Wednesday, October 1, 2008

Taxation and the Printing Presses: Recipe for a Monetary Crisis and $5,000 gold

Taxation and the Printing Presses: Recipe for a Monetary Crisis and $5,000 gold

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There's been much said about the fact Fed Chairman Ben Bernanke has been a devoted student of the Great Depression. In many ways, understanding the causes and dynamics of what caused the depression of the 1930s has been his life's work.

In 2002, Bernanke gave a speech titled, "Deflation: Making Sure ‘It’ Doesn’t Happen Here" (You can read the full text here.)

In that speech, you'll find some really amazing clues as to just how dangerous his approach to defending against deflation is, which is to just PRINT MONEY...

"Like gold, U.S. Dollars have value only to the extent that they are strictly limited in supply.

"But 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." (I've bolded for emphasis)

If this doesn't click for you please allow me to explain what he's really saying.

Bottom line: The U.S. government can tax the Dollars right out of your wallet. The government can do it at will... and there isn’t a thing you or I can do about it (other than convert those Dollars into something else before they get devalued, which is why I have been literally begging you and others to put physical gold in your IRA, 401K and in your investment portfolio with Finest Known 1-866-697-GOLD (4653) ext. 1406.

The thing you have to always keep in mind is that inflation is an insidious hidden tax. Whenever the U.S. government prints Dollars from thin air, it lessens the value of the Dollars in your bank account and that's what this entire $700 Billion Bail Out is all about. For that matter, that's what the Trillions of Dollars we're printing to subsidize foreign nations, the wars in Iraq and Afghanistan. It's all funny money with no backing just being printed.

Literally the value of the U.S. Dollar is being drained. The monetary growth rate is normally 3-4% a year. We're now growing money at a rate of 25% in a single year, not counting off the books spending like the war.

Imagine if you could print money and pay for your living expenses at will. This is why the value of the U.S. Dollar has been collapsing these past years. This $700 billion (really $1.3 Trillion) bail out will essentially devalue the Dollar by another 25% to 30% over the next 2 years -- if were lucky. The danger, of course, is that we need more than one bail out and investors worldwide would see the reckless printing of money and start dumping Dollars. The risk of this is a monetary collapse similar to what has occurred many times in South America, Africa and Eastern Europe and the Dollar literally collapses in a panic. In that kind of environment, $5,000 gold might well be a low target.

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