Monday, February 14, 2011

A Tipping Point Is Nearing - Hyper-Inflation?

The lack of seriousness by the Obama administration and the meager attempts by the Republicans to reverse our debt spiral, does not bode well for the survival of our way of life. It saddens me to think that my generation is the one that allowed the progressives, both Democrat and Republican, to take control of our government and run this great nation's economy into the ground.

There are already signs that the rest of the world no longer believes in the stability of the dollar and are becoming hesitant to buy US debt.

Bernanke's continuing monetization of our debt is increasing interest costs that, if the rates reach their historical highs, threaten to consume 100% of our incoming tax revenues.

Another shocking revelation is that 11% of all homes in the US stand unoccupied. This is a death knell for the building trades industry and for those that have their savings invested in rental properties.

We have a Social Security system that is solvent only if you count the interest paid to the "fund" by the government from borrowed money. There is no trust fund, it has all been spent by politicians eager to buy votes to perpetuate their reign.

Environmentalists have exercised unwarranted political might in stalling our quest for energy independence and have forced us into ever increasing costs to heat and cool our homes, produce
food and transport us to our places of employment.

Yes, we of our generation should be ashamed that we let this happen. But, there is a bright side. Last November we took the first step by electing what we hope to be a new breed of politician. We can build on this in 2012. Only time will tell whether the end is near or it is the beginning of a new prosperity for our children and our children's children.

So why do these developments argue for a crisis of Great Depression proportions? Because they speak unequivocally of our pathway to insolvency, and the potential of currency failure via hyperinflation, despite the hopes of conservatives and market participants to see a halt of such direction. Housing prices, the foundation of so much of private citizen debt loads, are destined for stagnation -- not inflation -- as the supply of homes is far greater than the demand -- 11% of the nation's homes stand empty today. When the world begins to recognize that there is no fix for America's borrowings, a fast and brutal exodus from our currency and bonds can send us a shock in mere weeks or months.

Unlike the Great Depression, however, we will enter such a shock in a weakened state, with few producers among us and record mountains of debt. More cataclysmic is the specter of inadequate food, as less than 4% of us farm, and those that do may cease to be as productive or may not accept devalued currency as payment, should the tipping point be crossed. Corn and wheat prices in the U.S. have nearly doubled in less than 12 months, using our rapidly evaporating currency as the medium of exchange.

The time for action has passed, which may only become apparent as the "aid" of easy money becomes seen as the harm that it is. May we all be spared the worst, but I offer no such prayers for those responsible. The harm that comes will be swifter, and more severe, than most of them thought possible.

Read full American Thinker article here.

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