A Rapid Increase of the U.S. Money Supply by $14 Trillion Could Cause a Run on the Dollar

Geithner Should Resign as Treasury Secretary

April 20, 2011

NIA - ...NIA constantly receives emails asking us if Paul Ryan's proposed budget were to be implemented instead of Obama's, would the U.S. be able to prevent hyperinflation. The truth is, both Obama's budget and Ryan's budget would leave us with just about the same national debt five years from now.

The constant battles between the Democrats supporting Obama's budget and the Republicans supporting Ryan's budget are simply being used to distract Americans from the real issue, the Federal Reserve's monetization of our debt and the record $1.4 trillion in excess reserves that are currently parked at the Fed.

The Federal Reserve's balance sheet has just reached a record $2.65 trillion. However, excess reserves parked at the Fed are now rising even faster than the Fed's balance sheet. NIA believes that come later this year, the Federal Reserve is likely going to stop paying interest on excess reserves banks have parked at the Fed, in an effort to push this money into the economy. This high-powered money will multiply by as much as ten times as it circulates throughout the U.S. economy, increasing our money supply by $14 trillion.

A rapid increase of our money supply by $14 trillion could potentially cause a run on the dollar, with the world rushing to dump their U.S. dollar reserves for just about any real asset they can get for them.

Inflation is beginning to spiral out of control even by the U.S. government's artificially low calculations. The Bureau of Labor Statistics just reported that the consumer price index (CPI) rose in March by 2.68% over a year ago, compared to the February increase of 2.11% and the November increase of 1.1%. Year-over-year CPI increases have risen 144% since November as a direct result of the Fed's destructive policies, yet the Fed continues to say that inflation is not a problem.

Even though inflation is now way above the Fed's informal inflation target of 1.5% to 2%, the Fed continues to ignore the CPI and only looks at core-CPI, which excludes food and energy and is mainly based off of rents. All gains in U.S. retail sales are now solely due to inflation and all U.S. economic growth is phony. Any temporary decline in the unemployment rate is only a result of the distortions caused by the Fed's printing of money.

Gold has just surpassed $1,500 per ounce and silver has now broken $45 per ounce. These latest movements in gold and silver prices indicate that there is a major risk of hyperinflation breaking out as soon as the second half of 2011.

Average U.S. gas prices are now $3.84 per gallon and are rapidly approaching the all time high of $4.12 per gallon from June of 2008. Unlike 2008, there are no leveraged up hedge funds buying oil futures contracts today. Oil prices are rising as a direct result of the Federal Reserve's zero percent interest rates and quantitative easing. Unless the Federal Reserve acts now to dramatically raise interest rates, $5 per gallon gas is possible by the end of 2011.

When gas prices reach $5 per gallon, there won't be a drop off in demand. It will only encourage the Federal Reserve to print more money so that Americans can afford $5 per gallon gas, which could push gas prices to $6 or $7 per gallon in 2012.

Saudi Arabia is reducing oil production because they have to: their oil reserves have been overstated by 40% and they are past peak oil production. As bad as rising gas prices are for all Americans, they will be hurt by rising food prices even more.

Inventories of gas are not as tight as food inventories, which are now at record lows for such agricultural commodities as corn. NIA has been warning about low agriculture inventories since its first documentary 'Hyperinflation Nation' and accurately predicted this past year's record rise in agricultural commodity prices in its October 30th, 2009, article "U.S. Inflation to Appear Next in Food and Agriculture".

NIA predicts the next major inflation crisis will be in college tuition prices. We are about to experience a record rise in student loan defaults as a result of rapidly rising food and gas prices.

College tuitions are the one area of the U.S. economy, besides healthcare, that did not experience any decline during the financial crisis of 2008. Despite rapidly rising college tuition prices, the value of a college degree is declining at an even faster rate. NIA believes that by the year 2020, we will conservatively see 20% of American colleges and universities close its doors with enrollments in remaining colleges and universities declining by between 15% and 30%.

NIA will expose the facts and truth about the upcoming American college education crisis in its upcoming documentary, 'College Conspiracy'. [See video here.]