First, here are some current economic indicators that impact us all…
- GDP forecasts for Q1, 2011 are calling for less than 2%, as low as 1.5% (this is basically a contraction, no growth).
- Note: Often the forecasts are made worse than they will be so the news can report “they were better than expected” so the government sounds better than they are but the number will still be horrendous, i.e. no growth.
- Mortgage applications plunged 6.7% and purchase applications dropped 4.7% despite the Spring selling season and mortgage rates continue to rise. Expect home prices to continue their decline.
- Exports fall 1.4%, the largest decline since Fall of last year.
- Business optimism and plans to hire both fell, and in the worst reading since last October, 32% of small businesses reported less earnings.
- Jobless claims rose to 412,000.
- Remember that Government unemployment figures count people who are still unemployed but no longer receive unemployment checks as “employed.” So as the two years of unemployment benefits end, right around now, we could still see the unemployment number fall even if none of those recipients actually find a job.
- Government has spent $1.6 trillion of your dollars to stimulate the economy. Does the economy feel stimulated to you?
Second, we are experiencing rapid inflation. Inflation drives up the price of food, gasoline and other commodities. This is not demand driven inflation (when a great economy makes people demand to buy more stuff than is available for sale), this is monetary inflation caused by our Government and The Fed. This type of inflation lowers the value of our dollar because the government is printing trillions of dollars out of thin air, which means it takes more and more dollars to buy the same things over time. This is why all commodities are rising including oil, gold, food, silver, cotton, etc…
This is also why the majority of currencies in the world are rising against the dollar. Those currencies are not actually rising. ALL of those countries are not actually getting stronger. They are really just holding steady…but the U.S. dollar, as the Fed continues to weaken it, is falling in relation to all of those other currencies which makes it look like they are going up, when in reality, they are flat and we are just falling.
This year, the average U.S. consumer will really start to see this inflation as companies can no longer absorb rising costs by reducing their profits. They will begin to pass this through to you and me. We have only seen it so far at the gas pump and the grocery store, but expect rising prices to spread this year.
Now let’s stop and think about this for a minute. Let’s just apply some common sense to this. You don’t need to work for the government or be an economist to think this through. The economy is slowing/contracting again despite the government spending $1.6 trillion of your money to stimulate the economy which is driving up the cost of everything you buy, housing continues to decline and no jobs have been created. So what did $1.6T get us? It got us $1.6T of debt and that’s it. And we will have to pay it back with money we are taxed on in an economy going nowhere.
If Obama and the Government had told you back in 2009 that they were going to spend $1.6T of your money and the result would be those bullet points above, would you still have supported our Government? I don’t know how bad this economy is going to have to get for Americans to understand that the Government and The Fed are the problem. Not the solution.
Two years ago I warned that the economic course at that time would lead to stagflation. Now that we have achieved stagflation I have to warn you about the next stage, hyperinflation. The stage after hyperinflation is economic collapse. When will we all start paying attention and doing something to stop it?