. Those are only the first-order impacts of these policies.
The real impact of this new money comes when it enters the banking system. Banks like JPMorgan Chase can take $100 million in new government bonds, which contradictorily is called a reserve asset, they then, through the fractional reserve laws lend out another $900 million or more in new commercial credit. That’s how a real credit bubble is created, through the accumulation of trillions and trillions in new credit.
Credit inflation has occurred over and over again, ever since the gold standard in 1971 was abandoned. Gold provided a physical limit to credit since gold reserves had to be mined and they couldn’t merely be wished into existence with the click of a computer mouse.
As interest rates have moved lower and lower, the size and scope of the credit bubbles have become bigger and bigger. More borrowing can be financed thanks to the much lower borrowing costs.
Moreover, as interest rates dropped, increasingly more credit could be extended to the most marginal parts of society. Subprime lending only works when institutional credit is available at rates of less than 5% a year.
Subprime borrowers typically default on 10% or more of these loans, and it’s difficult to charge anyone more than 20% a year to borrow money. For the business model to work, funding capital must be available at less than 5%, otherwise no operating margin is left to run the business and make a profit.
Falling interest rates have made each bubble worse than the last
The commercial real estate bubble of the late 1980s was tiny compared to the tech-stock bubble of 2000, which was less than one-tenth of the size of the mortgage credit bubble of 2007/8.
The next bust will feature far more civil unrest because it has largely been built upon the middle class and the poor.
This credit bubble has seen huge amounts of debt added to the accounts of major Western governments – middle-class taxpayers, students – in the form of student loans outstanding, sit at more than $1.5 trillion, and subprime borrowers – auto loans and credit-card debt total more than $1 trillion each.
As the amount of debt that must be serviced continues to grow much faster than wages do, it’s simply a matter of time before defaults overwhelm the ability of creditors to pay. At that point, the cycle will reverse and the crash will unfold fiercely.
Auto lending in particular began to get out of control from 2014. The major Western economies have experienced massive inflation every year since the crash of 2008. At least $20 trillion has been created in new credit in the U.S. alone, and with the EU and Japan together, this amounts to 50 Trillion over the same period of ten years. This is all accounted for as new governmental-, new consumer-, and new corporate debt.
In less than 10 years, there is more new debt created than what these three economies together produce in a year’s time. That’s an inflation that’s vaster than ever before created in all of human history, outside of World War II.
The question arises: Where has the money and credit gone? Not into commodities. These have been suppressed – manipulated – in a bear market. Housing prices have rebounded, and tend to be going crazy. Stocks have gone up tremendously, trading at bubble levels. But the worst are the bond markets, with junk bonds in particular, trading at highly inflated prices.
Inflation has been underreported
There is plenty of evidence to suggest that the measurement tools used are deeply flawed, as are the weak arguments and explanations. To conclude that inflation has been quelled, requires a dismissal of the macroeconomic forces that have temporarily blunted the impact of an overly loose monetary policy.
Since the 1970’s, the preferred government inflation metrics have changed so thoroughly that they bear a scant resemblance to those used during the “malaise days” of the Carter years, 1977-1981. Government and academia defend the integrity and accuracy of the modern methods while dismissing critics as ‘tin hat’ conspiracy theorists. But given the huge stakes involved, it’s hard to believe that institutional bias plays no role.
Government statisticians are responsible for coming up with the methodology and the numbers, and their bosses are granted huge breaks if the inflation numbers come in low. Human behaviour is unfortunately often influenced by such incentives.
Beginning in the early 1980’s, the methodologies were altered to compensate for a variety of observed consumer behaviours. The new “chain weighted CPI” for instance incorporates changes in relative spending, substitution bias, and subjective improvements in product quality.
Essentially these measures report not just on price movements, but on spending patterns, consumer choices, and product changes. This is fine if the goal is to measure the cost of survival. But that is not the purpose for which these metrics were initially meant to be used. – But if you simply focus on price, especially on those staple commodity goods and services that haven’t radically changed over the years, the underreporting of inflation becomes less apparent.
Randomly identified price changes of 10 everyday goods and services over two 10 year periods, and then compared to the reported changes in the Consumer Price Index (CPI) over the same period, show the difference between reality and the reported figures. The 10 items which were selected were: eggs, new cars, milk, gasoline, bread, rent of primary residence, coffee, dental services, potatoes, and electricity.
It is known that people do not spend equal amounts on the above items, while their share of income devoted to these items has changed over the decades. But our only interest was to find out how these prices changed and to compare the findings to the CPI-figures, as other issues don’t matter.
Observed was the period between 1970 and 1980 and then again between 2002 and 2012, because these time frames both had big deficits and loose monetary policy. But they overlap the time in which the most significant changes to inflation measurement methodology took effect. While nominal price increases rose much faster in the 1970’s, the degree to which the prices rose relative to the CPI was much, much higher more recently.
The CPI is a Lie
Between 1970 and 1980 the officially reported CPI rose by a whopping 112%, and prices of the selected basket of goods and services rose by 121%, just 8% higher than the CPI. In contrast, between 2002 and 2012 the CPI rose just 27.5%, but the basket rose by nearly double that rate – by 52.1%! So, the methods used in the 1970’s to calculate CPI effectively captured the price changes of the selected goods, but only got half of those movements more recently. How convenient.
Just to make sure, the same experiment was run with 10 different goods and services. This time the following items were chosen: sugar, airline tickets, butter, store bought beer, apples, public transportation, cereal, tyres, beef and veal, and prescription drugs. The results were notably similar. The basket increased 1% faster than the CPI between 1970 and 1980 and 32% faster between 2002 and 2012. This was the outcome for both periods of the selected random collection of food and non-food items.
To become convinced that the CPI does a poor job in gauging the cost of living, all one needs to do is look at health insurance.
According to the Kaiser Survey of Employer Sponsored Health Insurance, the average annual total cost for family health insurance in 2012 was $15,745, or more than one third of the median family income of $45,018 per year. Yet these costs are largely factored out of the CPI. In 2011, health insurance costs did not even merit a one percent weighting in the CPI. Furthermore, as far as the Bureau of Labour Statistics is concerned, health insurance costs are well contained. From 2008 through 2012, the BLS’ “Health Insurance Index” increased by just 4.3% (total), which is far below the general rise of the CPI. By contrast, the Kaiser Survey showed family coverage rising 24.2% over that time.
A recent poll of voters conducted by Fox News in the weeks before the election, revealed that 41% of respondents identified “rising prices” as their top economic concern. This area of concern beat “unemployment” by nearly two to one.
The underreporting of price movements would explain why inflation is a concern on Main Street even while it’s not a concern for Governments. If the price changes in the above experiments had been fully captured, the CPI could currently be high enough to severely restrict the Central Banks’ action to stimulate the economy.
But beyond arguments over the accuracy of inflation yardsticks, there are solid reasons that prices are not rising as fast as they could be, namely the ongoing printing binge that has characterised the last years. Economies no longer come in the neatly packaged national varieties. To a very large extent, monetary conditions within one country are now being influenced by activities of other countries.
Over the past years, unprecedented amounts of dollars/euros have been created. But much of that money does not stay within the confines of the own economy. A very large percentage of it winds up locked away inside the vaults of foreign central banks, particularly in the Far East. Countries like China and Japan, that run large EU- and US-trade surpluses, need to store these currencies so that they can keep their own currencies from appreciating against the dollar. The International Monetary Fund estimates that from first Quarter of 2008 and the second quarter of 2012, U.S. dollars held in reserve by foreign central banks increased by $850 billion, or 31%.
Given how weak the economy has been since the crash of 2008, it is surprising that domestic prices have risen at all. While there have been many similarities between the Great Depression and the Great Recession, one great difference was that the crash of the 1930’s was accompanied by significant deflation. By some estimates, prices fell by about a third. And so, while consumers and businesses then struggled with unemployment and dropping share prices, at least they were cushioned by falling prices. Today there is no such support. People who are spending a higher percentage of their incomes on necessities like food and energy are likely to be experiencing lower living standards.
It is impossible to create something from nothing. Printing money diminishes the value of all existing currency units in circulation by an aggregate amount equal to the purchasing power of the new currency. Governments take the position that the new money creates tangible economic growth, which are absurd claims that should bear the burden of proof.
Lower standard of living
Over time, the result of these actions will be a vastly lower standard of living for the working masses, thanks to declines in purchasing power and increasing commodity prices. Real wages will be much lower, as employers will not readily increase wages to keep up with inflation.
Volatile paper currencies will make it harder for entrepreneurs to invest and source products and services across borders. The so-called “wealth gap” will increase dramatically, as inflation will increase the purchasing power of the rich – whose assets will increase in value, while the poor – who have no ready means to protect themselves from inflation – are further impoverished.
The stability of any nation’s currency – is ultimately a reflection of the stability and reliability of their culture. It was the Deep State’s intention and the corruption in Nixon’s Government that led to the paper monetary system in use today. Many people forget that until 1971, gold-backed money – sound money – was a privilege every citizen enjoyed.
Today, under a totally unbacked fiat paper system, the entire monetary system is controlled by the political class, which has the power to allocate capital or to deny it. Thus, the world’s capital markets, rather than acting as capital allocators, have become merely speculative marionettes, whose strings are controlled by the Deep State’s well-connected and the influential.
Store your wealth in gold and silver
To avoid becoming a patsy of Western governments and their paper scheme: Instead of storing your wealth in the soon-to-be-debased paper currencies like the dollar and the euro, store your wealth in gold and silver. Although these “anti-paper money” metals have substantially been manipulated downward, schemes such as those here described are bound to fail, as has been repeatedly proven throughout history. Eventually, precious metals will rise in the years to come.
Higher prices, lower wages
This is how the game will be played. While the weak currency policies of the major nation states, impoverishes the citizens, they will never be allowed to impoverish the elite; who will only grow richer and far more powerful. The only question is, how long will the game continue before the side effects of higher prices and lower wages creates more social unrest, and turns this game into an economic disaster.
The fact is, no matter where you keep your dollars and euros; they now are being devalued by the second. The central bankers’ “print and promise” actions are aiming desperately at keeping the U.S. and EU economies afloat, while flushing your savings down the drain. What is coming next?
- Real purchasing powers of wages are falling.
- Government deficits are growing.
- Interest rates are rising – despite manipulations by both the ECB and the FED.
The vast majority of people, especially the retired, are forced to consume their savings and draw down their capital because they cannot get real interest on their savings. The beneficiaries are the bankers, who can borrow at near zero percent interest rates, charge consumers 16% on their credit cards, and use the Federal Reserve’s largess to speculate on interest rate swaps and credit default swaps. The taxpayers hold the bag for the bankers’ uncovered gambles.
A fake low consumer price inflation figure also allows central banks to continue inflating the world’s money supply. They’ve added trillions to the banking system directly, and trillions more to asset prices, and to the world’s debt. A rising CPI inflation would have scared lenders. Instead, the manipulated low-price increases act as a reassurance, so that more treasury bonds are sold at higher prices.
How the economy can become sustainable is explained in this video. Take your time to understand what is outlined, as it is a most valuable contribution to the comprehension of what has gone wrong over these years.