Tuesday, May 22, 2012

Hyper-inflation Evident as Countries Move Away from the Dollar


The cost to society of the private financial system is even higher. Writing in CounterPunch (May 18), Rob Urie reports that two years ago Andrew Haldane, executive Director for Financial Stability at the Bank of England (the UK’s version of the Federal Reserve) said that the financial crisis, now four years old, will in the end cost the world economy between $60 trillion and $200 trillion in lost GDP. If Urie’s report is correct, this is an astonishing admission from a member of the ruling elite.
http://www.counterpunch.org/2012/05/18/the-true-costs-of-bank-crises/print

Try to get your mind around these figures.  The US GDP, the largest in the world, is about 15 trillion. What Haldane is telling us is that the financial crisis will end up costing the world lost real income between 4 and 13 times the size of the current Gross Domestic Product of the United States.  This could turn out to be an optimistic forecast.

In the end, the financial crisis could destroy Western civilization.

Last year gold and silver were rapidly rising in price (measured in US dollars), with gold hitting $1,900 an ounce and on its way to $2,000 when suddenly short sales began dominating the bullion markets. The naked shorts of gold and silver bullion succeeded in driving the price of gold down $350 per ounce from its peak.  Many informed observers believe that the reason Washington has not prosecuted the banks for their known financial crimes is that the banks serve as an auxiliary to Washington by protecting the value of the dollar by shorting bullion and rival currencies.

When the dollar goes, interest rates will escalate, and bond prices will collapse. Everyone who sought safety in US Treasuries will be wiped out. We should all be aware that such outcomes are not part of the public debate.

Few Americans and no Washington policymakers understand the dire situation. They are too busy hyping a non-existent recovery. Statistician John Williams reports that when correctly measured as a cost of living indicator, which the CPI no longer is, the current inflation rate in the US is 5 to 7 percentage points higher than the officially reported rate.  The unemployment rate falls because, and only because, people unable to find jobs drop out of the labor force and are no longer counted as unemployed. The official inflation and unemployment rates are fictions; yet, the media continue to report the rates with a straight face as fact.

The way the government has rigged the measure of unemployment, it is possible for the US to have a zero rate of unemployment and not a single person employed or in the work force.

The way the government has the measure of inflation rigged, it is possible for your living standing to fall while the government reports that you are better off.

With an eye on the approaching dollar crisis, which will wreck the international financial system, the presidents of China, Russia, Brazil, South Africa, and the prime minister of India met last month to discuss forming a new bank that would shield their economies and commerce from mistakes made by Washington and the European Union.  The five countries, known as the BRICS, intend to settle their trade with one another in their own currencies and cease relying on the dollar. The fact that Russia, the two Asian giants, and the largest economies in Africa and South America are leaving the dollar’s orbit sends a powerful message of lack of confidence in Washington’s handling of financial matters.