Inflation is the Only Vitally Important Economic Issue

May 5, 2010

The U.S. economy is currently experiencing a "Meltup", a prelude to a "Hyperinflationary Great Depression" that destroys the lives of all Americans who aren't prepared. The average American has no idea what disaster awaits. Most Americans spend their days worrying about Tiger Woods, Kate Gosselin, and Lindsay Lohan, instead of becoming educated on the economic issues that will shape their futures.

Even those on Wall Street who are supposed to be experts on the U.S. economy are currently being distracted by Greece, a country with a GDP that is only 2.5% the size of the U.S. Greece is irrelevant and most likely won't be capturing too many news headlines in the U.S. a couple of years from now.

Recent financial market movements both in the U.S. and around the world indicate that inflation is the only vitally important economic issue at this time. Almost all stocks and commodities have been moving in parallel both to the upside and downside. Fundamentals have taken a backseat to the inflation/deflation tug of war.

Before the Dow Jones fell yesterday by 225 points (its biggest decline in three months), the Dow Jones posted gains for 52 of the previous 71 trading days. There is an unprecedented amount of upward pressure on stocks, due to the Federal Reserve's monetary inflation. The major down days, including yesterday, can be directly attributed to news concerning the debt crisis in Greece. Most investors mistakenly believe that if Greece defaults, deflationary pressures will overwhelm the world economy.

If you do a Google search for "Greece Debt Crisis", there are currently 5,780,000 web results and 2,940 news articles. Shockingly, if you do a Google search for "U.S. Debt Crisis", there are only 327,000 web results and 7 news articles. The world is blinded by current events in Greece, without any foresight of what is about to take place here at home.

With U.S. food inflation spiraling out of control, NIA believes the Federal Reserve will soon be forced to begin raising interest rates. However, NIA doubts that the Fed will raise rates fast enough to stop inflation. Most likely, the Fed will raise rates 1/4 or 1/2 point at a time and they will remain permanently below the real rate of U.S. inflation, which NIA estimates to already be between 5.31% to 6.31%.

Most of our national debt is currently financed by short-term bonds with interest payments that will immediately rise as the Fed tightens. NIA believes the U.S. won't be able to afford interest rates on our debt of just 5% (which will still be negative in real terms), because rates of 5% would mean that about 1/4 of U.S. tax receipts would be needed for interest payments on our debt. This is a level where NIA projects foreigners will stop rolling over our debt, forcing us to either default on our debt or monetize it.

Hyperinflation is now inevitable because even if the U.S. chooses default over monetization, a default will cause a complete loss of confidence in the U.S. dollar, leading to a dramatic currency devaluation anyway. The best thing the U.S. can do to keep the dollar bubble propped up for a little bit longer is exactly what we're doing today. We should continue antagonizing China, calling them currency manipulators and demanding they allow their currency to strengthen. The stubborn Chinese might actually fall for our reverse psychology, keeping their currency pegged to the U.S dollar so that we can temporarily maintain our phony standard of living.

NIA will soon be releasing its new documentary 'Meltup'. Meltup will be the most informative and entertaining economic documentary ever produced in world history. NIA has already spent about quadruple the time and money making Meltup than it did making its previous critically acclaimed documentary 'The Dollar Bubble'.

If you would like your friends and family to be the first to see Meltup, please tell them to become a member of NIA for free.