"The Dollar Today is worth more then the Dollar of tomorrow"
The Election of 2010 is clouding out the Fed's decision to print more money. I've wondered how once printed, how the government pumps money into the economy. They don't just give it away do they... Wait I guess they do in NO interest loans... Sorry off topic... They "...buy $600 billion in bonds as hedge against deflation"1
1: http://www.csmonitor.com/Business/2010/1103/Federal-Reserve-to-buy-600-billion-in-bonds-as-hedge-against-deflation
Being no Economist, I didn't fully understand how the government prints money and gets that money into the economy. I had in my head the counterfeiter who runs down stairs prints some $100's to pay his land lord at the front door. Don't get me wrong, I'm sure that the government actually does this, but how can they flood the economy with new printed money? I've recently been enlightened as to how they can backup the dump truck to the garage and fill it full of $100s. Buy Bonds! And when you need more bonds to buy, you simply print more and issue them. Great deal! right?
The interesting thing is that the decision does not say that the Fed will stop at 600 billion. It actually says that the Fed will "regularly review and adjust the program as needed to best foster maximum employment and price stability" ie it is open ended... 600 Bil is planned but it could go higher. 2
Ok, so what is the money supply right now... According to CNBC M1 stands at $1.773 trillion 3 or 1,773 billion. So if they pump 600 billion in that reduces the value of the dollar by.... 600/1773 or 33.84% (If any one is a math teacher or simply believes my math is wrong... do post a comment) Or a hair over 1/3 of the value of the dollar. So does that mean the Gold will go up by about 1/3? Lets see... As of this post Gold Spot price is $1354.36 per ounce... Once the government devalues the dollar by 1/3 the new price should be 1,800+ Lets see how fast it takes the dollar to get that bad...
From the first of 2009, I've seen in my purchasing, that about 1/3 of the dollar is already lost!! Then after doing some digging, sure enough the Fed has been buying bonds before... they have been making a bad habit of it. On March 19, 2009 it was reported that the Fed would purchase 300 billion + bad debit securities and other assets. 4 Again... printing more money and pumping it into the economy.
Those of you who know me know that I've been complaining that I've been seeing over the past year about a 1/3 reduction in the value of the dollar already... So it is already true! Price of Gold back on March 31 2009 was $922.60. If you add 1/3 to it, Guess what... it is almost what we have today ~$1,227.05 That is 1/3 IN LESS than one YEAR!!! it is already Proved!
OK... Don't panic.... just tell me what would be the best way to freeze my assets?! Send me your recommendations for dollar freezing. Gold? Silver? Food? Diamonds? Luxury Items? I heard one economist saying that it would be best to simply purchase Luxury Items. Buy your self a new Suit if that is what you like.
1: http://www.csmonitor.com/Business/2010/1103/Federal-Reserve-to-buy-600-billion-in-bonds-as-hedge-against-deflation
