The title of Bernnake’s speech was: Deflation: Making Sure “It” Doesn’t Happen Here.
“The conclusion that deflation is always reversible under a fiat money system follows from basic economic reasoning.”
“...the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation...”
“If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.“
Three quotes. Three uses of the word ‘always’. If something is ‘always’ guaranteed to work, you just keep doing it until you get the result you expected, right. Right?
The inflation warning light that is built into the gold price has been flashing non-stop for eleven straight years and, after the short-lived and, yes I’ll say it, somewhat suspicious-looking correction in December, gold has resumed its inexorable march higher this year amidst a wave of predictions for both high and higher prices and further inflationary action by the ECB in the form of the LTRO along with consistent and concerted talk of the need to generate inflation by the world’s other Central Banks.
Gold is most certainly NOT signaling a nice 2% rise in inflation as its gains since 2000 demonstrate. ]
zerohedge.com once again proves that they have the ability to see through the scripted garbage pushed through the corporate media and circle back to the facts, identifying the conjecture and opinions of the market seers who didn’t see the recession coming as worthless. Zerohedge has wisely revisited Federal Reserve chairman Ben Bernanke’s very revealing speech given back in 2002 to a group of economists on the topic of fiat money economics and his ability to manipulate & distort economic law to his liking and coerce the economy to do his bidding. The problem with this dynamic is that the federal reserve’s goals are never in alignment with the average tax payer as the FED has loyalties with big business and Wall Street not main street.
While the artificial economy controllers do have the ability to encourage spending or discourage it, again these goals are based upon what the FED wants out of the manipulation or big business wants or needs. This is in direct conflict with the needs of the tax payers as we have worked our whole lives to save money for our retirements and with a push of a button the FED can arbitrarily decide to flood the global economy with a 20% increase in the volume of fiat dollars, thus wiping out 7-10 years of your savings. Now some would argue that when the FED increases the money supply it doesn’t change the volume of dollars they have in their savings account so how can that be true? Well the truth is that if you had $100,000.00 saved away & like today the US dollar has lost lets say 36% of it’s purchasing power since the housing crash and banker bailouts started, you would still have the $100K in the bank account, but it wouldn’t be able to buy $100K worth of goods in the market place. Instead your money would only be able to buy just over $60,000.00 worth of goods as the prices for these goods have risen as the purchasing power of the dollar has shrunk.
the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services.
This is done, according to the money masters for the benefit of the economy but at who’s expense? In the words of the great Sir Isaac Newton: for every action there is an equal, but opposite reaction. So now you must ask, how then can you effectively flood the money supply with newly printed dollars out of thin air without having an adverse reaction somewhere in the economy? And where would that adverse effect be felt? The answer is if you are leveraging up the ‘growth’ side of the economy by hyper-expanding credit through the creation of surplus monies then you are leveraging down the benefit of saving those dollars for the average person in the real world. The current economic paradigm is not defined by real growth, real consumption and real savings but instead over-leveraged credit consumption without substance overshadowed by overleveraged derivative bubbles for the purpose of fee generation for the banks. So you have a scenario where the FED can ‘make growth appear’ on paper to justify destroying the life savings of seniors and retirees who in turn get to see their living expenses grow to outpace their savings. Does that sound like a fair trade to you?
If not then you must counter the dollar devaluation with the application of the ‘opposite reaction theory’ by diversifying into gold & silver. It is gold & silver that are the definition of ‘opposite reaction’ in that every time that the money supply is expanded these metals eventually rise to offset that increase. There is a major shift in the precious metals underway now as up to this point there has been no real long term consequence motivation for investors to rush into gold & silver to protect themselves because the ship always managed to correct itself. There is little to no faith that the ship will be able to correct it’s posture and right itself as many believe the FED has gone too far this time with it’s credit and fiat money expansion. This is changing what was once a ‘lets trade the precious metals for a month while the FED smooth's out this period of credit expansion’ into a mindset of ‘lets move a third of our assets into gold & silver and see if this recession doesn’t run into a depression’. How much gold & silver will be available for consumption at the point where your mindset catches up with this concept? As the availability of the precious metals shrinks the price will rise thanks to the classic supply and demand principles. So the decision before you is simple, do you buy gold & silver now and have a wildly profitable ride while the rest of the world comes to terms with this concept or do you resist the flight to quality urge and find yourself buying gold at $2750 & silver at $75 when the panic is in full swing? Tick, tock.
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