Double-Dip Recession Does Not Mean Deflation

FORT LEE, N.J., July. 19 /PRNewswire/ -- The National Inflation Association today released the following article to its http://inflation.us members:

In NIA's May 26th article entitled, "Don't Doubt Bernanke's Ability to Create Inflation," we said, "The U.S. Dollar Index has rallied only because it is heavily weighted against the Euro. The Euro is now overdue for a huge bounce." NIA was right, the Euro was $1.22 at the time and it has since bounced to $1.30. Meanwhile, the U.S. dollar index has declined from a high of 88 down to 82.50.

NIA has consistently said that the U.S. economic recovery is phony. With recently released Fed minutes indicating that our phony economic recovery is fading, the focus on Wall Street has shifted from the debt crisis in Europe to the risk of a double-dip recession and possible deflation in the U.S. However, NIA believes the threat of a double-dip recession and worries of deflation actually increase the risk of hyperinflation arriving a lot sooner than anybody thinks is possible.

There has been a severe plunge in stock market trading volume during the past month, but this is the calm before the storm. NIA believes the Federal Reserve is quietly getting ready to implement "The Mother of All Quantitative Easing." After all, the Federal Reserve's quantitative easing in 2009 was "successful" in causing the Dow Jones to bounce by 74% from its low of 6,469.95 in March of 2009 to a high of 11,257.93 in April of 2010. Sure, the broadest measure of unemployment also rose during this time period from 19.8% to 22%, but according to the Federal Reserve, unemployment is a lagging indicator and meaningless.

NIA believes there is no chance in hell that Time Magazine's Person of the Year Ben Bernanke is going to admit his destructive policies of artificially low interest rates aren't working. In fact, with the CPI showing a year-over-year U.S. price inflation rate in June of only 1.05%, the coast is now clear for Bernanke to raise his dosage of quantitative easing. NIA fears that come this October, Bernanke is likely to shoot up his largest ever dose of quantitative easing. If our fears come true, NIA will be forced to change our projection as to when U.S. hyperinflation will occur from the years 2014-2015 to as soon as year 2012.

NIA considers the number one catalyst to the upcoming hyperinflationary crisis to be our nation's out of control budget deficits and the Federal Reserve's need to monetize them. The White House is not projecting the U.S. to have a balanced budget ever again. In order to reduce our budget deficit from $1.56 trillion this year to $752 billion in 2015, the White House is projecting an average GDP (gross domestic product) growth rate of 5.58% over the next five years.

The Bureau of Economic Analysis (BEA) recently reported that revised 1Q 2010 GDP was up 2.42% on a year-over-year basis, compared to the previous estimate of 2.5% and an initial estimate of 2.55%. With consumer spending making up 71% of GDP and the mainstream media now focused on the risk of a double-dip recession, it will be impossible for our economy to grow at 5.58% per year in real terms.

If Bernanke decides not to implement massive quantitative easing and the U.S. government refuses to dramatically reduce spending in the short-term, by year 2015 the U.S. will likely be looking at an annual budget deficit of at least $2.2 trillion, but possibly $3 trillion or more once you take into account the likelihood of substantially higher interest rates. By that time, the Federal Reserve will be the only buyer of U.S. treasuries and all of our deficit spending will be paid for through outright money printing.

In our opinion, the Federal Reserve is likely to pull out all the stops to stimulate expansion of the money supply until the U.S. has a real annual price inflation rate of between 15% and 20%. Their hope is that with this rate of price inflation, our deficits and debts will be slowly eaten away without a complete loss of confidence in the U.S. dollar. NIA knows this is impossible. A price inflation rate of just 15-20% for five years in a row would cause the world to dump their U.S. dollar reserves and wipe out a huge part of America's remaining savings, leaving us with no way to rebuild our manufacturing base and improve the underlying fundamentals of the U.S. economy.

Americans can feel the purchasing power of their earnings and savings decline. They know that the real rate of price inflation is a lot higher than 1.05%. As long as we have a fiat currency system and Ben Bernanke as the Chairman of the Federal Reserve, there is zero risk of the U.S. experiencing deflation. If the Federal Reserve is forced to, they will print up enough fiat U.S. dollars for President Obama to mail out a $1 million stimulus check to every single American.

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About us:

The National Inflation Association is an organization that is dedicated to preparing Americans for hyperinflation. The NIA offers free membership at http://www.inflation.us and provides its members with articles about the economy and inflation, news stories, important charts not shown by the mainstream media; YouTube videos featuring Jim Rogers, Marc Faber, Ron Paul, Peter Schiff, and others; and profiles of gold, silver, and agriculture companies that we believe could prosper in an inflationary environment.

Contact: Gerard Adams, 1-888-99-NIA US (1888-996-4287), [email protected]

SOURCE National Inflation Association