Q) What is halting US Growth?
A) Americans are suffering because the central planning of money is destroying productivity. Mispricing money causes resources to flow into unproductive areas. The return of market-priced money will expose the malinvestments that have been created by artificially cheap money being pumped into the economy and cause short-term pain, but will also cause a boom in productivity because resources will once again be allocated much more efficiently.
Postponing the pain by providing more artificially cheap money only causes more malinvestments and therefore even greater pain in the future. Bankers and politicians enjoy their control over the printing press and do not want to be blamed for the pain, which is why the pain will likely be delayed until so much artificially cheap money is created that the USD becomes worthless.
Q) Is the US able to pay its debts?
A) The US is borrowing about 40% of what it spends. The US brings in revenues of about $2.310T, spends about $3.614T, racks up new debt of about has a debt of around $1.303T, has a total debt of around $15.114T, and has unfunded liabilities of about $100T. Furthermore, what’s not included in the national debt is all of the off balance sheet debt like Frannie / Freddie, student loans, etc., which go into the trillions of dollars.
By dropping a few zeroes, we can wrap our heads around the financial situation of the US: Income = $23,100, spending = $36,140, an adjustable rate credit card balance which currently has an ultra low interest rate and only the minimum payment is being made = $151,140, new credit card debt of $13,030, and unfunded liabilities = $1,000,000.
It is completely impossible for an income of $23,100 to able to handle a credit card balance of $151,140 and rising with $1,000,000 of unfunded liabilities on top of that.
Q) Will interest rates rise as high as they did in the 1970′s
A) Those high rates in the 1970′s and 1980′s were a result of the ultra low rates in the 1950′s and 1960′s brought about from a fed funds rate that got down to about 3%. Rates will go much higher now than the 1970′s as a result of the ultra low 3% fed funds rate in 1993 and 0% fed funds rate + QE the last few years.
The high inflation in the 1970′s and 1980′s weren’t seen until rates were RAISED because it uncovered all of the bad investments. Simply raising rates will not immediately kill inflation.
Once the inflation genie is out of the bottle he’s out to play for good until rates are raised enough to soak up all of the inflation created by ultra low rates over the last twenty years. The conundrum is that raising rates to even 5%, the low end of historical norms, will lead to an imminent default of the US. Of course rates will be needed to be raised much more than 5% in order to kill inflation, likely to 20% or more.
Q) What is a ponzi?
A) A ponzi is a scam which pays early investors out of the investments of later investors. In a sense, the world’s monetary system is one giant fiat ponzi scheme with the only question being when will the ponzi end, not if it will end.
The problem is growth is no longer able to keep up with the malinvestments caused by cheap money (0% rates + QE). Either cheaper money is increasingly provided in order to cover up the malinvestment (more QE, or purchasing of MBS, or printing money to purchase anything), or the malinvestments become exposed.
Allowing the malinvestments to become exposed is politically unfeasible, so cheaper money will be provided in order to keep the malinvestments hidden. In a sense, the new investor is the newly created currency..once the new currency stops or even slows, the ponzi fails, but keep the new currency coming in faster and faster and hyperinflation is the end result.
Q) How bad is hyperinflation?
A) With hyperinflation, there will likely be at least a short breakdown of the banking system which would disrupt the distribution of goods and cause food and energy shortages. Most of the population is completely unprepared for such a breakdown, so during hyperinflation it’s probably a good idea to be outside of major cities, and to store a few months worth of consumables and physical silver. Hyperinflation will leave the US at its most vulnerable point for the government to become repressive, so if the government strangles the markets and kills freedom so much to the point where opportunity becomes non-existent, emigrating from the US may become necessary.
Q) What will happen with housing?
A) Housing is set to fall 70%-80% considering hyperinflation will remove the easy credit because the printing press will be rendered worthless. Also, hyperinflation is completely economically devastitatin which will cause Americans to become much poorer, further driving down housing. In order to save on housing maintenance and utility costs, more people will live together in each household. In addition, many will altogether leave the country, which will further expose the overbuilding of housing that cheap money and government backing of mortgages has created.
Now is the time to take the equity out of your home if you would like to keep that equity. The best way to save is with silver. Gold is a great option too. If you’re looking to save in USD, nickels now have a melt value of more than $.05.
Q) Why is silver such a good investment?
A) Ever since the counterfeiting of gold began, silver has been under mined. There’s only about one billion ounces in “investable” silver and about only another one billion ounces in silver in trading form (rounds and bars). Finding the total amount of above ground silver which includes all of the jewelry / scrap/ tablewear is much more difficult and by best estimate ranges between eight billion and twenty billion ounces of silver that exist above ground. Even at twenty billion ounces, an extremely small amount of value is stored in silver relative to the amount of value stored in the fiat ponzi.
Silver demand basically must rise with combination of the breakdown of currency and the growing industrial uses such as the growing role of electronics (in electronics, silver is used in such small amounts that price virtually doesn’t matter). Also, silver supply is difficult to increase quickly because most silver is produced as a byproduct of mining other metals. The incentive to invest mining in silver has been muted by central banks selling of silver since silver’s demonetization in the 1960′s and the
proliferation of fiat currency fooling the world into trusting the worth of pieces of paper instead of real money.
Q) How much will silver be worth?
A) When fiat collapses, likely sometime between the next six months and the next five years, the currencies of the world will be gone but all of the goods and resources of the world will still exist. Goods will then be purchasable with a different medium of exchange and if that medium of exchange is not entirely silver and gold, it will certainly move largely towards silver and gold having much more purchasing power than they have today.
The enormous amount of purchasing power that gold is set to gain is evidenced by the size of the bond market which completely dwarfs the size of the gold market. At the minimum, the purchasing power of an ounce of gold will be equal to the amount that $10,000 purchases today. When a large amount of purchasing power flows into the precious metals, the silver to gold ratio compresses. In this precious metals bull market, the silver to gold ratio is set to hit at least ten to one, meaning that one ounce of silver will have the purchasing power of at least the amount that $1,000 is able to purchase today.
Q) When should I be concerned about the rise in silver coming to an end?
Q) Is inflation the normal state of an economy?
A) No, deflation is the normal state of an economy. Gold supply grows at only about 1.5% / year. So in a normal economy where real money is used, prices fall as technological gains improve productivity, allowing the amount of goods to increase faster than the money supply. To simplify, with a little more gold chasing an even greater amount of goods, prices fall.
Q) How long has the USD bubble been forming?
Then the Fed began a relentless campaign of debasing the dollar when rates were kept too low in the 1990′s which lead to the .com bubble. Instead of allowing a real recession after the .com bubble popped, Alan Greenspan, the Chairman of the Fed at the time, dropped the fed funds rate to below 2% in 2002 and ultimately to 1% in 2003. These ultra low rates brought mortgage rates down which helped drive up the price of real estate, leading to a real estate bubble. After the bursting of the real estate bubble, Ben Bernanke, the currenct Fed Chairman, brought the fed funds rate to near 0% where they have remained for about three years, with guarantees another three years of 0% rates, and the USD will soon pay the ultimate price for Bernanke’s and Greenspan’s mistakes.
Q) Won’t the FDIC protect my bank deposits?
Q) Will there be a big dip in silver like 2008?
3) The Fed’s balance sheet has exploded since 2008 and is now nearly $3T. Further expansion of the balance sheet will have severe inflationary consequences.
Q) What should the Fed set rates at?
A) The Fed should not set rates. The market should set rate. The central planning of rates causes malinvestments.
Q) What is all of this concern about deflation?
A) The problem with deflation is shown if assets lose enough value to cause the banks to go bankrupt. If assets are allowed to deflate enough to break the banks, then everybody that has their money in a banking institution loses their money.
In addition, politicians, bankers, and government cronies lose control over the printing press if the banking system breaks down. No longer will easy money be able to be doled out to special interest groups including connected businesses, entitlement recipients, and government employees. It’s much easier to get money out of a printing press than through taxation (or borrowing which is really future taxation).
At the point before the banks break, the bankers, politicians, and government cronies will have to decide if they will give up their control over the printing press and allow lose their deposits, or if they print enough money to save the banks. However, postponing the pain by providing more artificially cheap money only causes more malinvestments and therefore even greater pain in the future.
Q) How Long until the USD Collapses?
A) On the short end, the USD in its current form can end any time the money printers decide to stop printing. On the long end, the game can be kept going until hyperinflation. So the question really is how long could hyperinflation possibly be postponed until? It’s extremely unlikely that the USD will be around five years from now without a significantly large devaluation.