In Jim Cook's Archive


Sometimes you read an article that shares your viewpoint, but says it better than you can. Recently I read an interview with author, professor, researcher and speaker Bud Conrad, discussing inflation.

He put it this way, “The governments and their central banks have no limit on how much money they can create since there is no tie to gold or anything else. It is only logical to expect them to take the easy road and print money. The result is predictable. New government bailouts for whatever problems arise are going to continue.”

“Inflating its way out of problems has become the default solution for the U.S. government, and governments around the world…. U.S. budget deficit will jump to $400 to $500 billion this year. That kind of deficit will put yet more pressure on the dollar due to the expectation that the government will inflate the dollars to pay for the deficits, as well as further bailouts that may be required as the credit crisis continues to unfold. And just over the horizon, it gets worse because of the unsustainable costs of the entitlements due to the 76 million baby boomers now beginning to look to retirement, and for their government medical payments.”

“As governments don’t actually produce anything, paying for all of this will have to come either in the form of direct taxation, which has well-established limitations past which it becomes counterproductive, or from indirect taxation, in the form of a steady erosion in the value of the dollars that will be used to meet the government’s many obligations. In other words, inflation.”

“The world money supply is growing faster than the production of ‘stuff,’ resulting inevitably in less purchasing power for all currencies. How much longer this is sustainable is hard to say, but the odds increase every day that foreign holders of dollars will come to believe that the U.S. government is willing to sacrifice the dollar, and then they will begin to unload dollars in earnest. There are signs of this happening already, with the Chinese and others using their considerable dollar reserves to buy up large natural resource deposits, even shares in U.S. corporations. In other words, tangible items.”

“The slowing of world economies we expect in the mid-term may somewhat mitigate inflationary pressures. However, as we also expect governments to react as they always do when faced with an economic downturn – namely attempting to stimulate growth through further monetary creation – this will only plant the seeds of much higher inflation over the next decade.”

“The U.S. dollar has lost 81% of its value since 1971. Bad as that is, it would have been much worse, if not for the Chinese and others buying our treasuries. That, in effect, funded our deficit spending and exported our inflation to their shores. Look at the inflation in China: it’s headed higher….In effect, they loaned us the money to buy their goods.”

“The Chinese and Japanese have actively supported the dollar to maintain their exports, but should world dollar holders reverse course, a floodgate of even worse inflation could come from too many foreign holders all wanting to exit the dollar at the same time. That almost happened in August 2007. They stepped back from the potential melt-down, but it’s still not safely removed from our future.”

Mr. Conrad goes on to say that he is heavily invested in precious metals. High inflation is just another reason to buy and hold silver for the long term.

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