2007 is well under way!
The household debt accounts are all over the internet now. If you have not found them, here is a recap of the disaster waiting to happen:
1999 2006
Household Debt $ 6.4 Trillion $ 12.3 Trillion
Mortgage Debt $ 4.4 Trillion $ 9.33 Trillion (Second Quarter of 2006)
Consumer Debt $ 1.6 Trillion $ 2.4 Trillion
These are staggering figures. Remember that inflation is "An increase in the amount of un-backed currency in circulation." This results in price inflation which is commonly referred to today as simply "inflation." Upon examination of inflation, it is obvious that true inflation cannot be created by companies raising the price of their products, by workers demanding higher pay, or by consumers spending too much. Rather, inflation of the currencies of the world can only be created by central banks and governments who control those FIAT currencies. Central banks and governments increase the amount of un-backed currencies in circulation by printing their FIAT currencies and through the fractional banking system by increasing the available credit. With these facts in mind, examine the increase in un-backed dollars in circulation from only the increase in the household debt level.
Using only this, we can see an increase of almost 6 trillion dollars over the six years. Wow, that is a lot of inflation! Add to that the staggering debt of our governments in America and we are treated to an inflation of dollars never before experience in the history of the world. In fact, it is very likely that this increase of debt exceeds that of the total of all the debt of the many previous years summed together. Thus, we are in un-charted waters and should be, but will not be seeking a graceful way out. We will find that there is no easy way out.
Looking at Economics 101, consumer spending does not create wealth. This is particularly true when the spending is done with borrowed dollars, as is the case today. Even in the re-financing of housing, much of the dollars taken out were used by consumers to live beyond their income level for a temporary higher standard of living. The dollars which were received, were consumed and gone. The result is a great deal of liquidity in the nation today. Almost all of it came from debt.
This liquidity or inflation of the number of dollars in circulation has to go somewhere. Discounting that which was and is being consumed, much is floating around into "investments." Typically, this liquidity flows into first one sector of the market creating rapid price increases in that sector until the bubble gets beyond the ability to long exist and the sector collapses. We saw that in the ".com" industries, in the general stock market, and in the housing industry in recent times. This is causing a few people to wonder about the lasting value of FIAT currencies.
They are looking for a more secure form of value. Tools, equipment, knowledge of technology, and facilities for producing salable products or services have lasting value. Historical true money has been silver and gold. It is true that silver and gold do not earn interest, but they have been a store of purchasing power for centuries.
Central banks and governments are well aware of the fact that where real money (silver and, particularly gold) is readily traded in markets, the people have a great deal of freedom. Thus, they continue in an attempt to discourage, or even forbid the citizens to own or trade using the precious metals. This threatens the FIAT currencies which they can control to exercise more control over citizens. Were we in America to realize this as well as much of the rest of the world, we would have been more thrifty and not sought the easy way to perceived success through substantial increase in our debt.
The debt threatens, particularly, the so-called " middle class" of working people. There will come a time when the earning will not be sufficient to service the debt. It may be that we are now entering the early stages of that period, as we see foreclosures on real estate increasing. You can recall in the early to mid-1980s and the severe drop in home prices. Many people simply locked the doors and moved away giving the homes back to the lenders. Nation wide the foreclosures were in the 1,000s per month in many areas. It can and very likely will happen again.
Inflation and spending binges will not end easily. At some time, it will be necessary to stop both. This is painful, but essential to restore credability and stability of currency. Whether the nations do this voluntarily or when forced to by a colapse of the currency, it will happen. Always has in the past and will in the future, too. The one coming will be the biggest ever experienced as we are well beyond any threat ever experienced.
Will 2007 be the year for restoration of the equilibrium? I do not know. In my very limited mind, I would have thought it would have happened years ago. Certainly, in the last few years. When, is the big question which will be answered in time.
You who read and understand this must feel an urgency about becoming very thrifty. Cut back your spending, reduce and eliminate debt, build a reserve of cash for emergencies, and think of the lasting purchasing power of gold and silver for investment. The mining stocks will boom as the inflation continues.
Think for yourself. Study and prepare. Remember, you are the one most interested in and responsible for your financial security and the proper training of your children. They, too, must be prepared for an uncertain future. Teach them that you may not know the future, but that you and they must depend upon the Sovereign God of all who has the future firmly in His hands.
He knows and cares for His people. As you prayerfully study the Bible, accept the words, and apply them to your life under the power of the Holy Spirit, you and your family will be led in the right direction.
May 2007 be the year of growth in the Lord for you and your family as you enjoy a year of great blessing.
Best to each, Doug
1999 2006
Household Debt $ 6.4 Trillion $ 12.3 Trillion
Mortgage Debt $ 4.4 Trillion $ 9.33 Trillion (Second Quarter of 2006)
Consumer Debt $ 1.6 Trillion $ 2.4 Trillion
These are staggering figures. Remember that inflation is "An increase in the amount of un-backed currency in circulation." This results in price inflation which is commonly referred to today as simply "inflation." Upon examination of inflation, it is obvious that true inflation cannot be created by companies raising the price of their products, by workers demanding higher pay, or by consumers spending too much. Rather, inflation of the currencies of the world can only be created by central banks and governments who control those FIAT currencies. Central banks and governments increase the amount of un-backed currencies in circulation by printing their FIAT currencies and through the fractional banking system by increasing the available credit. With these facts in mind, examine the increase in un-backed dollars in circulation from only the increase in the household debt level.
Using only this, we can see an increase of almost 6 trillion dollars over the six years. Wow, that is a lot of inflation! Add to that the staggering debt of our governments in America and we are treated to an inflation of dollars never before experience in the history of the world. In fact, it is very likely that this increase of debt exceeds that of the total of all the debt of the many previous years summed together. Thus, we are in un-charted waters and should be, but will not be seeking a graceful way out. We will find that there is no easy way out.
Looking at Economics 101, consumer spending does not create wealth. This is particularly true when the spending is done with borrowed dollars, as is the case today. Even in the re-financing of housing, much of the dollars taken out were used by consumers to live beyond their income level for a temporary higher standard of living. The dollars which were received, were consumed and gone. The result is a great deal of liquidity in the nation today. Almost all of it came from debt.
This liquidity or inflation of the number of dollars in circulation has to go somewhere. Discounting that which was and is being consumed, much is floating around into "investments." Typically, this liquidity flows into first one sector of the market creating rapid price increases in that sector until the bubble gets beyond the ability to long exist and the sector collapses. We saw that in the ".com" industries, in the general stock market, and in the housing industry in recent times. This is causing a few people to wonder about the lasting value of FIAT currencies.
They are looking for a more secure form of value. Tools, equipment, knowledge of technology, and facilities for producing salable products or services have lasting value. Historical true money has been silver and gold. It is true that silver and gold do not earn interest, but they have been a store of purchasing power for centuries.
Central banks and governments are well aware of the fact that where real money (silver and, particularly gold) is readily traded in markets, the people have a great deal of freedom. Thus, they continue in an attempt to discourage, or even forbid the citizens to own or trade using the precious metals. This threatens the FIAT currencies which they can control to exercise more control over citizens. Were we in America to realize this as well as much of the rest of the world, we would have been more thrifty and not sought the easy way to perceived success through substantial increase in our debt.
The debt threatens, particularly, the so-called " middle class" of working people. There will come a time when the earning will not be sufficient to service the debt. It may be that we are now entering the early stages of that period, as we see foreclosures on real estate increasing. You can recall in the early to mid-1980s and the severe drop in home prices. Many people simply locked the doors and moved away giving the homes back to the lenders. Nation wide the foreclosures were in the 1,000s per month in many areas. It can and very likely will happen again.
Inflation and spending binges will not end easily. At some time, it will be necessary to stop both. This is painful, but essential to restore credability and stability of currency. Whether the nations do this voluntarily or when forced to by a colapse of the currency, it will happen. Always has in the past and will in the future, too. The one coming will be the biggest ever experienced as we are well beyond any threat ever experienced.
Will 2007 be the year for restoration of the equilibrium? I do not know. In my very limited mind, I would have thought it would have happened years ago. Certainly, in the last few years. When, is the big question which will be answered in time.
You who read and understand this must feel an urgency about becoming very thrifty. Cut back your spending, reduce and eliminate debt, build a reserve of cash for emergencies, and think of the lasting purchasing power of gold and silver for investment. The mining stocks will boom as the inflation continues.
Think for yourself. Study and prepare. Remember, you are the one most interested in and responsible for your financial security and the proper training of your children. They, too, must be prepared for an uncertain future. Teach them that you may not know the future, but that you and they must depend upon the Sovereign God of all who has the future firmly in His hands.
He knows and cares for His people. As you prayerfully study the Bible, accept the words, and apply them to your life under the power of the Holy Spirit, you and your family will be led in the right direction.
May 2007 be the year of growth in the Lord for you and your family as you enjoy a year of great blessing.
Best to each, Doug
posted by Doug @ 10:53 AM
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