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For several
months I have been warning that hyperinflation of the US dollar is
looming. The ominous signs of this impending currency train-wreck are
becoming increasingly clear.
For
example, crude oil is threatening to break above $90 per barrel. Copper
has broken through $4 per pound to a record high price. The prices of
many other commodities are also in uptrends. These
commodities are not in short supply. There is no shortage of oil or
copper. Rather, these high prices are the result of too much money
printing, which if not quickly stopped by returning to a sound money policy
will ultimately lead to hyperinflation.
Last week
another important part of the hyperinflation puzzle fell into place.
Long-term interest rates surged, continuing their sharp upward path that
began two months ago. The 10-year T-note during this two month period has
risen from 2.4% to end last week over 3.2%, a remarkable and therefore
telling jump.
This rise
in long-term rates lays bare the flawed logic of the Federal Reserve’s
newly announced $600 billion so-called “Quantitative Easing”
program supposedly designed to help the economy. This new round of
money printing is not going to help the economy, which has been hollowed out
by years of debt financed consumption along with too little savings and
production. This money printing is serving only one purpose. This
central bank trickery is providing the federal government with all the
dollars it wants to spend.
So despite
the fact the Fed will be purchasing $600 billion of US government debt
instruments, T-bond and T-note yields are climbing, a clear sign that investors
are rushing to sell their US government paper. Why? Because they
know the purchasing power of the dollar is being debased by QE, and more
importantly, will continue being debased.
I have discussed
this reckless monetary policy before.
“The [Federal Reserve] has one mission. It is to make sure that
the federal government obtains all the dollars it wants to spend. If
the federal government cannot attract these dollars from the world’s
savings pool, then there is only one other way to obtain them. The Fed
must print them.”
The
following chart illustrates that the US government continues to spend and
borrow recklessly. Despite all the pump-priming by the Federal Reserve
aimed at stimulating the economy and therefore increasing US government
revenue, there has been no meaningful reduction in the deficit.
Federal
expenditures remain far above federal revenue. More worrisome is the
resulting growth in US government debt – now nearly $14 trillion
– much of which the Fed is turning into currency with its QE
actions. The transformation of government debt into currency by the
central bank is the core cause of hyperinflation.
The dollar
not only remains on the road to hyperinflation, the rise in commodity prices
and bond yields mean that the dollar is picking up speed as it heads toward
the fiat currency graveyard. Remember, numbers don’t lie.
But the same thing can’t be said for politicians who refuse to accept
reality or central bankers willing to
experiment with the US economy just to test their chalkboard theories.
James Turk
Free Gold Money
Report
Article originally published by the Free
Gold Money Report.
James Turk is the
founder of the Free Gold Money Report and of GoldMoney.com. He is also the
co-author of The Coming Collapse of the Dollar (www.dollarcollapse.com).. Copyright
© by James Turk. All rights
reserved.
Copyright © 2008. All rights reserved.
Edited by James Turk
This material is prepared for general circulation and may not have
regard to the particular circumstances or needs of any specific person who
reads it. The information contained in this report has been compiled from
sources believed to be reliable, but no representations or warranty, express
or implied, is made as to its accuracy, completeness or correctness. All
opinions and estimates contained in this report reflect the writer's
judgement as of the date of this report, are subject to change without notice
and are provided in good faith but without legal responsibility.
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