{"id":692,"date":"2011-04-20T19:04:35","date_gmt":"2011-04-20T23:04:35","guid":{"rendered":"http:\/\/www.silver-investor.com\/blog\/?p=692"},"modified":"2018-06-10T10:58:17","modified_gmt":"2018-06-10T10:58:17","slug":"watershed-event-for-us","status":"publish","type":"post","link":"https:\/\/www.themorganreport.com\/blog\/watershed-event-for-us\/","title":{"rendered":"Watershed Event for US"},"content":{"rendered":"

Richard (Rick) Mills
\nAhead of the Herd
\nAs a general rule, the most successful man in life is the man who has the best information<\/em>
\n\u00a0Billions of Dollars
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\n\u201cCommon sense tells us that a government central bank creating new money out of thin air depreciates the value of each dollar in circulation<\/em>.” Congressman Ron Paul (R-TX)\u00a0 Declining confidence in paper money is pushing gold and silver from the shadows to center stage.
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\n\u201cThe surge in commodity prices over the past year appears to be largely attributable to a combination of rising global demand and disruptions in global supply. These developments seem unlikely to have persistent effects on consumer inflation or to derail the economic recovery and hence do not<\/strong>, in my view, warrant any substantial shift in the stance of monetary policy<\/strong><\/em>.\u201d Federal Reserve Vice Chairman Janet Yellen
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\n\u201cThere is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen\u2026 the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil<\/em>.\u201d Frederic Bastiat (1801-1850)
\nThe federal deficit this year is a record $1.6 trillion \u2014 a number that requires the government to borrow 43 cents out of every dollar it spends. The US government’s total debt will mushroom from $14.2 trillion now to almost $21 trillion by 2016.
\nObama\u2019s projected $1.6 trillion deficit for the current year would be the highest dollar amount ever. It represents 10.8 percent of the total economy, the highest level since 1945 when the deficit was 21.5 percent of GDP and reflected heavy borrowing to fight the Second World War.
\nThe president’s 2012 budget projects that the deficits total $7.2 trillion over the next 10 years with the shortfalls never coming in below $607 billion.
\nProfessor Peter Bernholz, from the University of Basel, examined 12 of the 29 hyperinflationary episodes where significant data exists.
\n\u201cHyperinflations are always caused by public budget deficits which are largely financed by money creation\u2026The figures demonstrate clearly that deficits amounting to 40 percent or more of expenditures cannot be maintained. They lead to high inflation and hyperinflations<\/em>.\u201d
\nMost analysts quote government deficits as a percentage of GDP:
\n\u201cThe president’s projected $1.6 trillion deficit for the current year\u2026would also represent 10.8 percent of the total economy<\/em>.\u201d
\nThis reporting is misrepresenting the true size of the problem because it doesn\u2019t say how big the deficit is relative to expenditures.
\nOn February 14, 2011, President Obama released his 2012 Federal Budget. The report updated the projected 2011 deficit <\/strong>to $1.645 trillion<\/strong>. This is based on estimated revenues of $2.173 trillion and expenditures of $3.818 trillion<\/strong>.
\nHe then unveiled a $3.73 trillion budget for 2012 with a projected deficit of $1.1 trillion \u2013 a lot of savings\/cuts and revenue assumptions in the 2012 budget appeared to this author, to put it politely, to be pie in the sky. The savings and revenue projections have more to do with the 2012 election than reality \u2013 Obama is trying to appear fiscally responsible to the voters. It also doesn\u2019t look like either party can agree to any cuts except to those in someone else\u2019s (somebody from the other party) back yard.
\nThe US government cannot sell enough of its debt to its own citizens and foreigners to finance its deficit and pay the interest on its existing debt.
\n\u201cYes, we are monetizing debt. You buy bonds and you monetize debt. Right now, a lot of that is going into excess reserves so it is not having an immediate effect on inflation. It will initiate inflationary impulses. It takes time<\/em>.\u201d Thomas Hoenig, President,<\/em> <\/em>Federal Reserve Bank of Kansas City, early March 2011<\/em>
\nThe US government is already buying its own debt – this is the most inflationary thing a country can do – and it looks like we can expect this trend to continue and probably increase.
\nThe Event<\/strong>
\nApril 18th<\/sup> 2011 – Standard & Poor’s Ratings Service lowered its long term outlook for the United States sovereign debt to Negative from Stable.<\/em>
\nMoody’s issued a warning earlier in 2011 saying that its rating could be downgraded if progress isn\u2019t made soon on the $1.5 trillion US budget deficit.<\/em>
\nConclusion<\/strong>
\nAre any countries in the world going to enter into a hyperinflationary episode anytime soon? This writer doesn\u2019t know \u2013 I do know we are experiencing inflation, I think it\u2019s going to get to much higher levels than today\u2019s and I\u2019ve been saying so for quite a while.
\nGold<\/span><\/strong><\/a> and silver<\/span><\/strong><\/a> shine brightest in inflationary times – when your cash is trash your gold and silver are shining – and history proves the greatest leverage to rising precious metal prices are junior companies involved in the discovery and development of precious metal projects.
\nJunior precious metal companies should be on every investors radar screen. Are they on yours?
\nIf not, maybe they should be.
\nRichard (Rick) Mills
\nrick@aheadoftheherd.com<\/a>
\nwww.aheadoftheherd.com<\/a>
\nIf you’re interested in learning more about the junior resource market please come and visit us at www.aheadoftheherd.com<\/a>.
\nMembership is free, no credit card or personal information is asked for.
\n***
\nRichard is host of www.aheadoftheherd.com<\/a> and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold\/Energy Reports, Calgary Herald, Resource Investor, FNArena and Financial Sense.
\n***
\nLegal Notice \/ Disclaimer
\nThis document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.
\n\u00a0Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.
\nFurthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.
\nRichard Mills does not own shares of any companies mentioned in this report<\/p>\n","protected":false},"excerpt":{"rendered":"

Richard (Rick) Mills Ahead of the Herd As a general rule, the most successful man in life is the man who has the best information \u00a0Billions of Dollars \u00a0 \u00a0 \u201cCommon sense tells us that a government central bank creating new money out of thin air depreciates the value of each dollar in circulation.” CongressmanMore<\/a><\/span><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[121,89],"tags":[],"yoast_head":"\nWatershed Event for US<\/title>\n<meta name=\"description\" content=\"Watershed Event for US\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.themorganreport.com\/blog\/watershed-event-for-us\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta 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