Before I get to the 4 reasons, I just wanted to cover an interesting bit of related news today…
Answer me one thing – if Japan, whose economy is closely related to ours just reported 7.1% inflation for last month (producer prices), why is our inflation level much lower according to the government?
I’ll tell you why – because it’s BULL! We have manipulated the figures for years now and at some point, it will become too obvious to hide. If you want the truth on US inflation numbers, click on “Shadowstats” to the right under resources. That site provides loads of data on true inflation and reveals what official inflation numbers would read if our government did not change the way inflation was calculated.
Let’s think of a few reasons why your government does not want to report the true, higher inflation numbers:
1. The Fed would be pressured to raise rates, increasing US borrowing costs and thereby increasing our national debt
2. Inflation would be officially higher than bond yields, which could cause bond yields to rise (and inversely, bond prices to collapse) destroying the bond market
3. Imagine the COLA (cost of living adjustments) that would be required on Social Security and inflation-adjusted pensions across the US. Social Security AND those pensions would face traumatizing budgetary issues!
4. Any semblance of economic growth would halt immediately (if it’s not already dead) and all the pieces of our economy hanging on to the thread of artificially lower rates (people on adjustable mortgages, bank bailouts, brokerage bailouts, companies relying on cheap debt to refinance their bonds) would fall off and plummet.
As you can see, our government has a vested interest in keeping this charade up. Unfortunately, going through a period of pain is the cleansing our economy needs even though your government is doing everything it can to avoid the pain. However, it won’t work in my opinion – the pain will come.
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