All Eyes on the FED

Today the Federal Reserve is doing their first ever press conference. We have one question we would like to contribute, if anyone has a media contact please forward them this email.

Question: Mr. Bernanke, despite everything going up in price you continue to show a lot of concern for deflation, not inflation. Can you please review the chart below and explain how this inflation chart is deflationary?

The Illusion has mentioned on several occasions that our recovery and economy is like an illusion. With that said, it shouldn’t surprise us anymore when we see just how deep the fraud goes, but once again, we come across a statistic that really shows us how screwed we are. USA Today recently did a report that shows from using Census Bureau data that 18.3% of all income in the U.S. comes from government handouts. That’s right, food stamps, unemployment, and other benefits account for 18.3% of ALL income in this country. It gets scarier though, only 50.5%of personal income comes from wages, the lowest since (wait for it) 1929! Government revenue was recently reported at 2.2 trillion, government benefits (wait for it) 2.3 trillion.

Gas Prices and the Double Dip

Gas prices are starting to become a major problem for policy makers, the U.S. is about to enter a double dip according to our calculations. With Japan still trying to recover from one of the largest natural disasters in history, certainly the largest natural disaster to hit an industrialized nation, the world economy will begin to see the effects of Japan in the coming weeks and months. That of course could be just the final straw that breaks the camel’s back.

When it comes to fuel and food prices, we are definitely heading for the second wave down in the economy. Food costs are now taking up 15% of consumer spending, 2 years ago when the official recession ended (not something we accept) food costs took up 12.7% of consumer spending. Looking at other modern day recessions, food only took up8% of consumer spending. We are already nearly double that percentage amount. When it comes to energy, historically, average energy costs are about 4% of consumer spending, however, when they cross 6%, it has always led to a recession. Today, energy costs are exactly 6%, now rising food and fuel is pretty much mandatory spending.

So, it is safe to say that Americans will have less to spend on everything else? The math is simple, Americans are going to spend less in a consumer driven economy which will equal a recession or what we would refer to as the next leg down in the long recession we have been in that never ended. Gas prices have risen over a dollar in the last year,33 cents in the last 30 days! Suncoast Energy in Orlando, the highest gas station in the country, is already charging$5.69 a gallon for regular. Gas has risen 35 straight days and currently has a national average of $3.87 a gallon. AAA has reported that since March, they have seen an 18% increase in roadside assistance calls for people running out of gas. Now most analysts agree that gas prices will go down as a result of people driving less. However, we believe any contraction in driving will be offset by the FED printing currency and dollar devaluation from a reckless government. We do see short term deflationary forces, especially in non needed items, but the reason we tend not to focus on them is because we are looking at the bigger picture of a U.S. dollar crisis. Our definition of a crisis is the dollar losing reserve status, no longer needed, no longer loved, and no longer of any value to the world. Now this may take 10 years or 10days, we are not about to even try and put a date on one of the biggest financial scares in history, certainly the biggest financial crisis in our lifetimes.

Judging by Tim Geithners Recent Statements, Dollar Devaluation Could Be Imminent!

U.S. Treasury Secretary Tim Geithner stated yesterday that he would never follow a strategy to weaken the U.S. dollar. He said, [su_quote]our policy has been and will always be, as long as I will be in office, that a strong dollar is in the interest of the country.[/su_quote]In fact, he really upped the ante and said, “we will never embrace a strategy to weaken the dollar.” Translation, get ready for one of the biggest dollar declines you have ever seen. Anytime a Treasury Secretary comes out with a strong dollar policy speech, it usually means they are getting ready to trash it. The more they advocate for a strong dollar policy, the more they plan to destroy it. Let’s just say their words have about as much backing as the dollar. So far year to date, the dollar verses other currencies has lost 6.5%. Gold, which is real money by definition, has risen substantially along with silver. In fact, commodities across the board have been rising due to monetary inflation of the global reserve currency. The dollar index, just in anticipation of what the FED is going to say, has dropped to a new year to date low of 73.58. It should be noted that in the last 10 years the dollar index is down 41.5% and gold has risen473%. During this time, Treasury Secretaries have always made it a point to let us know that they believe in a strong dollar policy. Right…

Don’t worry, everything is under control.

Our official prediction when it comes to QE3 is that it will happen, it just may not be called QE3. They may repackage it and call it something else. For instance, QE is just another name for printing currency. Ending it now is really not an option for the Keynesians, especially with the FED responsible for purchasing 70% of our treasuries, it is not going to just end with an annual 1.6 trillion dollar deficit.
Understanding The Gold & Silver Correction believes that the best way to understand what is happening with metals is understanding the correction. With the COMEX, silver shortage, ETF’s, and the amount of currency in the system, it is important to understand that when the precious metals go up in fiat dollars, that is the correction. With less that 1% of global financial assets in gold, any move up in price is gold correcting to its real value. Historically gold, in a modern society, has been around 20% of global financial assets. So, as you can see with it currently being less than 1%, the imbalance is the gold price being too low. Imagine what will happen if pension funds and other investors just move a small portion of their portfolios to gold, even seeing gold rise to 5% of global financial assets could put it at $8,750 per ounce!

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