The power of III

Summum ius summa iniuria--More law, less justice

31 October 2010

Why the Federal Reserve and government economists deserve the condemnation of all the American people.

Inflation, which robs each of us of the buying power of our money, in dribs and drabs, is planned by the Federal Reserve and the government.  They have a target rate of inflation that they consider "desirable."  This is so the government can pay off a debt made at one time with money that is worth less at a later time.   Meanwhile, our salaries, even with raises, tracks behind the inflation rate, so that "real wages" weaken.

Here is a personal example/lesson that I learned to my surprise about two years ago:

  Sometime just after the crash of the stock market, my mother in law returned to us a mislaid US Savings bond with a face value of $500 that someone had given us for our wedding about 15 years before.  It was purchased for $250.  It would take 30 years to mature to $500.  I found out that, if I were to cash it in at that time, before its maturity date, it would bring $414.  Then, out of curiosity, I looked into what would've happened if the person had spent the $250 on gold instead of the Savings Bond.  I looked up the historical price of gold, and found that the $250 would've bought about 2/3 oz. of gold.  At the time that I was doing these calculations in 2008, the 2/3 oz of gold was worth about $650.  Now 2/3 oz. of gold is worth $900.  (BTW, That $250 at the time of our wedding would have bought 50 oz. of silver, now worth $1200!!!)

Has the gold become more valuable?  It hasn't.  The gold still buys nearly the same list of commodities or items that it would have purchased in previous years:  the same expensive suit would have cost 1/2 to 1 oz of gold in the 1800's, 1900's, 1920's, 1970's, and today.  The gold stays the same in value over time;  the dollar decreases in value over time.

So I am liquidating a 401k that I have.  I no longer trust holding that wealth as Federal Reserve notes or stocks.  Whatever taxes I pay now aren't going to go down in the future unless there are Revolutionary changes in our government and economy.  I cannot rely on that for my kid's sake.  So I will pay my taxes to the current government, and turn the rest of the proceeds into precious metals and find a way to store it safely.  That way I know that a portion of the wealth I've accumulated is preserved.  This stored wealth may not then appreciate like an equity (stock), but if we have hyperinflation, the gold or silver can be used to purchase the ever worthless paper money at intervals when needed.  

There are troubling signs that we might have hyperinflation in the next couple of years because of the government and Federal Reserve actions which followed the stock market crash in 2008 and whatever they've done to follow up since then;  they are running out of tricks.  If the Fed tries to reverse the quantitative easing, and/or the foreign governments holding US treasuries (which you need to think of as the money in US dollars that we borrowed from them) start to dump the debt because they sense the dollar is losing its value, our market will be flooded with ever more and more dollars.  This causes each one dollar to be worth that much less.  People will try to dump the money becoming less valuable by buying, which causes demand to skyrocket, and prices to skyrocket.

This is our future.  Probably near future.  We are robbed of our wealth, placed into debt by our government, and the bill is coming due.

Leaders of the Department of the Treasury, the Federal Reserve, and their various cronies deserve tar, feathers, and being run out of town tied straddling a log rail.

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