Earlier this year, the senate passed a 1.1 trillion dollar increase in government spending, increasing the budget for healthcare, education, law enforcement and defense. If mounting record budget deficits weren't enough, the proposed increase in our debt ceiling (13.3 trillion) will be 14 trillion, by early to mid-2011.
If that money ever leaves the banks and gets into joesixpacs hands, prepare for hyperinflation.
We are all but guaranteed a hyperinflationary great depression (hyperinflation with unemployment exceeding 25%) similar to Weimar as fiscal recklessness goes. Money printing QE2 will be announced before year end. many times more dangerous than QE1. The Fed hint at more U.S Treasury purchases, and monetizing debt is a pure injection of inflation into the economy that could be the straw that brakes the camel's back.
Echoes of Weimar
The early stages of the hyperinflation were characterized by large influx of foreign capital. Weimar was financially and economically depleted due to the war. The U.S., is financially and economically depleted due to its lack of manufacturing base, consumer savings, which fuels capital formation, trade and budget deficits, destructive monetary policy, etc.
U.S has been able to print trillions without any immediate consequences because they maintain world reserve currency status, delaying the inevitable. NPV (net present value of all our unfunded liabilities) is currently around *200 trillion(!) and politicians just want to spend more.
The only remedy being to default. This is very unlikely to happen. Obama convinced himself that he can create jobs by spending more and more money instead of being responsible and cutting entitlements and defense.
There is still time to repair this damage. But 2010-2011 will see the deficit as a percentage of expenditures shoot up 52%. This should scare most people into putting at least 10% of their assets in gold or silver or other commodities, which rise faster than inflation.
Expect another big year for PM 2011 if:
the debt ceiling is raised again.
QE2 is announced.
Another round of bailouts - specifically the FHA.
Increase in mortgage defaults - something to watch in 2011 as ARMS reset.
SLW compared to other miners, has fixed costs, and is the asset of choice, as hyperinflation for fixed prices will affect miners negatively.
SLW is the smart investment.
When the debt market implodes the dollar will implode along with the stock market, SLW, the U.S. economy, and the world economy . This will happen quickly when it starts. Look for significant decrease of foreign buying of treasuries as the sign of the start. Since SLW is tied to the stock market and more importantly to world economies, SLW will fall also. An increase in silver investing will mitigate the fall of silver prices and SLW but there is substantial downside risk, imo. Gold is the only asset relatively immune to the above scenario, imo.
Believing the above I still choose to overweight silver, sliver stocks and SLW (all with greater short term appreciation potential than the gold equivalents) betting I can make the switch to Gold before the coming bubble bursting of debt, stock market and the dollar.
Once world economies begin to recover SLW will be a steal and fortune maker.
You, like most have been co-opted to believe the political spectrum to be linear when, instead, it is circular.
Let's start with 100% freedom (aka anarchy which gets a bad rap because most think it means something other than just an absence of government) and place it in the 6 o'clock position. From there, we can indeed advance to the left, toward 11 o'clock and ultimately achieve communism. Or we can advance to the right to say the 1 o'clock position and arrive at fascism.
Note how the two systems are arrayed so closely along the same arc segment.
In reality the two, communism and fascism, are quite similar insofar as totalitarian systems go, with only ownership of the factors of production being the primary and significant difference. Remember, we are discussing economic systems and not governmental systems although most Americans have been led to believe they are one in the same.
Ruminate on this for a while and it should dawn on you as to how the linear perspective is being used to polarize the people when we really ought to be closing ranks against the advance of totalitarianism of either flavor. That is very important as each work to destroy the concepts of private property and individual liberty.
Most intuitive people associate Republicans with fascist ideology and then also associate Democrats with communist ideology. Each approach is Statist by design. In fact, Messianic Statism is the end goal for either one. As you can see, this model certainly explains why it is that both parties seem to be functional adjuncts of the same operation, that which is operating against the foundational concepts of Life, Liberty and Property. It also serves as an adequate explanation as to why nothing ever really changes in government even taking into consideration the biennial cleansing process that supposedly takes place.
Does the linear model preached to the masses explain this circumstance?
No. Not only does it fail miserably, but it aids and abets the polarization of the masses which I frankly feel is the primary function of media today, right ahead of the other one - propagandizing. Why? Because if we are at odds with one another, duped to battle in the paradigm constructed for that exact purpose, we are simply being led down the primrose path, with energies spent for absurd rationale and all the while the manipulators laugh themselves silly. They know that win, lose or draw, they come out on top.
We cannot have hyperinflation since we are in a global economy and there are such large forces at work that inflation will be slow if any for the next few years.
We could sustain and would actually benefit from 10% inflation for the next decade, because it would repair our real estate valuation disaster.
If all the underwater homes and mortgages were revalued plus 30% our banking and credit default swap problems would go away immediately.
The stock market would double, and commodity equities would triple.
It would also create a huge amount of jobs and our debt to GDP ratio would shrink by HALF.
Wonderful ideas all. I trust you will continue to vote democrat. The socialist White House needs as many of you as possible to keep the Democrats in place in the House and Senate. Good luck.
One more thing, please expand on your notion that 10% inflation would "create a huge amount of jobs".
Oh, and one more thing, why does the "global economy" give a crap about "our real estate valuation disaster"?
Oh, and just one more thing, help me understand how "We could sustain and would actually benefit from 10% inflation for the next decade, ...". Wouldn't 10% inflation for a decade send the currently NEARLY worthless dollar to dollar Valhalla. I would suggest that 10% inflation (per year, I assume is what you meant), might push food and energy to heights inaccessable to the common man. Your house valuation (if you have a house) would be great, but you would have to walk to work and dig roots and pick twigs and eat them along the way.
Well, maybe your plan just isn't that great after all.
You cannot create wealth through inflation. Inflating the real estate is what caused the problem. People borrowed against overvalued real estate going into debt. Real estate is still overpriced. Producing real goods and balancing trade is the only real solution. Voodoo economics has failed.
Depressions and inflations can be explained very simply. Depressions happen when all the wealth gets concentrated in few hand and the masses do not have enough money. Inflation happens when the masses have too much money. What got us out of the depression of the 30s were the unions demanding better pay for workers and workers producing goods. Companies were glad to operate on 10% profit as the greatest industrial power the world has even known was built.
In the past 30 years workers pay has decreased, high paying manufacturing jobs were shipped oversea and corporate profits rose to 60% - 90%. The rich became richer and the working class went into debt.
Obama is listening to the banker’s theory of trickle down economics. It has never worked and will not work. The economy must be built from the bottom up. China had a system known as Gold Star Enterprises that built their economic powerhouse. Entrepreneurs, who wanted to start a new business, were helped by the government. The government taught them the basics of business and set up good- looking web sites for the company. One or two men in a garage had a web site that made them look like an international corporation. The government also provided seed money or start up funds and received half interest in the company. When the company became successful they bought back the other half from the government. China did it the right way; they invested from the bottom up and helped the bottom of society instead of the rich.
Both political parties in America are owned by the bankers and corporation. Neither will help in rebuilding the country or give up power until the country hits bottom. What will happen then can only be guessed at. A comparison to the Weimar Republic is valid. Extreme right wing fascist sentiment is on the rise. If a gifted speaker like Hitler comes forth then we are in for an out of the frying pan and into the fire period of extreme fascism.
The smartest thing about owning SLW may turn out to be that it is a Canadian company not American.
tburke states - "The government taught them the basics of business".
Are you for real?
Maybe we'll send Michelle Obama or Bill Ayers to your town to decide who gets a business loan and teach the the "basics of business", maybe Barack or Barney Frank (they went to Harvard) could help the hapless idiots in your town too lol.
They really know what makes business work. All those community shakedowns and years of stealing money.
You are truly an ignorant buffoon. Were you born in 1932? I hope so as we won't have to tolerate your communism much longer.
"Obama is listening to the banker’s theory of trickle down economics".
-tburke1932 useful idiot
Obama and his state controlled bankers are systematically stealing the wealth of the middle class @@s hole.
That is not "trickle down" economics. Its called stealing. You can't steal unless somebody has something to steal so Obama is stealing from the middle class. When the middle class is gone so is America.
North Dakota has a state owned socialized banking system. http://en.wikipedia.org/wiki/Bank_of_North_Dakota
The state bank helps entrepreneurs get started. As a result North Dakota has a 3.4% unemployment rate, the lowest in the country. How can anyone argue against the idea of helping the economy to grow from the bottom up instead of trickle down. The one shows success and the other failure.