DayTradeShow, 2013 January 21, Monday – Marketwatch reported on January 16, 2013, “For all of 2012 consumer prices climbed 1.7%, the third lowest rate in the past 10 years. That’s also down from a 3% increase in the prior year.”
Those numbers may have you ask, where is all the inflation?
What if I told you in 2008 that:
- The Federal Reserve would drop interest rates to zero.
- The Federal Reserve would print trillions in new money.
- Millions of Americans would begin to receive government checks to pay for their, well, just about everything.
- Platinum, gold, and silver prices would break through all time highs.
- Gasoline prices would also hit all new highs.
- “Debt ceilings” would be raised for the government to borrow more money and push the debt into the near-$20 Trillion range.
If I asked you in 2008 what you thought the inflation rate would be after four years of the aforementioned, what do you suppose you might have said?
5%? 10%? 15%?
I know what I said. I said inflation was about to go straight up. I argued inflation rates would skyrocket. I recorded videos where I showed images of the Weimar Republic and compared what we would get would be similar. I begged everyone I knew to buy gold and silver (got that right).
And, then, I waited for the inflation. Waited while tumbleweeds crossed the plains of the US economy. Waited while crickets chirped and you could hear a pin drop.
Waited long enough to realize, I got the story right. I got the timing wrong.
I was right on every fundamental issue with respect to the economy. I was wrong on the tidal wave of hyper, nutty, zany inflation.
And, I’m not alone. Peter Schiff, Mike Maloney, and others with much more “street cred” (read: Wrote Books and wear silk ties) than I, believed the same.
So, where did I and the Schiffs of the world go wrong in the analysis?
The thing I did not anticipate was the way all that “money” would be created, and used. In the “old days” (pre-Bernanke), when money was printed, it was PRINTED. And, banks then literally took physical possession of that money.
The dollars were printed to “stimulate” the economy. The thought being that if you print money, and banks loan it out to “mom and pop” businesses, the money will be used to hire, buy material goods, and light a fire in the engine-car of the US economy.
The problem “this time” was different. And, what Federal Reserve Board Chairman, Ben Bernanke did with the money “printed” is different from his bankster brethren that preceded him.
“This time,” banks found themselves with big holes in balance sheets. “Assets” became liabilities. And, theoretically, when a bank has more liabilities than assets, it does what all businesses with that predicament do: That bank should close its doors in a bankruptcy proceeding.
All Bernanke did so far is plug holes in balance sheets. None of the money “printed” is loaned out to “mom and pop,” because that’s not what the money was for. The money “this time” was literally from “thin air” and used as a stopper, and not distributed into the population.
But, when banks begin to hand out the loans again – which they will, the inflation will soar. Hyper inflation is on the way, just not yet. Bernanke’s got a few more holes to fill first.
Then, banks will begin to fill your holes, too.
Peter Schiff was wrong, but only on the timing.