Monthly Archives: March 2011

Liberty Dollar founder Bernard von NotHaus on Peter Schiff Show Friday April 1

This is just in from Bernard von NotHaus

Dear Liberty Dollar Supporters!

If you have been appalled with the government’s comments trying to paint me as a “unique terrorist,” you are not alone. The gov is now trying to brand all local non-government currencies as illegal and anybody who expresses opposition to the current US monetary policy is a “unique terrorist.” Since the Liberty Dollar trial the word “terrorist” has lost any rational meaning and has morphed to simply mean, “doing something the government doesn’t like.”

Seth Lipsky’s article in The New York Sun regarding a “Unique form of Terrorism” confirms the gov’s intention to tailor “terrorism” to any definition they want or need for any occasion. As a result, the adverse reaction to government’s “terrorist” comments has generated a tremendous “blow back” in their face.

So I am pleased to announce I will be a guest on the Peter Schiff Show at 11:00, this Friday, April 1, 2011. This is the first time I have spoken publicly since my conviction. The interview will be very informative so I urge you to tune into Peter’s live radio show at http://www.schiffradio.com/. The show’s toll free number is 866.226.5620.

For over twenty years, Peter Schiff has been the forerunner to accurately forecast the U.S. stock market, economy, real estate, the mortgage meltdown, credit crunch, sub-prime debacle, commodities, gold and the dollar. He has distinguished himself as an expert on money, economic theory, and international investing. Peter’s best-selling book, “Crash Proof: How to Profit from the Coming Economic Collapse” has cast him as a legend in predicting the course of the US dollar and what is best for your money.

I have been consistently impressed with Peter’s investment advice and his dedication to those values that the Liberty Dollar represents. It is an honor to be on his show.

Please note: Currently, Peter Schiff is President and Chief Global Strategist for Euro Pacific Capital that is not affiliated with or responsible for the content of SchiffRadio.com.

I hope you can join Peter and I for an engaging interview – one not to be missed!

Bernard von NotHaus

Catch it if you can. — t.h.g.

Fed buying bonds, hyper-inflation on the way

Below is a recent article from the National Inflation Association that describes 12 Warning Signs of U.S. Hyperinflation.

I think their analysis is correct but I’ll add here a few points that might make the entire matter easier to understand.

First, we must differentiate between monetary inflation and price inflation. Monetary inflation is the creation of money on an improper basis, notably the lending of money into circulation when banks purchase government bonds and other assets that do not bring additional goods and services into the market. Price inflation is the resultant increase in the general price level. Prices of individual goods and services can be affected by a number of different factors, but when prices increase virtually across the board, it is invariable the result of monetary mismanagement.

In the wake of monetary inflation, price inflation must inevitably follow. It may be delayed, but it cannot be avoided. In the case of a dominant power like the United States, the postponement may be extraordinarily long, but ultimately “the piper must be paid.” Price inflation can be postponed so long as some people, companies and countries have surplus income and these savers are willing to invest in government bonds.

In the case of the U.S. , China and other foreigners have been sending back their dollar earnings, not to buy American goods and assets, but to buy U.S. government bonds, in effect, financing the U.S. government deficits with money that already existed in the market. In other words, by selling bonds, the government is absorbing the savings, not just of foreigners, but also of domestic companies and individuals.

When aggregate savings are not sufficient to finance the deficits, the Fed and the commercial banks take up the slack by buying the government bonds, thus inflating the currency. The situation we see now is China and other countries who had been increasing their holdings of U.S. securities are now reducing their holdings. The same thing is happening domestically. That leaves the authorities with two choices: (1) offer higher interest rates on the bonds to entice investors to buy them, or (2) monetize the bonds by selling them to the central bank. The first option will have adverse effects on the budget, making the deficits even higher as interest costs rise. The second option (inflation of the currency) is the one currently being chosen, which must lead to price inflation very soon as that money gets spent by the government for weapons, bailouts, and all kinds of waste and payoffs, then trickles down through the economy. It is “legalized” counterfeit, and the counterfeiter is the one who gains from it. Those farther down on the earning/spending chain are badly hurt because the currency loses purchasing power at every step along the way.–t.h.g.

From the National Inflation Association, March 26, 2011

12 Warning Signs of U.S. Hyperinflation

One of the most frequently asked questions we receive at the National Inflation Association (NIA) is what warning signs will there be when hyperinflation is imminent. In our opinion, the majority of the warning signs that hyperinflation is imminent are already here today, but most Americans are failing to properly recognize them. NIA believes that there is a serious risk of hyperinflation breaking out as soon as the second half of this calendar year and that hyperinflation is almost guaranteed to occur by the end of this decade.

In our estimation, the most likely time frame for a full-fledged outbreak of hyperinflation is between the years 2013 and 2015. Americans who wait until 2013 to prepare, will most likely see the majority of their purchasing power wiped out. It is essential that all Americans begin preparing for hyperinflation immediately.

Here are NIA’s top 12 warning signs that hyperinflation is about to occur:

1) The Federal Reserve is Buying 70% of U.S. Treasuries. The Federal Reserve has been buying 70% of all new U.S. treasury debt. Up until this year, the U.S. has been successful at exporting most of its inflation to the rest of the world, which is hoarding huge amounts of U.S. dollar reserves due to the U.S. dollar’s status as the world’s reserve currency. In recent months, foreign central bank purchases of U.S. treasuries have declined from 50% down to 30%, and Federal Reserve purchases have increased from 10% up to 70%. This means U.S. government deficit spending is now directly leading to U.S. inflation that will destroy the standard of living for all Americans.

2) The Private Sector Has Stopped Purchasing U.S. Treasuries. The U.S. private sector was previously a buyer of 30% of U.S. government bonds sold. Today, the U.S. private sector has stopped buying U.S. treasuries and is dumping government debt. The Pimco Total Return Fund was recently the single largest private sector owner of U.S. government bonds, but has just reduced its U.S. treasury holdings down to zero. Although during the financial panic of 2008, investors purchased government bonds as a safe haven, during all future panics we believe precious metals will be the new safe haven.

3) China Moving Away from U.S. Dollar as Reserve Currency. The U.S. dollar became the world’s reserve currency because it was backed by gold and the U.S. had the world’s largest manufacturing base. Today, the U.S. dollar is no longer backed by gold and China has the world’s largest manufacturing base. There is no reason for the world to continue to transact products and commodities in U.S. dollars, when most of everything the world consumes is now produced in China. China has been taking steps to position the yuan to be the world’s new reserve currency.

The People’s Bank of China stated earlier this month, in a story that went largely unreported by the mainstream media, that it would respond to overseas demand for the yuan to be used as a reserve currency and allow the yuan to flow back into China more easily. China hopes to allow all exporters and importers to settle their cross border transactions in yuan by the end of 2011, as part of their plan to increase the yuan’s international role. NIA believes if China really wants to become the world’s next superpower and see to it that the U.S. simultaneously becomes the world’s next Zimbabwe, all China needs to do is use their $1.15 trillion in U.S. dollar reserves to accumulate gold and use that gold to back the yuan.

4) Japan to Begin Dumping U.S. Treasuries. Japan is the second largest holder of U.S. treasury securities with $885.9 billion in U.S. dollar reserves. Although China has reduced their U.S. treasury holdings for three straight months, Japan has increased their U.S. treasury holdings seven months in a row. Japan is the country that has been the most consistent at buying our debt for the past year, but that is about the change. Japan is likely going to have to spend $300 billion over the next year to rebuild parts of their country that were destroyed by the recent earthquake, tsunami, and nuclear disaster, and NIA believes their U.S. dollar reserves will be the most likely source of this funding. This will come at the worst possible time for the U.S., which needs Japan to increase their purchases of U.S. treasuries in order to fund our record budget deficits.

5) The Fed Funds Rate Remains Near Zero. The Federal Reserve has held the Fed Funds Rate at 0.00-0.25% since December 16th, 2008, a period of over 27 mo­nths. This is unprecedented and NIA believes the world is now flooded with excess liquidity of U.S. dollars.

When the nuclear reactors in Japan began overheating two weeks ago after their cooling systems failed due to a lack of electricity, TEPCO was forced to open relief valves to release radioactive steam into the air in order to avoid an explosion. The U.S. stock market is currently acting as a relief valve for all of the excess liquidity of U.S. dollars. The U.S. economy for all intents and purposes should currently be in a massive and extremely steep recession, but because of the Fed’s money printing, stock prices are rising because people don’t know what else to do with their dollars.

NIA believes gold, and especially silver, are much better hedges against inflation than U.S. equities, which is why for the past couple of years we have been predicting large declines in both the Dow/Gold and Gold/Silver ratios. These two ratios have been in free fall exactly like NIA projected.

The Dow/Gold ratio is the single most important chart all investors need to closely follow, but way too few actually do. The Dow Jones Industrial Average (DJIA) itself is meaningless because it averages together the dollar based movements of 30 U.S. stocks. With just the DJIA, it is impossible to determine whether stocks are rising due to improving fundamentals and real growing investor demand, or if prices are rising simply because the money supply is expanding.

The Dow/Gold ratio illustrates the cyclical nature of the battle between paper assets like stocks and real hard assets like gold. The Dow/Gold ratio trends upward when an economy sees real economic growth and begins to trend downward when the growth phase ends and everybody becomes concerned about preserving wealth. With interest rates at 0%, the U.S. economy is on life support and wealth preservation is the focus of most investors. NIA believes the Dow/Gold ratio will decline to 1 before the hyperinflationary crisis is over and until the Dow/Gold ratio does decline to 1, investors should keep buying precious metals.

6) Year-Over-Year CPI Growth Has Increased 92% in Three Months. In November of 2010, the Bureau of Labor and Statistics (BLS)’s consumer price index (CPI) grew by 1.1% over November of 2009. In February of 2011, the BLS’s CPI grew by 2.11% over February of 2010, above the Fed’s informal inflation target of 1.5% to 2%. An increase in year-over-year CPI growth from 1.1% in November of last year to 2.11% in February of this year means that the CPI’s growth rate increased by approximately 92% over a period of just three months. Imagine if the year-over-year CPI growth rate continues to increase by 92% every three months. In 9 to 12 months from now we could be looking at a price inflation rate of over 15%. Even if the BLS manages to artificially hold the CPI down around 5% or 6%, NIA believes the real rate of price inflation will still rise into the double-digits within the next year.

7) Mainstream Media Denying Fed’s Target Passed. You would think that year-over-year CPI growth rising from 1.1% to 2.11% over a period of three months for an increase of 92% would generate a lot of media attention, especially considering that it has now surpassed the Fed’s informal inflation target of 1.5% to 2%. Instead of acknowledging that inflation is beginning to spiral out of control and encouraging Americans to prepare for hyperinflation like NIA has been doing for years, the media decided to conveniently change the way it defines the Fed’s informal target.

The media is now claiming that the Fed’s informal inflation target of 1.5% to 2% is based off of year-over-year changes in the BLS’s core-CPI figures. Core-CPI, as most of you already know, is a meaningless number that excludes food and energy prices. Its sole purpose is to be used to mislead the public in situations like this. We guarantee that if core-CPI had just surpassed 2% and the normal CPI was still below 2%, the media would be focusing on the normal CPI number, claiming that it remains below the Fed’s target and therefore inflation is low and not a problem.

The fact of the matter is, food and energy are the two most important things Americans need to live and survive. If the BLS was going to exclude something from the CPI, you would think they would exclude goods that Americans don’t consume on a daily basis. The BLS claims food and energy prices are excluded because they are most volatile. However, by excluding food and energy, core-CPI numbers are primarily driven by rents. Considering that we just came out of the largest Real Estate bubble in world history, there is a glut of homes available to rent on the market. NIA has been saying for years that being a landlord will be the worst business to be in during hyperinflation, because it will be impossible for landlords to increase rents at the same rate as overall price inflation. Food and energy prices will always increase at a much faster rate than rents.

8) Record U.S. Budget Deficit in February of $222.5 Billion. The U.S. government just reported a record budget deficit for the month of February of $222.5 billion. February’s budget deficit was more than the entire fiscal year of 2007. In fact, February’s deficit on an annualized basis was $2.67 trillion. NIA believes this is just a preview of future annual budget deficits, and we will see annual budget deficits surpass $2.67 trillion within the next several years.

9) High Budget Deficit as Percentage of Expenditures. The projected U.S. budget deficit for fiscal year 2011 of $1.645 trillion is 43% of total projected government expenditures in 2011 of $3.819 trillion. That is almost exactly the same level of Brazil’s budget deficit as a percentage of expenditures right before they experienced hyperinflation in 1993 and it is higher than Bolivia’s budget deficit as a percentage of expenditures right before they experienced hyperinflation in 1985. The only way a country can survive with such a large deficit as a percentage of expenditures and not have hyperinflation, is if foreigners are lending enough money to pay for the bulk of their deficit spending. Hyperinflation broke out in Brazil and Bolivia when foreigners stopped lending and central banks began monetizing the bulk of their deficit spending, and that is exactly what is taking place today in the U.S.

10) Obama Lies About Foreign Policy. President Obama campaigned as an anti-war President who would get our troops out of Iraq. NIA believes that many Libertarian voters actually voted for Obama in 2008 over John McCain because they felt Obama was more likely to end our wars that are adding greatly to our budget deficits and making the U.S. a lot less safe as a result. Obama may have reduced troop levels in Iraq, but he increased troops levels in Afghanistan, and is now sending troops into Libya for no reason.

The U.S. is now beginning to occupy Libya, when Libya didn’t do anything to the U.S. and they are no threat to the U.S. Obama has increased our overall overseas troop levels since becoming President and the U.S. is now spending $1 trillion annually on military expenses, which includes the costs to maintain over 700 military bases in 135 countries around the world. There is no way that we can continue on with our overseas military presence without seeing hyperinflation.

11) Obama Changes Definition of Balanced Budget. In the White House’s budget projections for the next 10 years, they don’t project that the U.S. will ever come close to achieving a real balanced budget. In fact, after projecting declining budget deficits up until the year 2015 (NIA believes we are unlikely to see any major dip in our budget deficits due to rising interest payments on our national debt), the White House projects our budget deficits to begin increasing again up until the year 2021. Obama recently signed an executive order to create the “National Commission on Fiscal Responsibility and Reform”, with a mission to “propose recommendations designed to balance the budget, excluding interest payments on the debt, by 2015″. Obama is redefining a balanced budget to exclude interest payments on our national debt, because he knows interest payments are about to explode and it will be impossible to truly balance the budget.

12) U.S. Faces Largest Ever Interest Payment Increases. With U.S. inflation beginning to spiral out of control, NIA believes it is 100% guaranteed that we will soon see a large spike in long-term bond yields. Not only that, but within the next couple of years, NIA believes the Federal Reserve will be forced to raise the Fed Funds Rate in a last-ditch effort to prevent hyperinflation. When both short and long-term interest rates start to rise, so will the interest payments on our national debt. With the public portion of our national debt now exceeding $10 trillion, we could see interest payments on our debt reach $500 billion within the next year or two, and over $1 trillion somewhere around mid-decade. When interest payments reach $1 trillion, they will likely be around 30% to 40% of government tax receipts, up from interest payments being only 9% of tax receipts today. No country has ever seen interest payments on their debt reach 40% of tax receipts without hyperinflation occurring in the years to come.

http://inflation.us/hyperinflationwarningsigns.html

What happened to class war in America?

Back in December of last year, I posted an item titled, Class war in America: Senator Bernie Sanders tells it as it is, which included an embedded YouTube video of his speech. For some reason, that video has been removed; I can only speculate about the reason. Nevertheless, it still resides somewhere in cyberspace. Here’s a site to try:

http://dailyhurricane.com/2010/12/senator-sanders-on-the-class-war.html

If it disappears from that site, please let me know and search for it elsewhere. This speech is so important that I’m urging everyone to watch it, download it, and spread it around.

Try downloading it here: Sanders on class war

Hard as it is to face, class war is the reality in America today. Far from the American traditions of freedom, fairness, and opportunity for all, we must come to grips with the fact of this decades-long attack on the middle class.

We have the power to succeed in realizing the American dream by taking responsibility, by asserting our inalienable rights, by learning to share, cooperate, and organize on behalf of the common good. –t.h.g.

Usury, Interest, and Islamic Banking

One of the most popular posts on this site has been David Pidcock’s View on the State of Islamic Money, Banking, and Finance, which was posted in January of 2008. Over the past few years, these subjects have continued to draw increasing attention, and interest in interest-free financing has continued to grow in both the east and the west. It is not only on the basis of religious belief that the subject of usury is once again being debated (mainly in the Islamic world), but increasingly on account of the obvious and overwhelming expansion of debt throughout the world.

In November of last year (2010) the First World Conference on Riba was held in Kuala Lumpur, Malaysia. (Riba is the Islamic term for usury). In recent correspondence from David, he argued that there still are no truly Islamic banks. He also sent along one of his papers that he presented at the Riba conference. Whatever your preconceived opinions about the subject might be, I think you will find his paper to be interesting and informative. I have made it a permanent part of this website, which can be found in the sidebar under Other Resources, or just click on the title here, Riba? Part 1.

–t.h.g.

Monetary Reformer Convicted in Liberty Dollar Case

According to an FBI press release dated March 18, 2011, Bernard von NotHaus, 67, founder of NORFED and creator of the Liberty Dollar silver coin, has been convicted by a federal jury of “making, possessing, and selling his own coins.” The conviction of von Nothaus demonstrates just how far through the looking glass we have gone. According to the US government, anyone who advocates monetary reform (or any sort of government reform) may be a “terrorist.”

Here is a chilling quote from the FBI press release:

“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism,” U.S. Attorney Tompkins said in announcing the verdict. “While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country,” she added. “We are determined to meet these threats through infiltration, disruption, and dismantling of organizations which seek to challenge the legitimacy of our democratic form of government.”

It is evident that Ms. Tompkins has no idea what “legitimate currency” is, or that what she purports to be protecting is anything but “our democratic form of government.” The actual situation is well stated by J. Neil Schulman in his recent post at Rational Review:

“If there is such a thing as economic terrorism, it has been conducted without punishment by the financial elites who own and operate the Federal Reserve Bank. For the Department of Justice of the United States to overlook this mega-crime and prosecute a man whose goal was to enforce the law as written in the Constitution they have taken an oath to obey is an obscene reversal of fact and language. If there is such a thing as economic terrorism, the Federal Reserve is the economic equivalent of al-Qaeda, and its ravaging of the economy is the 9/11 of U.S. economic history.” (03/22/11)

This case is far from settled, and will hopefully serve to revive the political debate about money and finance, and ultimately advance the cause of free money and free banking.

By the way, Glenn beck will plug G. Edward Griffin’s book, The Creature from Jekyll Island, on Friday 2011 March 25. The entire Glenn Beck show that day will be devoted to an exposé of the Federal Reserve. The Glen Beck program is aired weekdays on Fox News at 5 PM Eastern time. –t.h.g.

Currency speculation and arbitrage

For anyone who is confused about foreign exchange rates and speculation (which I think includes almost everyone), here is a clear explanation provided by Prof. Dr. Ahamed Kameel Mydin Meera of the International Islamic University of Malaysia. He explains it in relation to the 1997 East Asian Crisis that was brought on by speculative attacks (manipulation) on several Asian currencies.–t.h.g.

Exponential growth-a key concept

In all of my writings I’ve tried to make clear that there is inherent in the political money system a growth imperative. That results from the fact that money is created by banks as interest-bearing debt. The compounding of interest causes debt to grow as time passes, not at a steady rate, but at an ever-increasing rate. At some point the amount of debt increases so rapidly that it overwhelms the ability of the real economy to carry it. We now seem to have reach that point and our civilization is in crisis.

This growth imperative based on debt compounding is the primary engine that is driving us to destruction, but debt is not the only thing that is growing exponentially. This video is part of Chris Martenson’s Crash Course. In it, he explains very clearly how compounding works. His entire Crash Course is highly recommended. –t.h.g.