Wednesday, September 22, 2010

Inflation Risks Soar as Investors React to Yesterday's FOMC Meeting

Today was all about the US dollar.  Here is a chart of bucky over the last couple days:

Gold reacted accordingly as it soared almost $20.  Here is GLD today:

Gold wasn't alone.  Pretty much all commodities are up sharply as a result of our crumbling currency.  Hat tip to The Fly at Icoin for the commodity charts below:




There are other commodity charts over at Icoin but you catch my drift.

Folks, the Fed is essentially throwing every middle class American under the bus with their QE/bailout policies.  The Fed is easing in every way possible in order to help out the banking cartel.

As a result, our currency is starting to get it's teeth kicked in.  The rising costs as a result of the falling dollar won't hurt the banksters because they can afford some inflation.  The problem is that 90% of us cannot AFFORD it.  In fact, many of you who are just getting by could starve if the Fed's policies don't change.

Just think what the dollar will look like if we announce a QE2?  Imagine what it will do to the cost of living in this country.

We are already seeing signs that the middle class is unravelling.  This article from The New York Times is particularly disturbing:

"The country’s continued economic doldrums have stores scrambling for the once-ignored low-end customer, as people make fewer costly shopping trips to stock their pantries, and increasingly, can only afford inexpensive items in small quantities like those sold at dollar stores.

Dollar stores have shown the biggest gain in shopper visits over the last year out of all the retailers that sell basic consumer goods, according to market research data.

Wal-Mart, the world’s largest retailer, is adding thousands of items to its shelves, including inexpensive ones, and is asking dollar-store suppliers to create small, under-a-dollar packages for its stores, too. In areas with high unemployment, Wal-Mart is grouping together its less than $1 items in a clear challenge to the dollar stores.

Some customers at Wal-Mart and the major dollar chains — Dollar General, Family Dollar and Dollar Tree — have such modest budgets that the retailers report upticks in spending at the beginning of the month, when government benefit checks and many paychecks come through. Late in the month, sales drop as even multiroll packs of paper towels are ditched for a single roll.

“People are literally running out of cash on hand as the month goes on and they’re looking for smaller package sizes,” said Craig Johnson, president of the retail consulting and research firm Customer Growth Partners. “They may have $10, $20, $30 to spend getting toward the end of the month, and they have to be able to still feed the family and get diapers and so forth.”

Take Continued
What are these people going to do if the currency keeps dropping and they only have $20 to spend by the end of the month? 

Whats going to happen when that $20 can only buy them 1 of the 4 items that they need in order to get through the end of month as we see further depreciation?

I don't wanna scare anyone but this is how social chaos gets started.  Everything is fine in America as long as they can watch American Idol and find a way to eek out a living.

If they no longer have the ability to pay their cable bill and eat it turns into a whole different ballgame.  We are the most armed country in the world and if Joe6pack can't afford a meal he is going to find someone who does.  They will then proceed to take it by force.

This happened all the time in Argentina during their inflationary crisis. 

The Bottom Line

I am as serious as a heart attack today.  The Fed is destroying this country with their policies.  They are IGNORING the majority in an attempt to save the minority who are mainly the banking elites. 

This is the polar opposite of what they should be doing. 

Their policies are going to make it more and more difficult for you to put food on the table every night.  Our way of living is being destroyed right before our very eyes.

Larry Summers just resigned last night and announced that he is headed back to Harvard.  Geithner is now the only person left from Obama's original economic team 

This shouldn't be a surprise.

I mean heck: Why would Summers or anyone else want to take the fall for economic catastrophe that's about to take place.

The only hope I have left is that the currency and bond markets continue to throw a tantrum which eventually forces the Fed to reconsider another QE2.

The scary thing here is without the QE2 I don't think the Fed can hide this monstrosity much longer.  Without the ability of the Fed to buy our treasuries I think the bond market collapses.

This leaves us with a hell of a choice: 

Do we QE2 and trigger a massive inflationary/hyperinflationary event?


Do we not QE2 and allow the whole house of cards to come tumbling down via a deflationary collapse.

In a nutshell this is what the Fed faces when it's all said and done.

The sad thing here is it didn't have to be this way.  If the Fed had said no to the bankers from the start we would have had the ability to afford the losses in the banking system.  It would have been painful as many banks would have failed but we would have survived.

Instead, the Fed decided to load their balance sheet up with trillions of toxic assets as they attempted to play "hide the sausage".

The results of this decision are catastrophic.

Papering over the losses by giving bailout after bailout to the people(bankers) who created this whole nightmare in the first place is the most disgusting thing I have ever witnessed as a human being.

Their plan failed miserably and it has left us bankrupt.  If this insanity continues we will also all be starving if they continue to destroy the dollar.

I'll end with three conclusions:

We are now left driving on a road to nowhere that will end in a very dark place. 

The arrogance and greed that has been exhibited throughout this crisis by the Fed and the bankers will be talked about in the history books forever.

I'll say it again:  It didn't have to end this way.


CT-Hilltopper said...

Yep Jeff.

We are screwn.

Jeff said...


I know. It sucks. More bad jobs data today as well.

MArket dropped on the news but it rallied back of course. The stock market is so out of touch with reality.

It's really unbelievable.