Collapse of the Global Economy

The World's Fiat Currency System Risks Collapse

May 10, 2010

National Inflation Association - On February 12th, NIA released an article entitled, Greece Distracting from Real Debt Crisis in U.S. in which we said:

"We hope that Greece doesn't get bailed out, because a bailout would cause foreign investors to become more irresponsible than ever and create even greater moral hazards. Unfortunately, not only is it likely that Greece will get bailed out, it's possible our own Federal Reserve will get involved. The U.S. Federal Reserve has the ability to make loans to foreign central banks without disclosure to the U.S. public. European banks have already benefited $50 billion from the U.S.'s bailouts of AIG, so it's not out of the realm of possibility that the Federal Reserve will intervene due to euro-zone countries being key U.S. trading partners."

NIA was right, late Sunday evening the Federal Reserve announced the re-establishment of U.S. dollar liquidity swap facilities with foreign central banks, as a part of the European Union (EU)'s nearly $1 trillion bailout plan. The Federal Open Market Committee has authorized swap lines through January 2011 with the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Swiss National Bank, and the Bank of Japan.

While the Federal Reserve may say these swap lines are necessary "to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and financial centers," NIA recognizes that this is nothing more than another transfer of wealth from the American middle class to bankers around the world through inflation. This program was originally enacted in 2008 when the Federal Reserve loaned $582.8 billion to foreign central banks without any disclosure of which central banks got the money.

NIA believes it is unconstitutional for the Federal Reserve to make loans to foreign central banks. Most likely, the Federal Reserve was pressured by Wall Street to re-establish the swap facilities because Bank of America, Citigroup, JP Morgan, Goldman Sachs and Morgan Stanley have about $2.5 trillion in exposure to Europe, and Wall Street doesn't want to see their bets go bad.

Not only will Americans now be exposed to the European debt crisis through the Federal Reserve's swap lines, but the U.S. will be giving money away to Europe through the IMF. The IMF is contributing up to 220 billion Euros as a part of the bailout, which equals $283.1 billion at the latest exchange rate. The U.S. represents approximately 20% of IMF funding, which means the bailout is costing U.S. taxpayers $56.7 billion, not including the potential losses from loans made by the Federal Reserve and the inflation it will create.

The moral hazards of the EU bailout are immeasurable. It sets a dangerous precedent that the ECB won't allow any eurozone nations to fail, just like the Federal Reserve won't allow any major financial institutions on Wall Street to fail. Eventually, if you don't allow the free market to punish countries and financial institutions that recklessly speculated and made poor financial decisions, the financial crisis we are preventing will turn into a currency crisis that the western world will never be able to recover from. Although NIA still believes the U.S. dollar will win its race to the bottom with the Euro, we are now at risk of a total collapse of the world's fiat currency system.

Imagine if baseball teams weren't allowed to fail. You probably remember playing t-ball as a kid and at the end of every game, both teams were declared the winner. Think about what would happen if Major League Baseball declared there will no longer be losers at professional baseball games, both teams will be declared the winners of every game. Would you still pay $300 for a ticket to see a Major League Baseball game? Of course not, the value of the tickets would collapse to nothing, similar to how fiat currencies will soon lose their purchasing power if we don't allow countries and financial institutions to fail.

NIA is almost done producing its nearly hour-long documentary 'Meltup'. We spent quadruple the time and money producing Meltup than we did producing our previous critically acclaimed documentary 'The Dollar Bubble', which has already surpassed 710,000 views since November 23rd. We believe Meltup will be the best economic documentary ever produced in world history and a must see for yourself, your friends, and your family.

Last week, NIA conducted an hour-long interview with Gerald Celente, founder of the Trends Research Institute. We can honestly say that our interview with Mr. Celente was the single most shocking, insightful and informative interview we have ever witnessed or heard. NIA will be using footage from our interview with Mr. Celente in Meltup. We highly recommend that you visit Mr. Celente's Trends Research Institute and subscribe to his Trends Journal. We just got done reading his latest Trends Journal and it is one of the most compelling pieces of journalism we have ever come across.

The Beginning of Global Economic Chaos

May 6, 2010

National Inflation Association - With the mainstream media focused today on the rioting and civil unrest in Greece, the Dow Jones plunged this afternoon from a decline of 400 points to a decline of nearly 1,000 points within minutes, before rebounding to finish the day down 347. Meanwhile, the price of gold surged $34.40 to a five-month high of $1,209 per ounce.

NIA believes U.S. stocks are extremely overvalued in terms of real money, gold and silver. One of our top ten predictions for 2010 that we announced on December 21st, was that we would see a sharp decline in the Dow/Gold ratio from 9.3 to below 7. After today's decline in the Dow and rise in the price of gold, the Dow/Gold ratio finished the day at 8.7. We expect this downward trend in the Dow/Gold ratio to accelerate in the weeks and months ahead.

On March 5, 2009, with the Dow Jones at its low of 6,594.44, almost all analysts on Wall Street were proclaiming that the U.S. would experience deflation for many years to come. However, NIA released an article that day entitled, The World is Awashed with Dollars. In this article, NIA said:

"It's a real shame that those who lost most of their money in the stock market and Real Estate bubbles, and are now finally selling out after these markets have already collapsed, are positioning themselves to get wiped out all over again through massive inflation."

... The Dow Jones went on to rise as much as 70% after our March 5, 2009, article, and while analysts today are proclaiming the U.S. economy is in the midst of recovery, NIA recognizes the entire rise in the Dow Jones has been due to nothing but inflation. This week's dip in the Dow Jones is only going to persuade the Federal Reserve to keep interest rates at 0% and create further monetary inflation. This will add more fuel to our economic "Meltup" and could lead to hyperinflation a lot sooner than we previously expected.

Standard & Poor's recently downgraded Greece bonds to junk, yet still rates U.S. bonds as AAA. The only thing separating U.S. debt from Greece debt is the Federal Reserve's printing press. NIA believes monetization is even worse than default, and U.S. debt already deserves to be rated junk right now.

The mainstream media puts too much stock in credit ratings agencies; they have already forgotten how Standard & Poor's and Moody's rated CDOs as AAA that were backed by BBB or lower subprime mortgage bonds and didn't downgrade them until it was too late. The media only sees what is happening now; they don't have the foresight to see what crisis will occur next. The debt crisis in Greece is being used to distract Americans from the real debt crisis in the U.S. The rioting and civil unrest in Greece today is nothing compared to what could happen in the U.S. when the U.S. government is inevitably forced to default on its social security obligations.