The Crack-up Boom! On The Way?

In his book Human Action, Ludwig von Mises wrote, “Continued inflation must finally end in the crack-up boom, the complete breakdown of the currency system." Similarly, we have Voltaire's wisdom, “Paper money eventually returns to its intrinsic value – zero.” So, Dr. Bernanke, we're not talking about a "tail risk" of this baby coming to term. It's coming. And, when the dust settles, it will be the very opposite of a really, really bad outcome.


One of the most poigniant peices I've read in some time is this little ditty by Arthur M.M. Krolman.

Think Precious Metals Prices Are A Bubble? Think Again.

Each time the two monetary metals reach new highs, calls for the end of the bull market in gold and silver come quickly and frequently. At $500, $850, and ever since gold first cracked $1,000 per Troy ounce in March 2008, the gold price remained the focus of those paid to report a popular view among those firmly entrenched in a fiat paper system that’s rewarded them handsomely for two generations. Those unencumbered by a financial system—a system that pays its employees “more than four times the average salary in the rest of the economy,” economist Paul Krugman wrote in 2008—make a living by developing a reputation for accurately appraising the current state of the vilified gold and silver market. Otherwise, these unleashed analysts and money managers will no longer retain their flocks and fortunes. One such tell-it-like-it-is investment manager is the publisher and editor of the Gloom Boom Doom Report, Marc Faber—who, as a side matter, says that the choice for the name of his report, Gloom Boom Doom, came about from his observations of changing investor sentiment during complete market cycles. So, is it Gloom, Boom or Doom for the precious metals? Faber rejects the notion of a precious metals market soon entering a “Doom” stage. “If it [gold] were a bubble a lot of people would have gold. The whole world would be trading gold 24 hours a day,” he told CNBC’s Joe Kernen. “But I don’t think it’s really a bubble. I think gold is maybe cheaper today than it was in 1999, when it was $252.” The rise in the gold price (but more spectacularly, in the silver price) has been primarily driven by the Fed’s unprecedented easy-money policies, first, following the popping of the NASDAQ bubble in 2000, then again, much higher in price following the collapse of the financial system, starting in March 2008, with the fall of Wall Street broker-deal/investment banking firm Bear Stearns. Not unlike most global pricing, the world’s traditional monetary metals are denominated in U.S. dollars, so a decline in the dollar’s relative value to world supply of precious metals lifts the price of gold and silver in dollar terms. The future of the gold price is bright as long as Fed chairman Ben Bernanke continues a policy of negative real interest rates—when compared, that is, with the rising rate in living costs, Faber has repeatedly stated. Even if the Fed followed last week’s European Central Bank’s (ECB) quarter-point interest rate hike, the competition for dollars between paper assets and tangible assets won’t tip the tide among investors in favor of paper assets, according to Faber. “One day they [the Fed] will increase it [federal funds] by a quarter percent. But what does it mean when commodity prices are going through the roof, energy prices are going up, health care costs are going up, insurance premiums are going up?” he said. Therefore, Faber posits that cash and debt will lose value relative to “commodities, real estate, art, collectibles and so forth, anything that essentially cannot be multiplied at the same rate as paper money, that is subject to the printing presses of Mr. Bernanke.”

The Dollar is Collapsing, just look at commodies!

This was sent to me by an aquaintence that has over 50,000 ounces of silver. He started buying at $12/oz. The market closed at $43.05 yesterday. It's my belief that until Congress can reign in it's deficit spending and pay off our national debt, the Federal Reserve Bank will continue to print money for them to pay their bills with, effectively destroying the dollar. Since the inception of the Federal Reserve Banking system in the USA, the purchasing power of the dollar has declined by 97%. Remember penny candy? It's not gone because it got expensive, it's gone because the Fed has flooded the market place with dollars. This is the true cause of inflation. And in the case of savings, it's theft. If the Fed increases the money supply by 5% and your bank pays 1% on your savings, they have effectively stolen 4% of your purchasing power.

2011 Federal Budget, In Easy To Understand Numbers

2011 Federal BudgetFederal Budget: $3,820,000,000,000.Income: $2,170,000,000,000.New Debt: $1,650,000,000,000. Amount Cut: $ 38,500,000,000 – about 1% of the total budget. Harry Reid is calling this a “historic amount“. The President said it is a “historic deal”. John Boehner simply said, “we’ve come to an agreement”. Let’s Put This In Perspective: It helps me to think about these numbers in terms that I can relate to. Let’s remove nine zeroes from those numbers and pretend this is a monthly household budget for the fictitious Jones family. Amount of money the Jones family spent this month: $3,820 Total income for the Jones family this month: $2,170 Amount of new debt added to the credit card this month: $1,650 Outstanding balance on the credit card: $14,271 (This represents our national debt). So last night, the Jones’ sat down at the kitchen table and agreed to cut $38 from their monthly budget. A historic amount! At my house, we don’t spend 43% more than we make. I’m willing to bet you don’t either. Why do we let them do it in Washington D.C.?"

US Debt and Printing Press Benny's Inflation Cause Revolutions Around The Globe

Cereal Wars…and Zombie Wars…
Hey, how ’bout that Ben Bernanke… He’s a freedom fighter! Look what he’s done to North Africa!
Seems like every time we pick up the paper another dictator is toppling over. Where does it lead, we wonder? What would a world be like without dictators? Without them, who will the CIA and the State Department give our money to?
On the run this morning (but not quite given up) is Muammar Gaddafi of Libya.
Wait… Is this guy a friend or an enemy? We can’t remember. Wasn’t he a bad guy a few years ago? But recently we’ve heard that he is a good guy. He’s helped with the War on Terror. And he sells oil.
Friend or foe, we don’t know…but whatever he is, he’s beginning to look past tense. As of this morning, reports say he’s lost control of Libya’s second largest city. His troops are firing on protesters in the capital, where he and his loyal guards are holed up in a few government buildings.
His son vows to fight back. He says there will be “rivers of blood” before he gives up.
That “rivers of blood” image was used by Enoch Powell in Britain fifty years ago. It came from Virgil’s Aeneid, in which a character foresees “wars, terrible wars, and the Tiber foaming with much blood.”
Powell was referring to the effects of immigration into Britain from Africa and elsewhere. He thought he saw race wars and power struggles coming as a result.
But the younger Gaddafi uses the language as a threat, not a prophecy.
Still, it didn’t do Powell much good. Maybe Gaddafi will have better luck with it. Most likely, he’ll high-tail it out of the country before the blood is his own. That will bring to three the number of regime changes in the last few weeks. Which leads us to ask: what’s up?
The answer comes from our old friend, Jim Davidson. He pins the revolutions on Ben Bernanke. Behind the popular discontent is neither the desire for liberty nor the appeal of elections. It’s food. And behind soaring food prices is Ben Bernanke.
The Arab world is a model Malthusian disaster, says Davidson. Populations have ballooned. Food production has not. Which makes Arab countries the biggest importers of cereals in the world. And when the price of food goes up, the masses rise up too.
From Jim’s latest newsletter, Strategic Investment:
Food prices hit an all-time high in January. According to the UN’s Food and Agricultural Organization (FAO) “the FAO Food Price Index (FFPI) rose for the seventh consecutive month, averaging 231 points in January 2011, up 3.4 percent from December 2010 and the highest in both real and nominal terms” since records began. Note that prices have now exceeded the previously record levels of 2008 that sparked food riots in more than 30 countries. “Famine-style” prices for food and energy that prevailed early in 2008 may also have helped precipitate the credit crisis that Federal Reserve Chairman Ben Bernanke described in closed-door testimony “as the worst in financial history, even exceeding the Great Depression.”
This time around, the turmoil surrounding commodity inflation has taken center stage with more serious riots and even revolutions across the globe. Popular discontent is not just confined to “basket case” countries like Haiti and Bangladesh as in 2008. High food prices have roiled Arab kleptocracies with young populations and US backed dictators such as Tunisia, Egypt, Bahrain and Yemen. Even dynamic economies have been affected. Indeed, all of the BRIC countries, except Brazil, have witnessed food rioting.
Well, how do you like that, Dear Reader? All those billions of dollars spent propping up dictators – $70 billion was the cost of supporting Hosni Mubarak in Egypt alone – and then the Fed comes along and knocks them down.
The Fed lowers the cost of money so speculators can borrow below the rate of inflation. And then it prints up trillions more – just to top up the worlds’ money supply.
Is it any wonder food prices rise? Imagine you’re a farmer…or a speculator. You can sell food. Or you can hold it in storage. You know the food is valuable. You know the world has more and more mouths to feed everyday. You know food production is limited. And you know Ben Bernanke can print up an unlimited number of dollars. What do you do?
Do you sell immediately? Or drag your feet…holding onto your valuable grain as the price hits new highs?
Davidson continues:
While Mr. Bernanke modestly declines the credit for de-stabilizing much of the world, close analysis confirms that he played an informing role. His QE2 program of counterfeiting trillions out of thin air has helped ignite a raging bull market in raw materials with food and commodities – up 28% in the past six months. The fact that the US dollar has heretofore been the world’s reserve currency means that almost all commodity prices are denominated in dollars. As a matter of simple math, when the dollar goes down, the prices of commodities tend to go up.
Today, Libya. Tomorrow…Yemen? Or Saudi Arabia.
In North Africa, Cereal Revolutions…
In North America, Zombie Wars…
Yes, the battle rages in the Dairy State. And yes, Nobel Prize winner Paul Krugman (Economics!) has no idea what is going on:
It’s “not about the budget. It’s about power.”
He thinks it is a battle between the rich and powerful, whom he calls the “oligarchy,” and the decent lumpenproletariat. Wisconsin’s governor is trying to bust the union, says Krugman, so that the elite can ride roughshod over poor government workers, cut their pay, and reduce their benefits (thereby downsizing the state’s budget deficit).
It’s not about money, says the New York Times columnist. He’s wrong, as usual. The Zombie Wars are always about money. There is less money available and more zombies who want it.
In the present case, rather than hire honest people to work at market rates…Krugman wants the state to be forced to deal with a privileged union. Union zombies should bargain with government zombies, he says. Together, in cooperation, not in conflict, they should figure out how to rip off the taxpayer.
Stay tuned…the Zombie Wars are just beginning.
Reprinted with permission from The Daily Reckoning.

Eventually Paper Money Will Return To Its Intrinsic Value - Voltaire

Faber believes the global economy may be okay for the next six months. “We have to realize that it’s an artificial recovery driven by ultra-expansionary monetary policies and also ultra-expansionary fiscal policies,” he comments. Faber predicts that deficits will lead to renewed problems down the road.
“The annual cost of living increases are more than 5% today and the Bureau of Labor Statistics is continuously lying about the inflation rate, including Mr. Bernanke. He’s a liar. Inflation is much higher than what they publish.”
Faber says the true cost of living increase for most US households is 5-8%, and just below that in Western Europe.

Fed takes a shot at Ron Paul

The Federal Reserve, no doubt at the suggestion of one of the high priced PR agents they maintain, has fired a shot at Ron Paul in his own backyard.

The Houston Chronicle carries an op-ed by Paul Hobby, who is chairman of the Houston branch of the Dallas Fed.

Let's take a look at this commentary that is boldly titled, "Hands off the Fed" Hobby makes clear right at the start this is about Ron Paul:

"Defense of our central bank is imperative just now because the House Financial Services Subcommittee, which provides congressional oversight of the Federal Reserve System, has a new chair — U.S. Rep. Ron Paul, R-Lake Jackson. Paul is a frequent critic who has published a book titled End the Fed. Almost certainly, Paul will seek to make a fundamental inquiry into whether the United States will retain the ability to conduct monetary policy at all."

Then he says:

"No one who studies the global economic issues today would forfeit this nation's ability to conduct monetary policy through a central bank."

This statement is simply factually wrong. Congressman Paul has certainly studied the issues and has not reached that conclusion, as have many economists, mostly from the Austrian school of economics.

I'm hoping Hobby isn't trying to be serious when he writes:

"Part of the problem in this public debate is that few of us have much personal experience with, or perspective on, monetary policy. It is simply not a visible part of most people's daily lives"

The problem is that most Americans have too much experience with the Federal Reserve through Federal Reserve notes that buy less and less food, clothing and gasoline every year.
A hint to Hobby, they don't riot in Third World countries over central bank created inflation because they don't have personal experience with inflation.

It's very personal.

Hobby then tells us that the financial system went through a "near death experience" without once discussing the role of Austrian economists, before the fact, warning that such a crisis would come about because of Federal Reserve policies.
Ignoring the forecasters of the crisis, Hobby then tells us how the Fed "saved" the country despite millions losing jobs, millions losing homes and some losing jobs and homes.

One has to ask what was left standing that the Fed saved?

The answer is, of course, Goldman Sachs.

To Hobby apparently the saving of Goldman Sachs was the saving of the economy. The Fed did just a wonderful job:

"History will judge these events in the fullness of time. With the benefit of some hindsight, however, it seems the strategies employed by then Secretary of the Treasury Henry Paulson and Chairman of the Federal Reserve Ben Bernanke were successful, and the extraordinary measures taken by the Fed are now expected to earn a profit for U.S. taxpayers"

A profit for the taxpayers?

Hobby writes this from of all places Houston, which is where the former headquarters of Enron was located, during the same week the Fed makes a desperate Enron type move to prepare and hide huge losses on its books by a new accounting scam called "negative liabilities". Ken Lay would have been envious.

As for the "profits" to date, put me in charge of the Fed with its money printing powers and I'll quickly make the former Edsel manufacturing plant profitable.

Hobby continues:

"To imagine this series of events retrospectively without the existence of a central bank is quite difficult. Only the Fed could have waved a wand and calmed the water in roiled, interconnected markets that swooned towards a full–on contagion"

Maybe it is difficult for Hobby to imagine but not me. Goldman Sachs would have collapsed, as would have Morgan Stanley and JPMorgan Chase,remaining would only have been the prudent banks that did not partake in the mad financial escapades of those the Fed saved.

Then things become more interesting in Hobby's column because for a minute he reveals the Fed is simply a confidence game:

"Because the dollar is a fiat currency, confidence is the only backstop, and aggressive monetary policy provided that confidence at a decisive moment."

It's another con to say that aggressive money printing provided the confidence. Huh. This part of the con isn't over. When the Fed printed money comes flying out of excess reserves, causing a trillion plus more dollars floating around on the planet, confidence is the last thing the global financial community will have in the dollar.

Hobby then gives us another laugher about Fed at transparency:

"Secrecy" is, of course, the match that lights the fires of populist dissent, and the Fed is trying many new strategies that increase transparency without exposing sober, deliberate long-term decisions to the daily vicissitudes of politics.

Oh yeah, the Fed is really reaching out and doing that transparency thing.

This is how the Reuters explained the Fed's "transparency" when it set up its Enron-like "negative liability program":

The significant shift was tucked quietly into the Fed's weekly report on its balance sheet and phrased in such technical terms that it was not even reported by financial media when originally announced on Jan. 6.

Some transparency!

Hobby should really do stand up. Here he is again, with another thigh slapper:

"If we were to abolish the construct the current Federal Reserve represents, there are several certain outcomes. Most immediately, Congress would have to replace the many billions of dollars that the Fed generates for the public till (those activities generated $78 billion turned over to the Treasury last year).

The Fed's $78 billion comes about because it prints trillions and earns the interest.There is no business the Fed runs that generates any income. Turn the powers of the Fed over to me and I'll top the Fed and give the Treasury $250 billion.

Hobby then tells us:

"The simple reality is that there are more reasons for our nation to have a monetary function than to not have it."

Yet, at the same time, he admits that Federal Reserve notes, i.e. dollars, are nothing but a confidence game. The long con is quite simply no way to run a country's finances.

Hobby then goes on to produce a list of central planning favorites that are all the rage, but have nothing to do with the Fed (other than the Fed will likely print the money to support them).The programs, themselves, will do nothing but push the economy further in the direction of socialism:

"How we achieve private sector expansion is the critical issue that policymakers must face. Growth-friendly policies will necessarily include a wide array of tools: labor/immigration policy, health care policy, tax code simplification, expedited regulatory processes, etc"

Why he calls this "private sector expansion" you would have to ask him. But he does know that the Fed will be required to print the money to support it all:

"At this moment especially then, it would seem very strange to deprive ourselves of the powerful tool that a central bank provides when access to capital and the price of capital are clearly essential to that growth."

"Access to capital" is code here for printing money.

Hobby pretty much ends the attack on Ron Paul at this point, and, indeed, it is a good point to end on because it clearly shows that the Fed is not only the creator of inflation but that it is needed to support the advancing socialist state.

Another good reason to End the Fed!

From Economic Policy Journal

More Gloom On The Horizon In This "Recovering" Economy

World food prices rose to a record in December on higher sugar, grain and oilseed costs, the United Nations said, exceeding levels reached in 2008 that sparked deadly riots from Haiti to Egypt, according to Bloomberg Today, on that Liberal Lapdog network CNN there was great information about the spike in other commodity prices, like oil and gold.
"Experts are a bit more bullish about oil than gold, with more than a third of the 32 survey respondents predicting $100-a-barrel crude prices by the end of 2011. Nearly half of those surveyed think gold will rise at least 7% to $1,500 an ounce by year end. " CNN says.

What does this mean? Well, when accompanied by the news that World Bank has issued it's first bonds in a currency other than US Dollars, it could be the signal of a coming total collapse of the US Dollar. The World Bank began issuing bonds in Chinese Yuan today in Hong Kong. This is not going to be good for anyone holding Federal Reserve Notes.

Fed leverages ownership.....of the United States?

Since the "financial crisis" started, the Fed has kept interest rates at Zero or near zero, to no avail. They increased the supply of money in the system, Quantitative Easing, now along the order of $3trillion over 2.5 years, effectively decreasing the purchasing power of the dollar by 25% over the same time period. (They already decreased the value of the dollar by 97% since the inception of the Fed in 1913)
Now, the Fed is buying Treasury Bonds like they are going out of style.
I wonder, why? Since the Fed has already siphoned off nearly all of the wealth of the USA through inflation, wouldn't it make sense that they are just stealing the entire country, all of it's assets, and all of your future labor through debt?

The Calm Before The Storm

An eerie calm has descended upon world financial markets as they await perhaps the two most important financial events of the year this week. On Tuesday, investors will be eagerly awaiting the results of one of the most anticipated midterm elections in U.S. history. On Wednesday, the Federal Reserve is expected to end months of speculation by formally announcing the details of a new round of quantitative easing. If either the election or the meeting of the Federal Reserve open market committee delivers a highly unexpected result, it could have a dramatic impact on world financial markets. In fact, many are looking at this week as a potential turning point for the U.S. economy. The decisions that are made or not made this week could set us down a road from which the U.S. economy may never recover.
At this point, it looks like the Republicans will take control of the U.S. House of Representatives and will pick up a number of U.S. Senate seats as well.
There are many in the financial world who already consider Barack Obama to be the most "anti-business" president in U.S. history, so a defeat for the Democrats on Tuesday would be greatly welcomed by many on Wall Street. Barack Obama's decline in popularity since he was elected has been absolutely stunning. According to Gallup, Barack Obama had an average approval rating of just 44.7% during the seventh quarter of his presidency, which was a brand new low. In fact, Obama's average approval rating has fallen during every single quarter since he took office. Things have gotten so bad for Obama that one new poll has found that 47% of Democrats now think that Barack Obama should be challenged for the 2012 Democratic presidential nomination.
However, if the Democrats were able to do surprisingly well on Tuesday, it would not only shock the political pundits, but it would also likely put world financial markets in a very bad mood.
If the Republicans do very well on Tuesday, it will likely mean that there will be no more extensions for those receiving long-term unemployment benefits. Some state governments are already anticipating this and are making preparations. For example, armed security guards are now being posted at all 36 full-service unemployment offices in the state of Indiana. It is estimated that approximately 2 million Americans will lose their unemployment insurance benefits during this upcoming holiday season if Congress does not authorize another emergency extension of benefits by the end of November. If the Republicans do very well on Tuesday, it would make it much more likely that the extension will not happen.
But if millions of unemployed Americans suddenly find themselves without any unemployment checks, that is only going to cause the anger and frustration regarding this economy to grow.
Either way, the unfortunate truth is that this election is not going to change much.
Over the past five elections, incumbents have been re-elected to the U.S. House of Representatives at an average rate of 96 percent.
This time will be a little different of course, but not that much different. The sad truth is that we are still likely to see about 80 percent of the exact same faces going back to the U.S. Congress for the next session.
However, even if the American people could somehow vote out every single member of Congress, it would still not do much to fundamentally change our economic situation because the U.S. Congress does not run the economy and neither does the President.
Of course both of those institutions can influence the U.S. economy, but it is actually the Federal Reserve that runs the economy.
The Federal Reserve controls the money supply. The Federal Reserve controls our interest rates. If the U.S. government wants more money it has to go get it from the Federal Reserve. It is the Federal Reserve that is tasked with the mandate of keeping unemployment low while also keeping inflation at a "reasonable" level.
But these days, Federal Reserve officials don't really seem to be that concerned about the dangers of inflation. In fact, several top Federal Reserve officials have come out in recent weeks and have made public statements not only advocating more quantitative easing, but also suggesting that inflation is not a danger because it is actually "too low" right now.
In fact, there have been some rumblings that many officials at the Fed would actually welcome more inflation because they think that it would somehow stimulate the economy. In fact, a Federal Reserve paper that was released in September actually floated the idea that a spike in oil prices would be quite good for the U.S. economy.
And these are the people running our economy?
Are we all caught in an episode of The Twilight Zone?
Well, as far as rising oil prices are concerned, the Fed will almost surely get its wish. As I have written about previously, the price of oil is almost certainly heading to 100 dollars a barrel.
But if the price of oil shoots up, isn't that going to cause significant inflationary pressure on the prices of thousands of other goods and services?
Of course.
Unfortunately, very few of our leaders seem too concerned about inflation or about protecting the value of the U.S. dollar these days.
In fact, now even the IMF is publicly proclaiming that the U.S. dollar is "overvalued."
What a mess.
But there is another aspect of a new round of "quantitative easing" that the American people really wouldn't like if they could actually figure out what is going on.
You see, the truth is that "quantitative easing" is not only just a way to stimulate the economy, it is also a way to give backdoor bailouts to the big banks without having to go through the U.S. Congress.
In a previous article, I described how this works....
1) The big U.S. banks have massive quantities of junk mortgage-backed securities that are worth little to nothing that they desperately want to get rid of.
2) They convince the Federal Reserve (which the big banks are part-owners of) to buy up these "toxic assets" at significantly above market price.
3) The Federal Reserve creates massive amounts of money out of thin air to buy up all of these troubled assets. The public is told that all of this "quantitative easing" is necessary to stimulate the U.S. economy.
4) The big banks are re-capitalized and have gotten massive amounts of bad mortgage securities off their hands, the Federal Reserve has found a way to pump hundreds of billions (if not trillions) of dollars into the economy, and most of the American people are none the wiser.
Now how do you think the American people would feel about "quantitative easing" if they really understood all this?
But unfortunately, most Americans will be watching the election results on Tuesday night without having even a basic understanding of how our economy is really run.
Already, there are a ton of signs that the U.S. economy is heading in a very bad direction, and dumping a handful of Congress critters out of office might feel good, but it isn't going to do much to really change our economic problems.
The American people desperately need to be educated about how our financial system really works. But unfortunately, most Americans will likely not wake up until the whole house of cards comes crashing down.
Reprinted with permission from the Economic Collapse Blog.
Copyright © 2010 Economic Collapse Blog

How High Can Silver Go?

Legendary commodity investor and hedge fund manager Jim Rogers recently pointed out that silver prices are 50% below all time highs.
He’s talking about the brief momentary highs of nearly $50 an ounce back in 1980. With silver currently selling for less than $24 an ounce, Mr. Rogers is technically correct. But priced in 2010 dollars, the inflation adjusted high for silver would be closer to $124.
So if you believe that silver prices will make new inflation adjusted highs, then you’re expecting to see a five-fold increase in the price of silver.
Silver has already trounced just about every other asset so far this year - it’s up 40% since January 1st.

Read More Here

Fed Set To Destroy 20% Of Dollar Value

The dollar is in danger of losing 20 percent of its value over the next few years if the Federal Reserve continues unconventional monetary easing, Bill Gross, the manager of the world's largest mutual fund, said on Monday.
"I think a 20 percent decline in the dollar is possible," Gross said, adding the pace of the currency's decline was also an important consideration for investors.
"When a central bank prints trillions of dollars of checks, which is not necessarily what (a second round of quantitative easing) will do in terms of the amount, but if it gets into that territory—that is a debasement of the dollar in terms of the supply of dollars on a global basis," Gross told Reuters in an interview at his PIMCO headquarters.
Read More Here

China is FED Up and Doesn't Want To Import Our Inflation.

Rampant issuance of dollars by the United States is saddling China with "imported inflation", Chinese commerce minister Chen Deming was quoted as saying by state media on Wednesday.

"Given the current situation, companies have thought ahead and prepared for exchange rate fluctuations as well as an increase in labour costs," Chen said, according to the state-run China Business News.

"But because the issuance of dollars is out of control, and international commodities prices are continuing to rise, China is confronted with imported inflation, which has created major uncertainties for businesses," he said.

The comments came ahead of a meeting of the US Federal Reserve next week at which the central bank is expected to announce additional stimulus measures.

While critics in the United States accuse China of artificially undervaluing its currency to give exporters an unfair advantage, Beijing says Washington is foisting its economic woes on the rest of the world by printing more money.

Beijing pledged in June to let the yuan trade more freely and the currency has since strengthened slightly, but US and European policymakers say it could be undervalued by as much as 40 percent.

At the weekend, Group of 20 finance ministers meeting in South Korea pledged to "refrain from competitive devaluation of currencies" and aim for "more market-determined exchange rate systems".

Jittery financial markets were looking for a strong stand from G20 members against beggar-thy-neighbour currency policies, in the leadup to a November 11-12 summit in Seoul.

Chinese Finance Minister Xie Xuren urged "major reserve currency countries to take responsible economic policies", with the dollar sliding on expectations that the Federal Reserve would launch even bolder monetary easing.

China's central bank on Wednesday set the central parity rate at 6.6912, weaker than the 6.6762 on Tuesday. The yuan can trade up or down 0.5 percent from that mark.

Preserve and Protect

You may think that I am speaking about the Oath of Office; sworn by millions of Americans. But it's worded slightly differently. "Uphold and Defend" is the way that the Oath reads. The following should, however, carry the same weight at a personal level.

I'm talking about Preserving and Protecting your personal "wealth" and that of those you hold most dear to your heart. Be it large or small. Be what it may, is no matter. It is yours and yours alone. It does not belong to the Federal Government, or God forbid, The Federal Reserve Bank. (though both will try to wrest it from you) .

Since it's inception, the FED (Federal Reserve Bank) has been working diligently to steal every dime you earn and make you an "interest slave" to the banking industry. All the while our Federal Government (FGov't) has also been making you a "tax slave"; both nefarious schemes arrived on the scene during the Wilson administration. Odd. (Wilson, an avowed "progressive" i.e. communist, and racist doesn't quite fit the mold of today's Democrat, but I digress, or do I) . Since the inception of the FED in 1913 , the US Dollar, which had a fixed value, based on the Coinage Act of 1792, has lost 98% of it's value. How does that happen? Well, the FED pumps money into the economy by means of Fiat Creation, resulting in an inflated money supply, which is of course, actual Inflation.

The Coinage Act of 1792, set an exact rate of exchange for Dollars to Gold and Silver. If the Treasury of the USA had enough gold and silver to back all of the dollars printed on paper, then a stable currency existed. Today, that is absolutely not the case, by a ratio of nearly 45:1. There is approximately 45 times as much paper in circulation as there is gold in reserve.

Gold and silver have specific historical commodity value. In ancient Rome, a "gold coin" (which for the sake of argument we will call an ounce) would buy a fine suit of clothes or 300 loaves of bread. Today, with gold at $1300 per ounce, it still has exactly the same purchasing power or commodity value. The dollar, however is falling fast.
In 1909, when the dollar was tied to gold, that commodity and the dollar where one and the same. Gold, $21/oz. The Dollar was "worth it's weight in gold". A 1909 Ford Sedan was $850 or 40 oz of gold. Today a comparable automobile, the height of fashion, new to market, and the height of technology is relatively the same price. Take a BMW 3 series auto. Really kind of run of the mill, by comparison to the level of technology in 1909 terms, but still 40 oz of Gold.

If you want to "Preserve and Protect" there is only one way. Precious metals of historical commodity value. Gold or Silver.

But, if you buy gold and silver, you must do one thing. Take delivery. Never buy paper promises of gold and silver on demand.

Inflation and deflation

According to the Federal Reserve Bank of St. Louis, the Fed has more than doubled the amount of currency in circulation in the last 2 years. Inflation is just that, inflation of the amount of money in circutlation, this forces prices to rise due to the lower purchasing power of the currency.
It's no wonder that WalMart recently reported inflation of consumer prices on their inventory of an average of 6% last month. Most food items are up as much as 50% in the same time frame. Commodity prices are going to skyrocket soon.

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.

Krugman Strikes Again

Krugman Strikes Again by Peter Schiff Interesting article-

But here's my take on it:
I don't agree that we need "deflation" as the article suggests, but rather a stable monetary policy. If we had our money backed by something stable, like gold and silver as our founders set forth in the "Coinage Act of 1792" these issues would not even be in discussion. Fiat currencies, such as the Dollar and Euro are backed by nothing other than the "good word" of the Central Bank, in our case The Federal Reserve Bank.
Prices in the USA remained very stable for much of the history of the Republic, up until the creation of the Federal Reserve Bank in 1913. Through the Fed's policies and the creation of money out of thin air we have seen inflation skyrocket and the value of the dollar fall by 97% since 1913.
The value of the Dollar was set at 371-4/16 grains of pure silver. Period. End of Story. Our currency was then set in value. If the fiat currencies of other nations rose and fell at the will of the Central Banks, the Dollar was stable. It would still purchase the same 371-4/16 grains of pure silver. Prices for goods and services remained at about the same level from the inception of the Republic until the Executive Order of FDR in 1933 that confiscated all privately held gold coins and bullion.
Gold had been $21 per ounce since the creation of the $20 gold piece, which contained just slightly less than one ounce of pure gold, again as defined in the Coinage Act. Once FDR confiscated and melted down all of the gold, which the government did buy at $21/oz, he raised the price to $35/oz, thus he devalued the currency (or created instant inflation) by 40%, decreasing the purchasing power of the people of the USA. Essentially the largest sing theft ever committed in the USA. Makes Bernie Madoff look like an amatuer. Inflation has been on a steady climb ever since. Soon we will be burning dollars in our fireplaces to stay warm. Think it can't happen here? That's what they thought in Germany too.
So at the end of the day Krugman, with his Cracker Jack Box Nobel Prize, is nothing more than a statist tool for the propaganda branch of the Federal Reserve Banking system.