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Inflation Is Here – Just Open Up Your Eyes And Look At These 5 Financial Charts!

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Despite what Federal Reserve Chairman Ben Bernanke says, rampant inflation is officially here.  The federal government is constantly monkeying with the numbers to keep the “official” rate of inflation below 2 percent, but it is becoming very difficult to deny that the cost of almost everything is really going up these days.  The American people are not stupid.  They notice the difference when they go to the grocery store or stop at the gas station.  The dollar is losing value rapidly now.  The price of gold set another new all-time record today and is currently hovering just above $1430 an ounce.  The price of West Texas crude has moved above 100 dollars several times recently and the price of Brent crude is currently above 116 dollars.  These higher oil prices are really starting to be felt in the United States.  The average price for a gallon of gasoline in the United States has now reached $3.38.  There are some gas stations in the U.S. where the price of a gallon of gas is already over 4 dollars.  But it is not just the American people that are feeling the pain.  The global price of food recently hit a new record high and almost every major agricultural commodity has absolutely skyrocketed in price over the past 12 months.  Meanwhile, Ben Bernanke just told the Senate Banking Committee that he really isn’t concerned about inflation at all.

When it comes to inflation, the key is not to look at the official U.S. government numbers (they are highly manipulated) or how the U.S. dollar is performing against other major currencies (because they are all being devalued as well).  Instead, you can get a truer sense of what is really happening to inflation by looking at what the U.S. dollar is doing against precious metals, commodities and other hard assets.

So are we experiencing rampant inflation right now?  Well, just open up your eyes and look at these 5 charts….

1 – The price of oil is racing back up to record levels.  The chart below from the Federal Reserve is a couple weeks out of date.  As noted above, the current price of West Texas crude is about $100 a barrel….

2 – The price of a gallon of gasoline in the United States seems destined to hit a brand new all-time record at some point this year.  Was it really just a few short years ago when the average price of gas in this country was about a dollar a gallon?….

3 – The value of most precious metals is very consistent over time.  So when you see precious metals go up dramatically in price, it means that the dollar is being devalued.  The price of gold just set another new all-time high and it seems destined to keep going even higher….

4 – The chart below from the Federal Reserve is a measure of the price of all commodities.  These price increases are inevitably going to be passed along to consumers in the United States….

5 – After a couple of years of stable food price, the price of food is starting to take off yet again….

In fact, many analysts are warning that we could experience a major food crisis over the next couple of years.  The global demand for food continues to grow at a very brisk pace, but all of the crazy weather we have been having around the world has caused some very bad harvests.

Unfortunately, the global price of food has gone up substantially in recent months and it is likely to keep going up very rapidly.  Just consider the following five facts….

#1 The United Nations says that the global price of food hit another new all-time high during the month of January.

#2 The price of corn has doubled in the past six months.

#3 The price of wheat has roughly doubled since the middle of 2010.

#4 According to Forbes, the price of soybeans is up about 50% since last June.

#5 The United Nations is projecting that the global price of food will increase by another 30 percent by the end of 2011.


But isn’t there some good economic news?

Yes, there is, but before we cover it, it is important to keep in mind that in an inflationary environment almost all economic numbers go up.

For example, during the recent hyperinflation in Zimbabwe stocks went up like crazy and “economic growth” statistics were very impressive.


Because those numbers were measured in currency units that were being devalued at a blinding pace.

So please keep that in mind when you hear “good economic statistics” on the evening news.

The truth is that in an inflationary environment such as we have now entered into almost all economic numbers should be going up.

So what is the good news?

Well, last month all three major U.S. car companies reported strong sales gains.  Sales of GM vehicles were up 49%, sales of Chrysler vehicles were up 13%, and sales of Ford vehicles were up 10%.

But just because a few pieces of good economic news come floating our way does not mean that we should forget all of the horrific long-term economic trends that are tearing this country apart.

The truth is that we are still a nation that is absolutely drowning in debt.

For example, it was just announced that China now owns 1.16 trillion dollars of U.S. government debt.

The borrower is the servant of the lender.  We should never forget that.

Also, the U.S. economy is slowly but surely becoming of less importance on the global stage.

In 1985, America’s share of global GDP was 33%.  Today, it is just 24%.

Our nation is rapidly being deindustrialized and we are becoming deeply dependent on industrial production from other nations.

Did you know that the new World Trade Center that is being constructed on the site of the September 11, 2001 attacks is going to be made from German steel and Chinese glass?

That says a lot about where we are at as a country.

We have allowed so much of our industrial infrastructure to be exported to China where workers slave away in almost unbelievable conditions.

A reader named Rish recently described what things are like over there….

As a product developer I went to china and saw the way the factory workers lived and worked in person. 50$ a month is about right, but if you are a skilled quality control expert you might make as much as 150$. at least this was true about 2 years ago the last time I went. The barracks were pretty meager, bunk beds with just plywood, no mattresses, if you wanted you could go to a store just outside the factory gate and buy a thick comforter that they sell as a “mattress” .

It will be interesting to see how the next few years changes the face of the USA. Who knows? if the unemployment rate and lack of jobs keeps going and enough people become homeless, we might become the next Bangladesh, and people will be lining up of the 30 cents an hour corporate factory jobs, and living in barracks just like those…

The only way the U.S. has been able to “thrive” during this deindustrialization is by borrowing gigantic amounts of money.  But all of this borrowing is slowly but surely destroying the U.S. dollar, and we are getting closer to the point of absolute catastrophe.

Peter Schiff recently shook folks up when he talked about these issues during a recent interview on CNBC….

But it is not just the United States that is printing tons and tons of money.  All of the major industrialized nations have been firing out gobs of currency.  That is a huge reason why so many investors have been racing to get into hard assets recently.

Now Ben Bernanke and other top Federal Reserve officials have been dropping hints that more quantitative easing may be necessary.

Unfortunately, just like with any other addiction, once you give in a few times it becomes easier and easier to engage in destructive behavior.  Now that the Fed has gotten a taste for quantitative easing it is going to be really hard to stop.

Nor can the Fed stop at this point.  If they did it would be disastrous for the U.S. economy.  But if the Fed continues on this reckless course it will make the eventual collapse of our economy even worse.

Under our current debt-based system there is no way out.  The Federal Reserve can attempt to put off the inevitable for a while by pumping up the debt bubble even more, but at some point it is going to burst.

When that happens we are going to be facing a financial crisis which will blow what happened in 2008 completely out of the water.

So enjoy these good economic times while you still can.  This is about as good as things are going to get from here on out.

  • Tatiana Covington

    I recall what happened the last time hyperinflation hit a major industrialized country.

    That country was Germany.

    If science had been just five years further along, Hitler would have had the bomb in 1940.

    Lights out.

  • impeachRonPaul

    Peter Schiff is a REPUBLICAN politcian. He failed in his bid for senate. Schiff was too much a coward to ever take a position on social issues. Perhaps he does not care about civil rights or the average man. It would seem he bought into the religous right and the dogma of the divide politics. Instead to run as an independent, Peter Schiff showed his true colors and America rejected him.

  • Colin

    I applied for General Assistance in Contra Costa County. The GA office identified me as non-employable as opposed to unemployable. This day, I received an approval letter. I am receiving $150 in benefits a month. When I worked at retail, this was the same amount I received for a weeks’ worth of work. How is this assistance? Regardless, with inflation rising, the value of this assistance declines quickly.

  • Jon

    Who is the press working for, not the American people. Schiff exposed the Government Ponzi scheme and they paniced!

  • sonnyboy

    Inflation has been here since the 1970’s. The cost of health care, housing, and education have skyrocketed since then. The price of food and gasoline is now rising on a daily basis. The only way out is for this massive amount of debt to be forgiven and I simply don’t see that happening. God help us in this country. When I was a young boy (50 years ago) someone told me that someday we would all be on our knees praying. That day may be coming sooner rather than later.

  • America the satanist country

    America is guilty of creating poverty around the world, to print counterfeit money, to create wars and kill innocents people in Iraq

    What a ***** of goverment ..Obama is a joke ..Oh yes , we can ( destroy ) the people ..hahahaha..keep on going guys ..

  • gregge johnson

    Ben Bernake,s job is to preach confidence>>>and a lie is as good as the truth/// if you can get people to believe it..

  • Davidm

    No one can tell when this whole thing is going to collapse. However, it seems to me it will start when food gets so expensive people riot as they are doing in the middle east. People will be so sick of inflation, the political will will be lost to continue with rampant spending and money printing. Once it stops the economy will naturally and dramatically collapse.

    Until then Bernanke will continue with QE3 and QE4 and pretend inflation does not exist. Obama will never have the guts to cut spending and theh huge deficits.

    The scary part is Obama and company know this and just playing the public for fools.

    Do you ever feel like you are a passenger on the Titanic being told everything is under control as the water reaches your ankles?

  • DMyers

    Inflation is Here-Just Open Your Eyes. You could have left it at that, no charts needed. I live here, along with a lot of other sensible people. We go to Wal Mart, Food Lion, Generic Discount Grocery, etc., and we notice that prices are climbing or containers are getting smaller for the same price. Yes, we notice. We are not the idiots assumed by the political/marketing machine. We note that the official inflation numbers are a farce and a fraud.

  • Phrygian cap, aka Michael2

    Is anyone really surprised by inflation going up? This is the same program used during the Depression. This is what happens in a rigged, corrupt economy.

    As far as the entitlement program talking point. I say it is more psycho-babble-double-code-speak used by the establishment to say that they are screwing Americans so they are rebranding Social Security as an entitlement program that way it sounds like hard working Americans who played by the rules and paid taxes for Social Security are now getting something for nothing and for free. Never mind that they totally mismanaged Social Security and left Americans with another potential disaster because they assume there is nothing we can do about it. Or we are to dumb to figure out what is going on. Either way we will do as they say and not as they do. There is nothing worse than lazy Americans who expect something for nothing from the government. It does not matter that average American’s have built one of the best nations in the history of modern times, not to mention all the wars we have won as well. Americans are just all the sudden lazy, fat, complacent, dumb, wussies, etc. and are not even worthy of basic health care to listen to the establishment automatons and sellout talking heads telling the story.

    And for those that spread this entitlement program propaganda against average Americans, I imagine they are the types who think to themselves, I’ll play the game, use the establishment talking points and then big brother will leave me alone.

    There are too many people in government and media that are cowardly, very self-centered, self-involved/absorbed, power hungry and willing to do anything to be relevant and to get paid. If selling out Americans is required, oh well I guess its better the little people than them. They got theirs, f*ck us!!

  • flubadub

    The Consumer Price Index has been transmografied into the Consumer Price Fantasy. Any measure of the cost of living to consumers should list the cost of food and fuel as numbers one and two in any serious calculation of the CPI. Those people charged with measuring inflation don’t even have the sense to realize that the consumers they seek to decieve recognize them for the lying tools they are.

  • MicroChipThis

    “When will the collapse come? We have been hearing this for years, yet we are still waiting.” Ok, here is MY answer.
    1971 – Dollar officially becomes a fiat currency. History shows that fiat currencies
    have a forty year lifespan. Do the math.

  • mondobeyondo

    The dollar is declining. Not to say other currencies aren’t as well, but much of the world’s commerce revolves around the greenback, at least for now.

    Why are oil, precious metals, food and other commodities going so high in price? Because the dollar is depreciating.

    Why is the stock market rising? Because it’s being injected with fresh new QE2 money. Yeah, the Dow may go up to 25,000, but by then your dollar would be worth less than a penny. At least copper is a metal with tangible value.

    You will never see gasoline in the U.S. at a dollar a gallon again. Ever. Food is about as cheap right now, as it’s going to be for a long time. Stock up/freeze/grow as much as you can. Our country is rapidly descending towards the Eternal Inferno.

    Surprising to see how many sheeple don’t “get it”. But then, living is easy with eyes closed, misunderstanding all you see (John Lennon)

  • Davey Jones


  • The Beast

    “Truth is a lie that is being repeated over and over again” (Joseph Goebbels, ministry of Propaganda of the Third Reich Germany)
    Looks like Bernakio and Obambio are following Goebbels’ recipe of mass deceit.

  • William

    The method of computing the CPI was changed under Clinton, by adjustments made for “qualitative” and “substitution”. If the real CPI was computed by BLS using the method in place before the Clinton era changes, the CPI would be almost 9 %.

  • jimmy

    yes look at the crb index mr bernanke you idiot. Tells us there is no inflation the tool!

    I subscribe to the guy from australia
    that guy has called many big events before they have happend, i.e. market crash, Economic collapse etc.

    They have been accurate on alot of the world events latetly, and i follow them closely.

    They have a big launch for an ebook they are releasing next week called “THE U.S. SECRET HIDDEN TREASURE MAP!”

    Looks VERY intresting. Their prelaunch page is over at :-

  • BJ99-MD

    We are being told not to worry because we would panic across the nation.

  • junior
  • Have you noticed what incentives the car companies have to give to get the cars out of the door? With GM, Chrysler and Ford it is highly likely that they are losing money on each car sold, and sooner rather than later they will out with their begging bowls again looking for bailouts! Increased car sales is a trap that will lead to more TARP, of that I am 99.9% sure. There is nothing trustworthy in Corporate sales / profits being reported because the accounting practices are so convoluted that a billion dollar loss can easily be made to look like a 2 billion dollar profit. I would be very hesitant in citing auto sales figures or earnings reports as ‘GOOD NEWS’

  • Kevin


    Peter Schiff was one thing. Correct. He said they would buy the debt with fiat currency. The Federal Reserve said “never” and guess what? They did exactly what he predicted. He said but silver and gold and guess what Yep he was correct again. Silver more then doubled and gold did double.

    You can’t create prosperity with a printing press.

    The poor will suffer the most when a loaf of bread is $20.

  • sharonsj

    Don’t know if we’ll see a full collapse, but expect more job losses, more foreclosures and bankruptcies, and falling revenues–which have to be made up by higher state taxes.

    Maybe the squeezed sheeple will finally notice that they are stuck with the bill while corporations pay nothing. When ExxonMobil and GE are made to pay taxes, then we’ll have “shared pain.” Until then, the Republicans and the blue dog Dems can go to Hell.

    I’m off to go shopping and stock up on more staples while I can still afford them.

  • SPECTRE of Deflation

    This from Charles Hugh Smith, and I couldn’t say it any better. We are fooking broke! I see we still have astroturf doing what “it” does, and I say “it” because nobody could be that clueless at this late stage in our own destruction. “It” would love to keep everyone fighting amongst themselves while the fooking crooks steal the last nickel from the American Treasury.

    The budget of the U.S. government as presented by the Office of Management and Budget (OMB) is a counterfeit budget, inauthentic and riddled with blatantly false projections. As late as 2009, in the midst of the Great Recession, the OMB was projecting surpluses in the Federal budget by 2012.

    By 2009, the OMB had plenty of data on the recession and the opportunity to revise their previous estimates to more realistic levels.

    But instead, the OMB continued issuing pie-in-the-sky estimates which grossly underestimated future deficits:

    2009 estimate: receipts: $2.7 trillion outlays: $3.1 trillion deficit: $–407 billion

    2010 estimate: receipts: $2.93 trillion outlays: $3.09 trillion deficit: $–159.9 billion

    2011 estimate: receipts: $ 3.07 trillion outlays: $3.17 trillion deficit: $–94 billion

    2012 estimate: receipts: $ 3.26 trillion outlays: $3.22 trillion deficit: $+48 billion

    The reality is that the 2012 deficit is expected to hit $1.6 trillion, a sum that equals 11% of the nation’s gross domestic product (GDP).

    In other words, the OMB and the rest of the Federal machinery issues simulacra of authentic budgets–counterfeits designed to fool the people and win their trust via artifice and facsimiles of authenticity.

    As Bernie Madoff recently observed–and we can suppose he is an expert in manufacturing facsimiles, fraud, embezzlement and counterfeiting authenticity out of lies–the U.S. is a giant Ponzi scheme.

    The financial “reforms” are counterfeit reforms.

    The “balancing the budget cuts” are counterfeit.

    The projections of future growth are counterfeit.

    The unemployment numbers are counterfeit.

    The inflations statistics are counterfeit.

    And of course, the “news” which drives the stock market ever higher is also counterfeit.

    When everything is counterfeit, then what’s left that’s authentic and trustworthy? Essentially nothing.

  • All of the above facts point for the need for protectionism for American workers. The lie of “free trade” must be exposed. All countries are fiat and subsidize their corporations to steal market share and everyone is stealing from America. Oh, yeah – END THE FED!

  • Rup S.

    Yup, inflation is certainly here as prices are creeping up gas, food, commodities. Cereal packages getting mysteriously shrinking – Companies quitely under the radar ripping off consumers. Back in 1983 when just getting out of university interest rates were 19/20 % and all hiring was on hold it took me from May to August to land a job after finishing school, Man it’s going to be tough for our youngsters to establish a house hold for them selves, I guess we will be supporting them rather than saving for our retirement. God Bless Canada & America hope we can get out of this mess…

  • InArizona

    The “trick” I have noticed most at the grocery store is… they increase the regular price of an item, then attach a “on sale” price tag and the sale price WAS the original price of the item before the price increased. Like they think they have fooled us… really, we are not that stupid! Anyone else notice this little trick?

    Inflation is here, for us regular folks… as our municipality and county continue to vote increases into our utilities, with the increase in the price of the electricity and natural gas, they pile-on and now our utilities cost us an average of 700 per month for a tiny little house and four people.

    We cashed some of our failing 401 to make a big costco run.. before it is too late. We talked about doing this back in 2009, 2010, but just couldn’t get ourselves to believe it… now we are behind the curve-ball… and our money will buy less than we had originally hoped, we are sure that prices will continue to climb, so all is not lost and we will at least have something to fall back on in the comming months.

  • Inflation is a peculiar thing particularly since it is not necessarily innately built into an economy. Continual inflation is an act of intervention into normal monetary mechanics, unlike supply/demand inflation; continual inflation is implemented by a very narrow operation of expanding monetary creation, particularly that of the fiat monetary supply.

    It has been relatively easy for this government and the Federal Reserve to hide the inflationary monetary policies from the public for decades behind the idea that it is simply a supply and demand issue increasing the price of goods and services in this country, but that ruse is rapidly coming to an end as more of the population is becoming educated to the actual causes of our continual inflationary push. Of course, there are other factors that can be manipulated to contribute to the ruse of inflation, such as the rising costs associated with raw materials and labor.

    Since 1971, we have seen a continual rise in prices; year after year there has been a depreciation of the purchasing power of our dollar. Part of the ruse is that there appears to be much more money floating around, and indeed there is along with more people earning more dollars each year and thus there appears to be a great deal more wealth in our country. The problem of course is not the number of dollars within an economy, but the actual purchasing power of each dollar that determines wealth.

    Under the Federal Reserve Act of 1913, one of the primary objectives listed in that Act is price stability, but what really is price stability and who can appropriately determine a stable level of price. As we have seen, repeatedly, the FED attempts to determine price through its policies by seeking to balance economic growth on a razor’s edge; it is an impossible feat as we have seen over the years. So, what is price anyway? In a free-market price is really determined by equilibrium between those who produce the goods and those who consume the goods. In other words, the market sets the price of goods and services under a free and unencumbered market economy; the same is true of interest rates in a free market economy.

    There are extremely crucial elements within free market economies, which cannot be duplicated although they can be distorted. Not only are there numerous variables within a free-market economy, but also there are numerous variables of variables that simply cannot be adequately determined, measured or predicted. In terms of pricing, one thing in particular either compels or restrains price and that is the purchasing power of each dollar within economic circulation at any given moment.

    This is particularly true in a fiat monetary economy since continual inflationary pressures brought about by government or central banking intervention into monetary mechanics always plague such systems. Thus, if we were to take an overall view of pricing throughout the entire economy under a fiat monetary system, we would see a direct correlation between the total monetary stock within that economy and how pricing if effected by that supply. Since the Federal Reserve has a very limited pallet from which to work, the primary tool that it has used over the last decade has been monetary expansion. It appears that in the collective mind of the FED that it believes that a continual increase in pricing is essential for economic growth and thus it appears that inflationary pricing is the same, in their collective mind, as stable pricing.

    As we have seen through the years, this government and the FED cannot bear the thought of price declines and will do everything they can to assure that there is absolutely little or no deflationary pressure within the economy. This however, is a very dangerous road to travel upon, as we have seen of late. Eventually, when the artificially created booms begin to deflation the FED must resort to extraordinary measures, once again, as we have seen in this latest fiat fiasco.

    It is essential to understand that under normal circumstances, within a free-market economy, prices are determined as a reciprocal quantity of the supply of goods and services then directly by the demand of consumers for those goods and services. As we have seen within our economy, there is an overwhelming supply of both goods and services, which, under normal free-market forces would mean a steady decline in pricing. In some instances, such as computers, we have seen a drop in pricing, that however appears to be the result of technology rather than an actual supply/demand issue. So, if there is such a huge supply of goods and services within an economy such as ours where is the inflationary push coming from? Obviously, it must be coming from the demand side and the primary source for all demand-side inflation is the increased supply of money and therefore the depreciated purchase value of each dollar in circulation.

    Since we have determined that the source of our chronic inflation, particularly over the last 37 years, has been the steady increase in the monetary supply then it is important to understand who controls that supply. As we know, the FED controls the supply, has, over nearly four decades, increased that supply enormously, and has done so not necessarily due to a growing demand for money but as a political expediency to fuel a rapidly growing federal government and maintain its political agendas and policies on the domestic front and around the world.

    We should understand that government has always sought to control money because with that control breeds a power that rivals any level of military might. When a government can control not only the creation of the money supply, but the means in which that money is distributed within the economy then there is a huge degree of power shifted away from the people and the markets. At one time, a man’s money was his private property and an asset that was literally beyond the control of government and government hates any form of money beyond its reach or control. The more control over money the government can retain the more control over the people it can retain. Therefore, the government has always sought to bring about a complete control, a complete monopoly of money in order to finance what it considers its interests along with its interventionist adventures; but just as importantly, to maintain social control over the population of citizens.

    Thus, as we know, our government has implemented a central banking system that is completely politically motivated in order to achieve this degree of control. In a very real sense, this great power has been placed into the hands of a rather small group of people that are in charge of the creation and control over the money that once belonged to the people. It should not be a surprise to anyone that there is a very good reason behind this fact; one is that under a fiat monetary system the government can easily avoid the need for over-taxation of the population to keep them placated. Another huge advantage of a fiat monetary system is that it can be easily manipulated to provide a vast illusion of wealth through the extension of debt.

    An equal consideration is that under such a fiat monetary monopoly, the leadership of the country can easily create any amount of money needed for its own expansive functions, spending without much restraint and lending or giving it always to ensure the sometimes-precarious loyalty of the allies it attempts to buy favors. Of course, this was not nearly as easy under a sound monetary system that required much more responsibility and accountability. While gold and silver money proved to be the bane of the “ruling class”, the printing press has proven to be its best friend. Once the dollar was defined as a measure of gold, today it is defined as a note of increasingly questionable value. So, the transformation of the dollar from a demand note representing an actual redeemable value of real money to a debt note was easily completed without much fanfare or public notice. It is truly an amazing fact just how complacent the people of this country have become, for once revolutions would have been fought to retain the monetary integrity of a country.

    Instead of being restrained by common-sense budgets under a real sound monetary system, the government was now free to stamp its “seal of approval” on pieces of paper and call it money with virtually no real costs associated with its creation. While the consequences of such maneuvers are not immediately visible, eventually, due to the nature of fiat money and the gluttony of governments, the consequences of monetary depreciation will wreak havoc on all fronts including economic, social and political. This government will “print” as much money as it can possibly get away with until the consequences of its actions catch up to its irresponsible actions. Political expediency has trumped common-sense reality in this country for decades, but that too will end as the consequences of its actions become blatantly apparent under immense inflationary pressures.

    Since money only performs its ideal utility at the pinnacle of its purchasing power and inflation is a process of depreciation, then there comes a point when people begin to realize that the utility of their money is no longer as functional as it once was at a previous time. As the government, through the agency of the Federal Reserve, increasingly depreciates the purchase value of each dollar through inflation of the money supply, people reach a point where they seek to convert their cash into other tangible assets as quick as possible to retain some degree of value. Additionally, there comes a time within the market itself that begins to demonstrate that the purchasing power of each dollar has been debased to the point that it is no longer a reliable measure of exchange. During the final stages of an inflationary push leading into a hyperinflationary event, there will be a rapid increase in the purchasing of goods due to the fact that more and more people will lose the confidence in the currency and seek to exchange it as fast as possible for some asset in which they feel a degree of security.

    The monetary history of the last century has seen the systematic dismantling of all types of restraints that checked the power and scope of our government. With the advent of the Federal Reserve Act, the leash was removed from the government’s neck and it was free to roam in just about any direction it deemed necessary in order to accomplish its goals and secure its interests. By 1933, the all-out assault on sound monetary policy had begun and the actual restraints of monetary inflation were eroded by gradually erasing the gold barrier from the fiat dollar and creating the impression that the paper Federal Reserve Note was the actual money instead of the gold that once backed those notes completely. By the 1960s the last vestiges of sound money were eliminated from the domestic monetary system and, of course, by 1971 all ties were successfully broken between gold and the U.S. Dollar. The actions taken in 1971 finally released the constricting bonds of gold on the fiat monetary system and thus ushered in an international push toward a relatively uniform fiat mechanism as the U.S. effectively declared it would no longer pay its foreign creditors and trading partners. Essentially, the U.S. Government once again reneged on its obligations in a similar fashion as it did under the Administration of FDR. So much for the “Full Faith and Credit of the United States”!

    Though few seem to realize it, the fact is that there is a defined limitation upon the Fiat Monetary System and that limitation is based in the inflationary deterioration of the purchase value of the money itself. Even under a process of controlled monetary expansion, the government will always push such a system to the extreme limits of its efficiency. The degree of this limitation is easily measured by the level of degradation of the currency itself, from the peak of its purchasing power to the point where the money has been depreciated to such a low level of exchange that it no longer functions within an economic matrix. At that point, of course, the currency collapses and all that is dependent upon that currency collapses.

    It should be obvious that the government, without reservation, will always abuse the powers of inflationary fiat creation and in turn it will always be forced to intervene because of the economic consequences of such inflationary policies.

  • There was a time in this country when those who advocated a Fiat Monetary Standard were considered certifiable crackpots, monetary quacks and dangerous interventionists set on domination of both the political and economic processes in this country, the roles have been reversed and those who advocate sound money are assigned such epitaphs of derision. Fortunately, that will change and at this point in time, change rather rapidly as the true nature and inherent problems of fiat money become evident to the people themselves.

    At one time, Classical Liberalism promoted the ideals found within the principles of a sound monetary unit that not only provided stability economically, but also provided for the spread of real prosperity and liberty. The cornerstone of Classical Liberalism was private property rights and the cornerstone of all private property rights was, and is sound money, money that is actual real property, solely owned by the individual who labored either by the sweat of his brow or the sharpness of his creative mind. Such money was not owned or controlled in any significant way by government except in trust through the regulation and verification of the fineness of coinage in purity, weight and measure. Otherwise, money was the property of the individual, or legal corporation, just as any other property of which legal title may be held.

    Along with the ideal of private property rights, Classical Liberalism, which could just as easily be called Jeffersonian Liberalism, promoted a confidence in the market economy, as free as possible from all interventions, especially from the government. They held, and still hold that private property rights, in all aspects, provides for the best means of production and distribution of prosperity within society with a system of economic organization organic in both concept and operation. It was, and is, the best system to secure the broadest means of prosperity and individual protection within a society for it assigns the individual consumer the power to choose which producers provide the best quality at the lowest possible price for the consumer’s needs and desires. The principles of sound money and free, unencumbered markets were just some of the foundation stones that help create this wonderful and I might add, successful experiment in the broadest spectrum of individual freedom and liberty the world had experienced: These united States of America under an mutually agreed Constitutional Compact between the people and their government.

    The Founders of our country realized that the main challenge facing such a liberal system of government and society was how to control the only real danger that would ever face the country, the government itself. The goal of the Founders was to institute a government so cumbersome, so divided in function and authority that all power would be distributed between the general government and the independent State Republics; the best description could be called a Republic of Republics, functioning in a cooperative compact. Then, of course, they implemented further divisions within the general government itself, once again dividing function and authority to ensure that power could not easily be concentrated or consolidated.

    In essence, the general federal government was simply a reflection of the will of the people through the agency of their respective State Republics. So, the main problem, in the minds of the Founders, was how to prevent those who are entrusted to govern by consent from becoming despots, endangering and enslaving the citizenry in their stewardship. The layers of defense for individual liberty was obviously the primary goal in the institution of our system of governments and the focus of each layer of defense was the broadest application of individual freedom and liberty possible within such a system. What an absolute shame that we have allowed ourselves and our country to devolve far from such a very workable, very efficient ideal.

    Today, there are few who seem to realize or understand that within all the defenses for individual freedom and liberty laid out by the Founders, was the principle of sound money. It is absolutely impossible to understand the full meaning and import of sound money without understanding that one of the primary purposes of sound money is the protection of individual freedoms and liberty, private property rights, as well as a protection against government intrusion. Sound money is politically and ideologically in the same strata as our Constitution and our Bill of Rights, and it is just as important to our freedom and liberty. It was, and should be considered, the most essential restraint upon arbitrary government expansion and the potential for unbridled consolidation of power.

    The principle of Sound money has a dual purpose, one positive, one negative; in the positive aspect it provided for the greatest degree of individual freedom and liberty while providing for the broadest spectrum of free market choices. On the negative side, its aspect was one of governmental restraint, an abutment of reckless expansion, potentially dangerous debt aggregation and of course eventual despotism. In such a system, only actual coinage was to be considered loose legal-tender, all tokens, scripts and types of “paper-money” were to only represent the real money and only served as fiduciary mediums, which upon demand of the holder, were completely redeemable in lawful real money. “Real money”, it definitely has a wonderful ring to it, doesn’t it?

    Today, we are so far-removed from the concepts of sound money that it is totally foreign to our understanding; we have been convinced that the only monetary system that is acceptable or applicable is the one we current have imposed upon us and that is the fiat monetary system. Sound money is an alien concept, so much so that we don’t realize just what we are missing, it doesn’t enter our minds, for the most part we are totally unaware of the benefits of a sound monetary system. Of course, a fiat monetary system requires ignorance, equalized with confidence, in the general population to function properly, without widespread ignorance or confidence, the system fails, as we will see.

    The fiat system not only relies upon widespread ignorance and misplaced confidence, but it also relies heavily upon government intervention and regulation. A sound money system, on the other hand, doesn’t rely upon such numerous variables in order to function; actually it is extremely simply and straightforward in both functionality and application. A sound money system can easily operate independently of all government policies and the pressures of political intrigues, including very divisive party politics. Such a system also helps to prevent government officials, and representative assemblies, from using various tricks to elude their budgetary and fiscal responsibilities to the people and the country.

    Since the rather subversive introduction of the fiat monetary system in this country, there has been little room for the consideration of a sound monetary system. The proponents of the fiat system have for the most part, effectively exiled it from economics and serious monetary studies for good reason, for it poses the greatest danger to the fiat system and those who enormously benefit from that system. The various proponents and schools of economic thought have yet to consider the precarious position they are in because they have failed, utterly failed to contemplate that all their theories are based upon a monetary system inherently doomed to failure. Such a foundational flaw will always ultimately distort all conclusions associated with it, especially when the flaw is not considered to exist. Today, our country is fraught with what could only be considered “Crypto-Despots”, eager to maintain their position as well as their power, the prime impetus of which has been the introduction of a system of fiat money for it provides them with medium of control over society that they crave.

    So, there are few questions asked and the questions that arise are based upon incomplete assumptions because the foundational structure of the economy is completely based upon a system that contains two divergent fault lines, which will, in time converge in disaster. The first fault line consist of the inherent terminal life span of all fiat monetary systems due to the systemic inflationary pressure, the second fault line consist of requirement of absolute widespread public confidence in fiat money itself.

    Eventually, these two fault lines converge and the system collapses. Such collapses are not preventable any more than the system itself is sustainable without massive government and central banking interventions. The system lends itself to those who require the benefits of inflationism, this trait, of course, is welcomed and enhanced by both government and central bankers who are all too eager to utilize such a trait to their best advantage. What need is there to operate within budgets, to maintain expenditures by within tax revenues since, according the a former Chairman of the Federal Reserve of New York: “taxes for revenue are obsolete”, and indeed they are obsolete within a fiat monetary system. I have found that the full import of that statement has yet to be realized, especially within the minds of the majority of economists and their feeble schools of economic theory fashioned around the fiat monetary system, a system that is inherently flawed.

    Eventually, of course, the people, the economists and the politicians will become painfully aware of just how flawed the fiat monetary system really is as the very harsh reality rises into view, affecting everything and everyone within this country. Like all fiat monetary systems, ours is destined to go through the same stages of failure as all others before it, and our economy will, at that moment, collapse under the weight of massive insolvent debt, upon which the system is created.

    Inflation is an easy tool in the hands of the government as long as they can maintain it at gradual incremental increases over long periods of time, but the moment a rapid increase occurs, the ruse becomes far more difficult to maintain. In the first stage, the people will begin to witness the rapid increase in prices for both goods and services. While at that point they simply believe the government when it states that commodity prices are rising for various reasons; the government of course, always has a plethora of reasons on hand to justify such price increases, all in the hope of maintaining the charade.

    At this stage, there will be a few people who actually realize just what is going on in the economy, but unfortunately the majority will remain true to their conditioning and while they may gripe, will not question the true cause of their financial pain or the culprit behind it. The majority will continue living their daily routines as though the inconveniences of higher prices will be a passing phenomena, continuing to misplace their trust in a government that was in on the damnable ruse from the beginning as it shifts all blame to something or someone other than itself.

    While, at this stage, people may wish to make certain purchases, they think that prices will eventually retreat so they put off the purchases in the short-term until a later date. This common attitude is relatively short lived because as prices continue to rise, at unprecedented levels over longer, consistent periods of time, people will begin to think that because prices are so high that they will then put off a purchase for a year or two, perhaps then prices will once again subside to more normal and manageable levels for their income. The last stage abruptly hits and the entire system then faces catastrophic collapse when the people begin to think that they had better make a purchase, any purchase immediately because they realize that the purchasing power of their fiat money is rapidly loosing its value of exchange.

    So, the people, in a panic, will withdraw, if they are allowed, their bank deposits, cash in their stocks, redeem any bonds for cash to exchange for commodities or merchandise they feel will retain value even if they have no real needs for the commodities or merchandise they are buying. As the panic spreads, shortages being to take shape, manufacturing slows to a halt, unemployment skyrockets, and public services breakdown and in the last stages chaos ensues. The government seeks to assert itself, but to no avail for even the government under these circumstances, in this present age will prove to be as impotent as the fiat money they so ardently promoted, to solve the problems faced by the country and the people.

    While it is easy to see the conclusion of such a system as a failure, the truth of the matter is that entire system, and the polices created to sustain it, were failures from the beginning. The purpose of the system is not, nor has it ever been throughout history, for the benefit of the people; its sole purpose is to provide the government with unlimited, unrestrained finance and the central bankers with an incredible profit machine without much oversight or regulation to impede their government authorized monopoly.

    So, the system of government and central banking fiat money, dependent upon intentional deception of the population to remain viable comes to an abrupt end, it is no longer a manageable system of exchange, nor will it provide the government with a free financial reign. There are no solutions to the problems inherent within our government’s fiat monetary regime even though the government economists continue to heap unabashed praise on both the system and the polices required to maintain it, that will become more and more difficult as the system reaches its terminal point.

    Historically, fiat inflation was realistically deemed extremely dangerous to the economic, social and political safety of a country, but as usual, the temptation for the unleashed power and the ability to use the fiat system to convert the labor of a population to unlimited wealth for those in charge of the money has always proven far too great to resist. Of course, the campaign to demonize sound money has been unrelenting, primarily from those who benefit the most from the fiat monetary system, and those who have been duped into believing it was the source of all economic troubles prior to the advent of the Federal Reserve System, of course, it wasn’t. Those pro-inflationist, those fiat-philanderers have vowed to forever prevent sound money from raising its head in this and other countries again, but their faith will be shaken soon enough.

  • “The sole fact that credit is today the normal and proper expression of value and of exchange has introduced an element of extreme instability into all contemporary economic systems. Modern economic systems appear to be balanced on a knife’s edge as it were; the tiniest excess or deficiency of national credit can tip the balance in one direction or the other. This system is minutely adjusted, so to speak, to reflect the smallest increment in weight which it can just support, and that is why it is so extremely sensitive.” –Karl Lamprecht

    We have had decades of economic paving in this country, the road has been paved with what amounts too little more than “bills of credit”. With each manipulated “boom”, there has also come a very predictable “bust”; since each “boom” is completely financed by the creation of debt, these “booms” are, for the most part, economically superficial. These “booms” seem to make people think they are “wealthier” and act as though debt is wealth, when in reality it is just the opposite and sooner or later that reality makes itself known.

    Since the 30s, the government, in conjunction with the Federal Reserve, has increasingly narrowed the “sweet-spot” of economic viability. Historically, every depressionary trough was preceded by a panic, which usually included bank-runs and failures. A very interesting fact about “depressions” is that the word itself has been defined out of existence, conveniently replaced with less-foreboding sounding words. Today, even the word “recession”, now nothing more then “depression’s replacement” has been politically relegated to the closet. Eventually, economic law will overwhelm the illusion that has been carefully crafted at the hands of the political handlers, the bureaucratic managers and the central bank economic planners. Their attempts at a very particular social and political plan is failing far more rapidly then they realize; the problem, of course, is that the rest of us will pay the price for their manipulation of our society through their central economic planning and excessive debt creation. As I have stated, they can simply repeat the mistakes of the past, they have nothing else in their bag of tricks, eventually nothing they try will shift the downward economic spiral they helped create.

    The current Fiat System is about to demand reality and that reality is about to come in the way of interest rates. This country, the government and indeed, the Federal Reserve has yet to see that this demand is on the way and are doing everything to avoid such rate increases, but it is pressing against the artificial barriers that have kept massive rate increases at bay, but the fragile economic damn grows weaker and weaker. Eventually, even the powers that be will not be able to restrain the forces that press against the rate process in this country. The combination of an extremely sensitive economy, high levels of risk in the throws of decay, the artificial rate racket is about to come to an end.

    There is though, one huge problem; this reality will wreak havoc in an already sensitive Fiat economy. There has been a sign that few seem to be aware of and that sign is the decreasing margin of tolerance this economy has between the low levels and the highs it can manage while remaining viable. At one time the economy could tolerate higher rates without convulsing however, as we have seen, that is no longer the case. With each “boom” and “bust” the level of tolerance has narrowed substantially to the point that even minor increases become reactionary.

    Our “money” supply is being inflated at a precipitous rate and eventually, and we won’t have to wait long, that monetary expansion will, it must be mirrored in interest rates. They, the government and the Fed, are, of course, attempting to keep money cheap, pumping it out in hopes that they can avoid massive business and individual economic failure. However, the eventualities of reality, a reality that none want to think about, will forcefully, even violently push through the illusionary blissful world of the fiat economy.

    The Fed, and its government darlings, has attempted to suppress the forces that naturally bear down on a fiat economy by keeping rates as low as possible, all in the hopes of preventing widespread economic insolvency, but since they will eventually have no other options left to them, the reality will exert itself and the very thing they have sought to avoid by keeping rates low will happen as rates catapult to the point that the economy falters. The fiat economy will be placed on the harshest anvil of reality it has ever been subjected to…think Great Depression ten fold.

    There were however, a few saving characteristics of The Great Depression that our contemporary society lacks. First, economic resiliency has been removed from our society, the manufacturing base has been effectively decimated and the people of this country are wholly unprepared for such distress, particularly those in urban areas. Additionally, in all likelihood, this next Depression era, will be conflated with hyperinflation rather than deflationary as was The Great Depression. The amazing thing about the Great Depression was its slow creep, like a vine, it slowly spread across the country. This current recession will prove to be just the beginning of a far larger, far deeper depressionary creep.

    As much as the government tries, it’s attempts to “cure” the economic woes that it helped create will only make things worse. Politicians are quick to deflect blame, but the blame falls squarely on the shoulders of those power-twisters in Washington, D.C. This country and its people will face a period that few people can even conceive at this point.

  • jc

    Is this inflation, or speculation driven by investors fleeing other investments and plowing money into commodities? Your charts only prove prices are going up, but don’t provide the ‘why’.

  • Kevin


    Well velocity of money is not going up with increasing consumer demand but the supply of money (M1, M2 and M3) is.

    It damn sure looks like too many dollars chasing too few goods.

  • dippitydoo

    I put together a video I thought some of you might be interested in…

    video part one :
    video part two :


  • Peter E

    If America keeps printing and devaluing the currency, people will keep inflating prices on commodities so they get the same value. If I was any commodity producer, I would adjust my price to allow for quantitative easing. Just because the US gov (and Fed Res) can flood the US media with propaganda doesn’t mean that they can con everyone. Funnily enough when the likes of Rupert Murdoch start charging for news, people seek out alternative outlets (like this one) and with the internet, the flow of opinions (good and bad) are easier to access. Sadly, governments all over the world try and buy votes with middle class welfare, but we pay for it by excessive taxes while letting the super rich corporations off the hook. How many large corporations planning expansion get tax free (or love tax holidays!!) Hey, I wouldnt mind paying the tax rate of the News Corporation!
    No one is stealing from America. America has given away many hard earned advantages. The technology transfer (paid for by the average worker) has given countries like China a big leg up. They don’t cost it into products, they haven’t paid for it and they have cheap labour. And don’t expect China to share any tech breakthrough or advance. They’ll expect the West to pay for their environmental damage and pollution as well! I might say they will attempt to steal any new discoveries as well. Just look at any outlet at the number of cyberattacks there are on government, let alone corporations.

  • Rod

    Petrol $3.38/gal ?
    Lucky you !
    Here in Australia we’re $6.60/gal and in the UK they’re $9.70/gal
    You ain’t got reason to moan yet…

  • american

    Peter Schiff is not getting my attention. We gave the keys to the republicans and they drove us into a ditch. Now he wants us to give them back?

    Republicans seem to think we will give away our coutry to greedy corporations and the top elite.

    No thanks Schiff.

  • mondobeyondo

    In my humble opinion, it’s probably 85% inflation and 15% speculation.

    Inflation tends to drive investors towards more stable items and commodities like gold, silver, oil, corn, wheat and so forth. Speculation is investors investing in commodities, hoping they’ll gain value faster than the currency will.

    These commodities have value. It takes effort and energy to mine gold and silver, drill for oil, and plant crops. You cannot create a new gold or silver mine and mine more metals, or create a new cornfield and magically harvest corn. (There is a little bit of mining and drilling and plowing and harvesting involved. Physical effort.)

    But the Federal Reserve can create dollars from thin air. It requires no physical effort or labor, other than punching a few numbers on a keyboard (ow, those fingers really hurt!) A U.S. dollar really has no value. Ever since Nixon took the dollar off the gold standard in 1971, it has only had as much value as the Federal Reserve and Treasury says it does. Need more dollars? Ben Bernanke waves his arms, and poof! More dollars into the financial system! (aka quantitative easing). This doesn’t work with corn, cotton or oil. When the CEO of Exxon or BP waves his hands, there is no new oil created. Oh damn! What did they do wrong?

    There is nothing backing the dollar, and hasn’t been for nearly 40 years. Not gold, not copper, not wheat, not even tulips. The dollar has no backbone – no spine to hold it up. And without a spine, it’s going to eventually bend, break and collapse.

  • It has been here, FED and government are just too blind to see. I don’t see and feel any bright spot in this economy. With $1 trillion in deficit, were going down under. Like I always say, Republican and Democrats, both have failed to stand up for the American people.

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  • SPECTRE of Deflation

    american, you gave the keys to Democrats in Jan. 2007, and they spent $5 TRILLION DOLLARS propping up the banksters. The Republicans have had a majority in the House for all of a couple of months, so what the fook are you talking about?

  • How very strange that there are some who actually swallow the tripe that has been put out that it was the Republicans and the Republicans alone that helped facilitate this mess. The mess didn’t start in 2008, long before and it must be remembered that Congress has been in the hands of the Democrats many more times and for longer times than in the hands of the Republicans. Legislation by Congress, whether under the control of the Republicans or Democrats, tends to always cause problems which make politicians find other solutions to the problems their legislations created, this, in turn, creates more unintended consequences, more problems which again continue the cycle of “fix-it” legislation. The problems faced by this country stems for politically expedient “good-ideas” emanating from the minds of men and women in office who usually have no concept of economic law or constitutional principles. They are essentially, for the most part, the blind leading the blind and the American People, for some bizarre reason, still follow them as though they hold some expertise. I am constantly amazed at what I hear coming from Washington, D.C., it proves that not only does power corrupt and absolute power corrupts absolutely, but that shear stupidity mixed with such corrupting power is one of the most dangerous combinations on earth and it will ultimately cause the collapse of our economic, political and social system in this country.

  • Davidm

    Inflation? What inflation? Bernanke says it does not exist. So I guess I will believe him and these government statistics. Ignore the prices in the stores!



  • TripodXL

    I find it interesting that some people can’t do anything, except rant and rail against corporations and their tax rates, demanding higher taxes on them. The U.S. has one of the highest corporate tax rates in the industrialized world. The funny thing is, people, that apparently don’t have critical thinking skills, don’t realize that corporations DO NOT PAY TAXES! Oh, yes, they send in a corporate tax return and money, like I do, but the cost of the taxes is part of the cost of doing business and it is ALWAYS passed on to the people that purchase the products and services that corporations provide. Most businesses are in business to make a profit and businesses that don’t….well, they don’t do business after a while, because they are bankrupt. To be sure, there have been some very well articulated essays here describing the problem with fiat monetary systems, with which I agree. However, corporations are not the problem. The Fed was created by our CON-gress (research T. Roosevelt and his relationship with corporations and his push for this CB system) in 1913 by making corporations the scape-goats and espousing the needs of the government to have a “central bank” to “manage the money better” and “rein in the corporations”. Most of our forefathers vocally eschewed and condemed the concept of a CB and knew it would be abused at the detriment of the common populous, as is now evident. As for the corporations, they simply do what our CON-gress allows (forces) them to do and they do what it takes to stay in business and the system is subject to much abuse and corruption. Is it frustrating, yes, but everyone has to play the game the way it is done, or not be in business, providing the few jobs that remain. Get the financial framework of our country in order (get the gov’t out of it) and use real money and it will take care of itself. An inflation and debt based economy is the bane of true good business and a stable economic environment and is for the sole purpose of control of the masses for the benefit of the government and to provide the “welfare cocaine” of public assistance and entitlements that placate the masses. The central banking system allows deficit spending which funds these social services and this is the “true opiate of the masses”. Get your house in order. Eliminate all debt, buy commodities, both hard and soft both to have and hold as well as for investment. Live within your means. This finally sank in to me in 1999 and I did everything I could to get out of debt, save (real) money, buy commodities. I have a paid for house and 22 acres of land, a diversified nest egg, commodities for both reasons and a very low stress relaxed lifestyle. NO DEBT!!!

  • CitizenKate

    The Republican/Democrat, Right/Left paradigm is false and is just being used as a distraction to keep people embroiled in meaningless controversies. While we’re following their helpful guidance and watching our coats and hats, they and their cronies are eating our lunch. It is time for them to GET IGNORED.

    I hope more people now-days are setting aside a few extra cans of food such as they and their families normally consume, and some sacks of rice and dried beans, all available from the grocery store and freshness dated with a little stamp on the bottom or on the side. A few pre-1965 US silver coins would be nice to store, and shouldn’t set folks back too much although the price is increasing. I would suggest some extra pairs of shoes in your size (rubber unit soles=petroleum products), socks (cotton’s going up, so are synthetics), and underwear (elastic=rubber) and store them in their packages. Also: Liquid soaps such as dishwashing liquid are often made from petroleum distillates and are going to get really expensive so stock up now before oil goes through the roof (rotate –these go bad). How about tires for your car? Rubber and petroleum again –if you think you’ll need new tires within the next few months you could order them from someplace like Tire Rack, have them sitting in your garage or your basement when it’s time to “re-tire,” and avoid the explosion in prices that is bound to occur. Are you trying to lighten your load so that you can move more easily should it become necessary? This would be a good idea, but if you need to sell some stuff don’t wait until unemployment’s so bad that nobody has any money –unload it now or you may end up giving it away. Being prepared, and developing appropriate plans of action in the case of one or more mostly-likely scenarios, are much more useful than despair and focusing on the false paradigm that has been spoon-fed to us by the mainstream media. If we really think inflation is going into overdrive we should all be buying ahead the things we think will increase the most in price.

  • Visitor

    Schiff does not have a clue what is going to happen in the future and neither does anyone else. But many of the gloom and doomers sure think they know. They say this is going to happen and that is going to happen and some of them guarantee it and even give dates. And when their predictions turn out to be wrong they give some lame excuse as to why they were wrong. It is because of their stupidity that they lack creditability.

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