Right now we are in the rather calm eye of the storm. But the worst damage comes after the eye passes and the winds come from the other direction. The first winds of this storm weakened the economic structure in this country, but they didn’t destroy it. At this date, there is a relative calm in the economy of this country – it seems to have stabilized and the stock market has rallied. Our politicians and newspapers are declaring that the recession is over and there will be good times ahead. DON’T BELIEVE THEM!!!!

This is just the calm in the eye of the storm. The winds are about to hit us from another direction and they will completely destroy the economy of this country. It is coming very, very quickly. Be prepared to live on virtually nothing. Be prepared to live without many of the conveniences you have today. Be prepared for exhorbitant price increases on everything from food, to electricity, to gasoline, to clothes, to just about anything you buy. Hyperinflation is coming very, very quickly.

You must learn to do with much less than you have today. Energy prices will skyrocket to unbelieveable levels and many of you will not be able to afford to air-condition or heat your homes. Gasoline prices will be higher than anyone could ever have predicted, be prepared to drive only for essential errands. Food prices will skyrocket and you will be able to afford only the basic necessities. Salaries WILL NOT rise accordingly. Cut back on your expenses and save as much money as you can.

I can’t tell you how dire this warning is! It is from the Lord. When I woke up this morning I had no idea that I would be writing this today. But I read something in this morning’s Dallas Morning News Business section where the reporter asked the question “Are we in the eye of the storm?” Then the Lord put this message upon my heart.

What should you do? I don’t give blanket advice except to tell you to spend more time in prayer and fasting, asking the Lord what He wants you specifically to do. His direction will be different for different people. I do believe that many families and friends will be living together to try to conserve money and resources. I do believe that it is time to begin planting your own vegetable gardens. I do believe that it is time you learned to ride bikes again. I KNOW that it is time to get your prayer life in order and make it the most important part of every day. Turn off that idiot box and pray and read the Bible. Seek the Lord while He may be found. The days of darkness are almost upon us.

http://www.watchman2009.blogspot.com

The Monetary Base makes up bank reserves. Banks hold federal reserve notes in their vaults so that when people want to cash a check the bank has available cash to give them. Banks hold checking accounts with the federal reserve banks in order to cover check clearing. The higher a bank’s reserves, the greater their ability to create money (M1, M2, or M3) out of thin air and loan it to individuals, businesses, and governments.

When the crisis hit, banks did not have adequate reserves to meet demands and continue to expand the money supply by making new loans. This was a liquidity crisis, and it was easily solved by the federal reserve bank creating checking accounts on their own books and loaning these checking accounts to banks, but these checking accounts that banks hold at the federal reserve bank are interbank accounts and not part of the money supply, and these balances are not driving inflation because they are not getting into the hands of businesses and individuals, although the profligate federal government is borrowing what it can to prevent its own bankruptcy.

Here is an indication of what is really happening to the money supply (M3 is collapsing):

http://www.nowandfutures.com/key_stats.html

If you go to the St. Louis federal reserve website and look at the year over year growth rate of M2 and M1 they are certainly not hyper-inflating. The fact that M3 is deflating, M2 is very anemic, and M1 is growing at no more than historic norms, tells us that savings are being eroded, and that what money is being held is in the most liquid form (federal reserve notes and your checking accounts), a sign of fear and desperation as people consume their savings to survive.

There seem to be several myths about money. One is that the US government issues (prints) money into circulation; this is false; banks create new money (federal reserve notes and checking accounts)and loan them into existence. The Treasury may print up federal reserve notes, but they do not issue them; the federal reserve bank does; you carry around federal reserve notes (bills of credit), not treasury notes. So if the money supply is to be inflated, the banks must make loans to businesses, individuals and governments at a faster rate than prior loans are being repaid; they must find credit worthy borrowers to borrow the out of thin air money. The banks must trust the value of the collateral for these loans and this is a catch 22, because in order to drive the value of collateral (like real estate) the banks must accept that the value will not collapse, but failure to make the loans causes the value to collapse.

Only if the monetary system is changed is hyper-inflation possible. If the US treasury begins to bypass the banking system and issue its own bills of credit (greenbacks or treasury notes) by spending them into existence then hyper-inflation is possible.

It is much more likely that money will become worthless, not from over issue, but from bank insolvency which makes your checking and savings accounts worthless, and ultimately makes people unwilling to accept federal reserve notes as the federal reserve bank fails also. Your checking and savings accounts are liabilities of your local banks; federal reserve notes are liabilities of the federal reserve bank. And this will likely be coupled with collapse of the federal government, just as the USSR collapsed.

You forgot to mention that the US banks borrowed that money from the Fed (i.e. taxpayers) at 0%. Outright theft if you ask me.