Inflationary depression takes place when the central bank tries to stimulate the economy by producing money beyond the usual rate. This is an effort of encouraging people to have a more positive outlook on debt. However, this is also the point where the public, along with companies, has lost their confidence in the economy’s future growth and progress. This leads to the public refusal to invest or transact using the country's monetary currency.
We see signs that American workers are getting worn out. Management may have squeezed the last drops of extra work that they can out of them. That has been reflected in the latest worker productivity. Since WWII the average increase has been 2-1/2% year after year, but last week’s numbers were terrible, up only 0.2% per year. Europe and the US have been able in part to offset advantages of foreign producers by consistently getting better productivity results. For those of you that are new to these statistics, they are a reflection of labor productivity, or advances in the way work is done. Such previous success have allowed companies to get the job done with fewer employees and in instances to offshore some work to take advantage of cheap foreign labor. If you use a combination of labor and investment funds, recent results are only up 0.1% for 2009. Those numbers are usually about half of regular productivity numbers. What low overall numbers mean is that throwing money at manufacturing problems is not working as well as it has in the past.
Recessions tend to supply lower figures and that is understandable. We are currently in an inflationary depression and have been since February of 2009, just over two years ago. Few economists agree with us, but that is normal. A few catch up in 8 to 12 months, the rest take two or more years.
Higher interest rates tend to be a factor, a negative factor. The higher the rates the larger the impact on the use of investible funds and productivity. The negative side coming from the cost of funds. During our recent depression the cost of funds has not been a factor, because interest rates are very low. As rates eventually move higher they will negatively impact employment at the worst possible time. Those higher rates will as well inhibit the level of capital investment and will contribute to corporate insolvencies. During the beginnings of this depression employment has paid a very heavy price, as corporate profits have boomed. Unemployment rates are about half of what they were during the “Great Depression.” Current long-term unemployment is terrible and many over 40 years old caught in that web will never work again.
It is very discouraging and disconcerting when workers train foreigners to do their jobs and are then fired. The jobs go to some foreign land and the new worker is paid 20% or 30% of what the terminated worker was paid. In addition companies, especially large corporations, are taking advantage of the breaks government is offering and buying labor saving equipment so that they do not have to hire or re-hire personnel. The result as we have seen is long-term unemployment, which in many cases means permanent unemployment, particularly for those over 40 years old.
Using invested capital, interest rates and manufacturing productivity, along with monetary policy gives one a possible overview of where the economy is eventually heading. They also give you a solid view of where gold and silver and commodities are headed. In 2000 after 20 years of being in the doldrums these factors, especially monetary policy, told us that we were embarking on a long-term bull market in gold and silver. The dreadful monetary policy of the 1990s had set the stage for what we have seen since June of 2000, almost 11 years. At this juncture we are as yet anywhere near where the top is, but it certainly is not here. We are in the process of stage 2, which should take us to $2,400 to $3,000 and then stage 3 to $6,000 to $8,000, based on real inflation since 1980. Obviously that figure will be higher three to five years from now. One of the good aspects of all this is that once devaluation, revaluation and multilateral default come. There will be no further reason for the Treasury, the Fed and other central banks to manipulate gold and silver prices, if the new world reserve currency is 25% gold backed and we believe that will become reality. The elitists want another fiat currency, but nations will not stand for a repeat of what they have seen during the tenure of the US dollar. You had all better hope we are right, because a fiat alternative would create another world monetary disaster.
As we have explained many times in the past, since February 2009 the US has been in an inflationary depression. It has taken a while to get underway, but it is moving relentlessly forward.
We currently have real inflation in the vicinity of 8%, not less than 2%, which our government tells us. By the end of the year we will have 14% plus, matching 14-3/8% of 2-1/2 years ago, which was caused by an 18% increase in money and credit. Current inflation is mainly caused by a switch to quantitative easing, QE1 and $850 billion in stimulus from Congress, which will play itself out into next year. Fast on the heels of that monetary policy we will be exposed to the affects of QE2 and the $862 billion injected into the system by QE2 and stimulus 2. That will carry us into 2013. The big question is will we have QE3 and the answer is yes, officially or unofficially.
Getting stimulus 3 will prove very difficult, if not impossible. That means the Fed will have to take up the slack in funding to keep the financial system afloat. Thus, next year or perhaps by the fall, the Fed will have to feed $2.5 trillion into the system just to keep it going sideways to slightly lower. Establishment economists are calling for 4% to 4-1/2% GDP growth for 2011. Remember without these monetary and fiscal crutches GDP would be minus 1% or more. Such performance will put ever-higher pressure on inflation taking 2012 to 25% or perhaps 30% in 2014. It is already in the pipeline. We know some of the inflation will be exported, but not nearly enough to make a major difference. Other nations like to blame their own inflation on others, especially now a days on the US, but it is their policies similar to those of the US, that really cause their problems. For ten years the deflationist camp has been making noises and nothing has developed. It hasn’t because the Fed preempted them, which was a foregone conclusion. They will be correct in the next 3 to 5 years, but they will have lost 15 years of profits by being wrong. their timing was wrong and they should have known better.
The elitists were not about to dive directly into deflationary depression, but they should have. The most important factor in making monetary and fiscal calls is knowing the history of what these criminals have done over and over again in the past. That is the factor other economic and financial writers miss, and the result is failure. You have to understand what the elitists are after, and they are not afraid to tell you. It’s world government and the only way they can affect that is by taking down the system in the strongest countries and forcing those citizens to accept world government by creating a failed system. Deflation is the shallow view of those who do not know what the missing link is. Common sense would tell you the Fed and other central banks will flood the system with money and credit in order to loot it one last time. They know the most money is made and stolen in the final sages before planned collapse. In just 2-1/2 years the Fed and Congress will have spewed $5 trillion into the system. This is an endeavor that began ten years ago. Why do you think this is being done? Not only in the US but also Europe, the UK and other countries as well. Why do you think everything possible has been done for over 20 years to keep gold and silver prices down? They had to kill the canary in the coalmine. They couldn’t let the performance of gold and silver give away what they are up too. Deflationists have missed the boat because the majority of them do not know financial and economic history, so they unfortunately do not know what they are talking about. It is all about selling subscriptions. They do not care that they have cost investors billions of dollars by keeping them out of gold and silver related markets. They also have inadvertently assisted the elitists in their attempt to smoother the gold and silver markets.
Then the question arises are they misinformed and half educated, or are they consciously assisting government suppression? It is all in the fundamentals, which are irrefutable and there for everyone to see. In 52 years we have never seen such charlatanism and stupidity. Most of these people are ill prepared to write newsletters. We also never hear from them concerning their back calls, especially chartists, waviests and cyclists. For the past five years their records have been dismal, if not abominable. Most of what is written is garbage and we have to take the time to answer their dumb and outrageous theories promulgated to garner more subscribers.
The Fed and the powers behind government had a great opportunity in 1992 to fix the system and purge the excesses. The stock market had fallen a few years before and the real estate market had a severe recession starting in 1988. That was not to be. It was the same old game over again. During the late 1990s another bubble was created by the Fed in the stock market called the dotcom boom. As we predicted the fall in the stock market in the second week of April of 2000 the elitists had another opportunity to purge the system, but that was bypassed and it wasn’t long after that the beginning of the real estate bubble began. As usual we were the only ones recommending the beginning of accumulation of gold and silver shares, bullion and coins. As we reflect back the elitists wanted two things, the accumulation of great wealth during this last great bubble and the final deliberate destruction of the American economy to bring about world government. It was the beginning of financial terrorism by Wall Street and banking and the dismantlement of the US economy by transnational conglomerates, with the aid and assistance of Congress. The point here is that this didn’t happen overnight. This was a long-term plan hatched in 1944, that you might call the rise and fall of the American empire. Out of that destruction would come even greater riches and immense power. The plan was for the total control of the world under corporatist fascism. That is not what they called it, but that is what it was and is today.
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