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10 Important questions and answers about inflation

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posted on Mar, 30 2010 @ 01:12 PM
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The following is from an article from the National Inflation Association answering what they see as the 10 most important questions about inflation;



NIA's 10 Most Important New NIAnswers

1) Is there any kind of signal to look out for that would indicate that hyperinflation is close, or will it just all of a sudden happen one day and catch everyone off guard?

We see many signals that hyperinflation is almost here already. The price of gold has been rising to record nominal highs. Stocks have been rising despite rapidly deteriorating fundamentals. College tuition and health care costs are surging to astronomical levels. Social security is now paying out more money than it takes in. Our budget deficits are reaching record highs. Our national debt growth is rapidly accelerating. China is diversifying out of their U.S. treasury holdings.

Hyperinflation can literally occur at any time now. It will catch most people off guard, but not NIA members because we see all of the signals that the mainstream media is ignoring. It is important for us to prepare as if hyperinflation will be here tomorrow.

3) What has happened in other countries when an 'inflationary holocaust' wreaks havoc on pricing? Will the (broke) government actually rescind the outrageous "gains" taxation and just print more money?

During historical instances of hyperinflation, the inflation took place so fast that governments funded over 99% of their spending with money printing and less than 1% through taxation.

Let's say for example you had a car that you purchased new for $20,000 and you decided to scrap it for $50,000 worth of metal. The government might force you to pay taxes on the $30,000 fantasy profit. However, if you merely delayed paying that income tax for a few months, it's possible inflation will be taking place so quickly that you will now be able to sell an old beat up pair of shoes for $50,000. Therefore, paying the tax, assuming there still was one, wouldn't be a problem at all.

5) China needs the U.S. to purchase their products. Do you really think their economy will grow without selling their products overseas?

The only reason the U.S. can afford to purchase cheap products from China is because the U.S. is exporting inflation to China and China is allowing the U.S. to run huge trade deficits. When China stops artificially propping up the U.S. dollar and allows their currency to strengthen, the Chinese will be able to afford to consume their own goods that they produce. They don't need Americans to consume goods that they are perfectly capable of consuming themselves.

6) Do the other countries have to buy our debt or face the wrath of our military?

We don't believe this is true, because if other countries stop buying our debt we won't be able to afford our military. Our military is bankrupting our country and one of the main reasons we have such large deficits that will eventually lead to massive price inflation. The world does not need our military to police it. Countries like China can afford their own militaries a lot more cost effectively.

Read more: NIA



I only included a few that I found to be most interesting. Read the whole list to find out more. It's a very good article which includes some insights I hadn't expected.




posted on Mar, 30 2010 @ 06:43 PM
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What, nothing yet.

Well, here's a little more from the article:



3) What has happened in other countries when an 'inflationary holocaust' wreaks havoc on pricing? Will the (broke) government actually rescind the outrageous "gains" taxation and just print more money?

During historical instances of hyperinflation, the inflation took place so fast that governments funded over 99% of their spending with money printing and less than 1% through taxation.

Let's say for example you had a car that you purchased new for $20,000 and you decided to scrap it for $50,000 worth of metal. The government might force you to pay taxes on the $30,000 fantasy profit. However, if you merely delayed paying that income tax for a few months, it's possible inflation will be taking place so quickly that you will now be able to sell an old beat up pair of shoes for $50,000. Therefore, paying the tax, assuming there still was one, wouldn't be a problem at all.

7) With the current size of our national debt, is deflation even possible?

The U.S. is the most indebted nation in the history of the world with a national debt of $12.7 trillion, Fannie/Freddie debts of $6.3 trillion and unfunded liabilities of more than $60 trillion. Our real debts are now about 600% of GDP and it will be impossible to pay them back. The U.S. will either default on its debt or print its way out of it, creating massive inflation.

Because we believe the U.S. is unlikely to admit it can't pay back its debts, inflation is clearly the solution. We don't see any risk of deflation long-term.

The mainstream media talks about deflation because they see through a rear view mirror. They see some prices having fallen after the financial crisis of 2008, but they don't realize there were temporary forces driving prices down due to artificial forced liquidations and excess inventories that needed to be worked off.

When the artificial pressures holding prices down are gone, all that will be left is the trillions of dollars of newly printed money in circulation that will chase goods and services all at once.

8) What good would it be to elect a few select people to the Senate like Rand Paul and Peter Schiff? Shouldn't we focus our energy and efforts on changing the entire system?

We believe the system is corrupt because of the Federal Reserve and its ability to manipulate interest rates and create phantom money out of thin air. Before the creation of the Federal Reserve, the value of our currency was stable and we did not have the booms and busts that we do today.

In our opinion, the system our founding fathers created would work if we only followed the Constitution. The creation of the Federal Reserve and all of the actions of the Federal Reserve are unconstitutional.

We need to do more than elect a few select people to Washington. We need to replace everybody in Washington with people who will work to protect the Constitution. If everybody in Washington was like Ron Paul, our country would not be on the verge of a hyperinflationary crisis like it is today.

It is because of the mainstream media and how they brainwash Americans, that Congress is full of people who are clueless about the economy and the root cause of all our problems. With the Internet, the mainstream media is slowly losing its power and our hope is that an increasing percentage of Americans will see our documentaries and learn to think for themselves instead of electing politicians based on what the mainstream media tells them.

9) If no governments currently back their currency with gold then why do they still hoard it?

Even though there are no currencies that are still convertible into gold, gold is real money and it is important for central banks to hold gold in order to protect the value of their foreign exchange reserves.

The average country has about 10% of their foreign exchange reserves in gold. However, China currently only has 1.5% of their foreign exchange reserves in gold and they have most of their reserves in U.S. dollars. Due to the massive monetary inflation taking place in the U.S., China's reserves are at risk and it is important for them to diversify out of their U.S. dollars and accumulate more gold.

Although the U.S. has the largest gold reserves at 8,133.5 tonnes, which makes up 68.7% of its foreign exchange reserves, the value of the U.S.'s gold and other reserves is nothing compared to its $12.7 trillion national debt plus Fannie/Freddie debt and unfunded liabilities.

NIA



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