Media Misleading Americans About Inflation

The National Inflation Association (NIA) believes that every time the mainstream media focuses its attention on the weak Euro, it is trying to trick the world into going long the U.S. dollar, when the U.S. dollar will win its race with the Euro to zero. Not only were eurozone countries first to implement austerity measures (something the U.S. is still showing no signs of even considering),
 but it was just announced this weak that the European Central Bank (ECB), which just left interest rates unchanged this month at 1%, plans to raise interest rates next month in order to combat food and energy price inflation. NIA has been warning its members for two years that the policies of the Federal Reserve and ECB would lead to massive inflation in the prices of food, energy, and clothing, and that is exactly what we are beginning to see right now.

The ECB just dramatically raised its inflation expectations for 2011. The ECB has a sole mandate of price stability, but the Federal Reserve's mandate is not only price stability, but also maximum employment and moderate long-term interest rates. Printing money does not create jobs, except for temporary government jobs that act as a burden on the rest of the economy. Federal Reserve Chairman Ben Bernanke has been obsessing over the fact that the U.S. doesn't have any wage inflation, as a reason not to raise interest rates. As NIA has long been predicting for years, wages will be last to rise during the current inflationary crisis. If wages in the U.S. were rising at the same rate as energy, food, and clothing, price inflation wouldn't be a problem at all. The fact that wages aren't keeping up with rising prices should actually be a good reason to raise interest rates immediately.

China is so disturbed by the inflation being created by both the Federal Reserve and ECB, that they are looking to abandon both currencies and position the yuan as the next reserve currency. The biggest news of this past week, which conveniently got swept under the rug by the U.S. mainstream media, was news out of China that they will be allowing trades to settle in yuan instead of the U.S. dollar. China is simply responding to overseas demand from those who don't wish to hold on to large amounts of U.S. dollar reserves that are rapidly being debased by the Federal Reserve. By the end of 2011, Chinese exporters and importers will be able to settle cross border transactions in their own currency, instead of U.S. dollars. China is working to rapidly grow the yuan's role in international trade and NIA believes it will soon become the world's new reserve currency by default.

The fact is, if the Chinese abandoned the U.S. dollar, China would immediately have the world's largest economy as a result of the yuan strengthening in value. Over 70% of U.S. GDP is consumer spending and when Americans can no longer import cheap goods from China using money we borrow from them, consumer spending will fall off a cliff. Canada and other resource rich nations have nothing to worry about. Just as one small example, the U.S. for many years has been the largest importer of lumber from Canada. Shockingly, the U.S. share of lumber imports from Canada has fallen just about in half percentage wise in recent years from 70% to 36%. Now, it is expected that China will displace the U.S. as the largest importer of lumber from Canada by 2012.

Besides Canada, NIA has long said that one of our favorite places to emigrate to is Australia, because Australia's central bank was the first to raise interest rates. The Reserve Bank of Australia has interest rates at 4.75% compared to Australia's inflation rate of 2.7%. The Reserve Bank of Australia is the only major central bank with interest rates that are positive in real terms. Despite having the highest interest rate out of all major developed countries, Australia's GDP is still growing 2.7% on an annual basis.

The U.S. GDP is only growing due to artificially low interest rates of 0%-0.25%, where the Federal Reserve has held them for over two years. Artificially low interest rates of 0%-0.25% basically means that the U.S. economy is on life support. Any kind of economic growth during this period is phony and only due to inflation. Australia has a truly healthy economy, being that it is growing with modest interest rates. If the Federal Reserve raised interest rates to a modest level of 4.75% like Australia, there would immediately be a massive wave of debt defaults that sends the U.S. economy into a tailspin. We would experience a crash much worse than the Great Depression, which will likely be so bad that the median priced U.S. home will fall in half from $158,800 down to only $79,400.

Silver just reached a new 31-year high on Friday of $35.32 per ounce up 103% since NIA declared silver the best investment for the next decade on December 11th, 2009, at $17.40 per ounce. The short squeeze in silver that NIA first predicted on April 3rd, 2010, in its article entitled "Silver Short Squeeze Could Be Imminent", is now taking place as we speak. NIA was one of the first to connect the dots and expose to the world why the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns, but didn't mind allowing Lehman Brothers to fail. Bear Stearns was the holder of a massive naked silver short position in silver that was being used to artificially hold silver prices down. As part of JP Morgan's takeover of Bear Stearns, the Federal Reserve guaranteed to cover certain losses that would arise from the Bear Stearns portfolio, and this most likely included the silver short position.

Unfortunately, the average American family still has the bulk of their savings invested in Real Estate, when it should be invested in silver. In NIA's first ever documentary 'Hyperinflation Nation', in which we urged viewers to get out of Real Estate and invest into silver, the median U.S. home to silver ratio was 14,700. In NIA's second major documentary 'The Dollar Bubble', we once again discussed the median U.S. home to silver ratio, which was now down to 9,900, and predicted a further major decline. The median U.S. home to silver ratio is now down to 4,500. This means U.S. Real Estate has lost 69% of its value priced in silver in just the past 21 months alone. NIA is 100% sure that this ratio will decline to below 1,000 this decade and probably bottom around 500. Therefore, even if the Federal Reserve keeps interest rates near zero, we are still looking at another 78%-89% decline in the price of Real Estate in terms of silver.

NIA has been warning the Federal Reserve to raise interest rates almost since the time they lowered them down to near zero. The longer they keep interest rates where they are now, the higher interest rates will need to rise later this decade to counteract the damage being done today. It is shocking to us how the financial mainstream media still uses the bond market to determine inflation expectations. Comparing U.S. treasury yields to Treasury Inflation Protected Securities (TIPS) yields does not accurately determine inflation expectations. TIPS are a scam, because they are based on the U.S. Bureau of Labor Statistics (BLS)'s Consumer Price Index (CPI), which the government does everything in its power to manipulate as low as possible in order to keep payment increases to Social Security recipients as low as possible. The bond bubble is the largest bubble in world history and during bubbles in the financial markets, assets always get mispriced.

NIA doesn't understand how the mainstream media allows Bernanke to get away with testifying in front of Congress this week, "the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation" and that rising gas prices “do not yet pose a significant risk either to the recovery or to the maintenance of overall stable inflation". NIA is one of the few organizations out there challenging Bernanke's belief that we have "overall stable inflation". We know this to be the exact opposite of the truth.

The new Apple iPad 2 being released this month is going to be 33% thinner than the original iPad, but it will be sold at the same price as the first version. NIA forecasts that the BLS will use hedonics to say that the iPad 2 is now 33% better than the first iPad, being that it is thinner. With the price being the same as the old thicker version, the BLS will consider the new version to be 33% cheaper once quality adjustments are factored in. This type of deception will help cancel out food and energy price inflation when the BLS reports the CPI in the upcoming months.

We are sure that the millions of sheep in America who will wait for ten hours across a dozen city blocks to be the first to purchase the new iPad 2 will agree with Bernanke that inflation in the U.S. is overall very stable. However, for the overwhelming majority of Americans who see food and gas prices spiraling out of control, they have nobody to thank more than Bernanke.

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