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Friday, September 17, 2010

The War on the Middle Class

Gold Rises to Record on Increased Demand for Wealth Protection - Bloomberg - By Pham-Duy Nguyen and Nicholas Larkin - Sep 16, 2010

*** Gold is a real asset. The increase in the value of Gold and Silver directly correlates to the value of the dollar. In the early 2000s the U.S. budget was nearly in balance, on April 2, 2001 Gold had fallen to $255.91 at the closing bell. Here at 1:30am on 9/17/2010 it has spiked to $1,278.50 and many investors that I follow believe that Gold could reach $1,500 by year's end and Siver is headed to $28 in that same time period.

The cause for this is the wreckless and aimless spending of our government and the aimless monetary policy implemented by the Federal Reserve. What is the method to all of this madness? What is the endgame?

If I reverse engineer what I am witnessing here, I would swear that the Federal Reserve is going to devalue the dollar to reduce the debt that we are in. They think that moderate inflation can kickstart the economy and reduce the value of the national Debt that has been accrued. I don't think they can control such policy and we are going to see more substantial inflation than they want.

If the consensus policy of the Federal Reerve (the controllers of the Money Supply)towards the Consumer Price Index (Inflation/Deflation) is admitted to be 10% inflation next year, then it would relate to a desire for a real inflation rate of 20%, because the numbers the government uses are cooked. If this is attempted, I believe that we could easily see double that and real inflation (Staple Goods and Services) would be around 40% for Fiscal Year 2011. Gas would be back at over $4 per gallon, by the end of 2011 and food would see a substantial run up. Discretionary Goods and services will hold steady, because consumers will not be able to afford them, because their dollars will be eaten up by the necessities of life.

Yen hits 15-year high vs dollar - Reuters - 9/14/2010

Foreclosures Rise; Repossessions Set Record - CNBC - 9/16/2010

***Under all of these scenarios, it is the Middle Class that gets hammered, because the rich can afford precious metals as a hedge and the poor are receiving hand delivered entitlements from the government. Can one not see that the vast majority of the middle class are already living on the edge? They are the real losers. Those with less than $150,000 annual household income are generally considered middle class, because of taxes. The poor may think families with combined income of $150,000 are rich and some of these people may even think they are wealthy. Well that theory is going to be tested, if we start seeing the kind of inflation that I point to above. That type of inflation would test the fabric of our society.

I will leave you with this:

Here Are 13 Signs That We’re Actually In A Depression Right Now - Gregory White
Business Insider - 9/7/2010

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