"But a Constitution of Government once changed from Freedom, can never be restored. Liberty, once lost, is lost forever." - John Adams

Friday, September 3, 2010

The Beginning of The End

In Peter Schiff's 2009 book "Crash Proof 2.0", which is an update of his 2006 "Crash Proof", he has this to say about the effects of the Federal Reserve's creation of inflation and the foriegn investor coming to the realization that their investment is worthless:

"When the focus is on inflation and Uncle Sam is printing the next Trillion of stimulus money, demand for our debt will implode and the only buyer left will be the Federal Reserve. At that point there will be an increase in the velocity of money, as in "I'd better spend this dollar today because it's going to buy less tomorrow". High velocity marks the terminal phase of a currency, and we are setting the stage for the stampede right now."

Think about that for a moment.

High velocity marks the terminal phase of a currency........ only buyer left will be the Federal Reserve....

The Federal Reserve has been monetizing our debt for some time now, but at the beginning of August, no one was willing to put any money into US Treasury Bonds, so who bought them?
The Federal Reserve, of course. The August 5 purchase was a paltry $7 Billion, but when one understands that inflation in general is caused by the Fed "inflating" or increasing the supply of dollars in the market, and our foreign debt is in dollars, you can see how easy it is to pay back a 1990 debt of $100 million with a volume of $100 milllion 2010 dollars. Our 2010 dollars have a much lower commodity "buying power" but, volume is volume and when it's in fiat currency, a dollar is still a dollar.

We are in serious trouble folks.

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