Wednesday, September 2, 2009

How the debt will hurt you- big time!

Excerpts from: Banana Ben Strikes Again By Michael Pento

Apparently having the world's reserve currency drop 13% since March, even as measured against a basket of other flawed fiat currencies isn't enough. And if you were to measure the dollar's performance against hard assets like copper since March, the currency has lost 50%. Yet despite those facts, Fed head Bernanke thought it wise to increase the size of the monetary base by $86 billion just last week alone! . .

In the long run it seems the Fed has acquiesced to the plain truth that having an $11.7 trillion National Debt means that a loose monetary policy is a necessity. Perhaps it was no coincidence the Fed increased its balance sheet in the same week it was announced that the deficit would grow by at least $9 trillion over the next 10 years.

The economic reality is that when a country owes a tremendous debt; it becomes less burdensome and easier to pay off under an environment where the currency is losing value. Of course the citizens of that same country become poorer while they are taxed without their consent through inflation. It is also true that the holders of that country's debt become victims as well. . .

The world's reserve currency can't inflate its way to prosperity. The danger of causing a disorderly decline of the dollar is very high. . .

no country in the history of planet earth was ever able to sharply devalue its currency while bringing about a stable economy and fostering real growth. That's because a strong currency is indicative of a strong country. One that is providing investors with solid economic growth, positive interest rates, a current account surplus and low inflation.

The opposite is evident in a country that is plagued with a chronically falling currency. But eventually a weak dollar will no longer mean the market goes higher. . . And unfortunately, it will also result in a much lower standard of living for most Americans. . .

the Fed has made it abundantly clear that it will rely on an inflationary monetary policy to help the government pay off its debt.


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