Is Total Financial Meltdown of the U.S. Economy Still Preventable?

“Meltup,” the documentary above, was released last month by the National Inflation Association, and it is a phenomenally important film. If you haven’t yet watched it in its entirety, I suggest investing an hour to do so. It explains in no uncertain terms that the U.S. economy is teetering on the edge of a currency crisis that will lead to hyperinflation.
 

The U.S. media has announced that the worst may be over for the U.S. economic crisis -- the “Great Recession” is over, many would have you believe.

While it would be a great delight to see that happen, every possible piece of evidence I have been able to review does not support this optimism.

The U.S. unemployment rate is at 9.5 percent, as of April 2010, higher than it was for all of 2008 and much of 2009. Meanwhile, Americans are still struggling financially, with an average personal savings rate of just over 3 percent. Nearly half of U.S. workers now have less than $10,000 in retirement savings, and 27 percent have less than $1,000.

Meanwhile, an analysis of government data by USA Today found that Americans are getting less of their personal income from private businesses and more from government benefits like Social Security, unemployment insurance and food stamps.

Income from private businesses is actually now at its lowest share in U.S. history, according to the USA Today report!

This does not paint a rosy picture for the average American family, and when you delve into what’s going on behind the scenes on a national level, the picture gets even gloomier.

No More Gold Standard

The U.S. dollar is being devalued at record pace. Where the value of U.S. currency was once backed by gold, today it is literally created out of thin air. In my past article on surviving in today’s economy, Jim Ehmke, whom I consider an expert in understanding how this system works, stated:

“Until 1971, the world of paper assets and currency was balanced with the gold standard. Gold provided a physical storehouse of wealth that was used to balance trade deficits and prevent unlimited printing of paper money.

Gold established and maintained economic discipline and balance. The use of gold in this fashion was agreed to by all the major countries in what is known as the Bretton Woods Accord.

But when President Nixon dissolved Bretton Woods, the modern world was thrown into uncharted waters; without the discipline of the gold standard, a new era of unlimited money creation was ushered in. Over decades, this eventually spawned an economy based overwhelmingly on debt, deficits, inflation, currency manipulation and unimaginable (at least to most of us) instruments called derivatives.

And now this house of cards is crashing and the economic worst-case scenario, for which few have prepared, is upon us.”

Is Hyperinflation Inevitable?

Congressman Ron Paul has expressed his concern that virtually none of our politicians understand the basics of economics, monetary policy, and free market economics -- an ignorance that could be disastrous for the future of America.

Many people also still do not understand that the Federal Reserve has been given the power, by the U.S. Congress, to create money out of thin air -- money that is not backed by gold.

This is in fact illegal, according to the constitution of the United States.

Yet, the Fed is likely pumping up the market with money printed from thin air to maintain confidence in the stock market (10,000 is the magic number they try to sustain).

But putting your money into this system is a losing proposition. Large hedge funds can easily manipulate the market. They execute trades in milliseconds (having leases or ownership of sophisticated networks) using elaborate formulas that automatically trigger trades before anyone else. This allows them to sell off large amounts of stocks -- purposely manipulating the market.

The bottom line is the stock market is nothing but speculative gambling against the house … and the house will always win.

And, as you can see in the chart below from Goldprice.org, the price of gold is at an all time high. This really is a primary indicator for inflation, as gold has real value and fiat currency printed from thin air creates inflation, which increases the price of gold.

This is also why if you really want to build wealth, you need to invest in tangible items -- land, gold, silver, any tangible item that has real value -- not something in electronic or paper form.

And remember, the Federal Reserve can make virtually any amount of credit available, but as Ron Paul explains, it’s done in a way that is akin to theft, because the money created gets its “value” by diluting the value of the money already held by others.

As a result, the people who are saving money in this system are essentially being robbed. Paul is fond of referring to inflation as a sort of hidden tax. As more and more money is created that is not backed by anything of real value, inflation goes up.

You’re paying for all this money being created when the money you have loses its value.

The people who benefit the most in this system are the ones who get the money first, generally the rich people, while the middle-class and the poor are destroyed and overtaxed. If hyperinflation occurs, it can quickly devastate a country.

We got into this mess, as Paul says, by spending too much, running up debt and printing too much money, and the trend is showing no sign of stopping.

It’s even been suggested that the United States may one day have economic woes on par with Greece, which is faring the worst economically in all of the European Union. For comparison, Greece’s debt is about 115 percent of its gross domestic product (GDP), while the U.S. debt is estimated to reach 140 percent of its GDP by 2030, according to the New York Times.

What to do if Prices Start Rising Through the Roof …

As inflation drives up prices and devalues the dollar, Americans will no longer be able to depend on cheap imports from China, and that includes not only consumer goods but also food. Because of this, coupled with a serious lack of farmers and farmland in the United States, The National Inflation Association is predicting a major food shortage in 2010:

“For the past several decades, most Americans went to college to get a non-productive job on Wall Street and nobody went to school to become a farmer.

There is currently a major lack of farmers in the U.S. and to make matters worse, the Real Estate bubble destroyed immeasurable amounts of farmland to build houses we didn't need and couldn't afford.

Inventories of agricultural products are the lowest they have been in decades yet the prices of many agricultural commodities are down 70% to 80% from their all time highs adjusted for real inflation.

Catastrophic food shortages are possible in 2010, not just in the U.S. but all around the world.”

One of the major solutions to the impending currency crisis, hyperinflation, food shortages and all of the related financial hardships is to return back to our roots as a country. This means supporting the small “mom and pop” shops that get their goods from local suppliers, buying your food from a small local farm, and valuing quality USA-made goods and foods over those that came cheaply from overseas.

As “Meltup” pointed out, if just 20 percent of people begin to act in this way, it will propel a shift in the standards of the United States, a shift that may very well save us economically.