“Thanks to the government’s reckless over-spending, continued bailouts, and the Federal Reserve’s easy money policy, this year the purchasing power of the dollar hit an all-time low in the several decades since we went off the gold standard,” said Senator DeMint. “In order to rebuild strength and confidence in our economy, we need both the fiscal discipline to cut wasteful spending and the monetary discipline to restrain further destructive monetizing of our debt. This legislation would encourage wider adoption of sound money measures, and that’s a step in the right direction.”

“Good monetary policy is an important part of a healthy and prosperous economy,” said Senator Lee. “Since the Federal Reserve Act of 1913, the dollar has lost approximately 98 percent of its value. This bill is an important step towards a stable and sound currency whose value is protected from the Fed’s printing press.”

Senator Paul added, “As the government runs massive deficits, uncontrolled spending, and an increasingly unsustainable debt, governments and the bureaucrats in charge are often forced to take an easier approach: to monetize the debt, inflating the currency.  These implications can be devastating, leading to higher interest rates, which lead to higher borrowing costs and slower economic growth, but most importantly, destroying the savings and standard-of-living of all Americans.  This bill will hold politicians and the Federal Reserve accountable; acknowledging that states are serious about an alternative to a weakening dollar.”

The warning signs for our economic problems can no longer be ignored:

• While the value of a dollar is at historic lows, the value of gold is at historic highs

• Recently Standard & Poor’s downgraded the U.S. outlook from “stable” to “negative,” meaning there is a 1 in 3 chance of an actual credit downgrade in the next two years

• The world’s largest bond fund has dumped its U.S. debt-related holdings, over concerns that we will not get our fiscal house in order

• The Federal Reserve is now buying 70 percent of U.S. Treasuries, set to surpass the holdings of both China and Japan combined

http://lee.senate.gov/public/index.cfm/2011/6/demint-lee-paul-offer-bill-to-begin-restoring-sound-money

http://demint.senate.gov/public/index.cfm?p=PressReleases&ContentRecord_id=8da42323-9b6e-45d7-8695-56d21bb3fa53

When asked about the timing of hyperinflation in the United States Williams stated, “That’s the type of thing that could happen at any time, all of the fundamentals are in place.  I do think we’re going to have a dollar crisis.  I can’t give you the precise timing on it, but circumstances are negative for the dollar in terms of relative political stability.  When you look at our government here we can’t control the fiscal conditions.  Our trade deficit is continuing to deteriorate, that’s a negative for the dollar, inflation is rising on a relative basis, that’s a negative for the dollar.

The Fed although it is officially ending QE2, most likely is going to come back with a QE3 and that will debase the dollar and if we are going to debase the dollar the rest of the world generally is not going to want to hold it.”

Read or listen to the entire John Williams interview on King World News

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In 1971, Gross Domestic Product (GDP) was $1.29 trillion.  Today it is $14.6 trillion, nominally.  But adjusted for all the inflating the Fed has been doing, it is only $2.73 trillion, which constitutes only a 1% real increase per year!  So with all this extra money going around, we may appear nominally wealthier, but the reality is, we have barely moved at all.  This is unfortunate especially for the prudent, conscientious savers, whose nest eggs are constantly being devalued.  Unless of course, they have saved in something out of the Fed’s reach, like gold.  While the economy has basically been in a holding pattern against the leeching of wealth by the Fed for 39 years, gold has seen an inflation adjusted increase in value of over 5% per year, if measured in 1971 dollars.  This is due to the Fed’s ability to make dollars plentiful.  And yet, this is the only tactic the Fed can come up with to rescue an economy already devastated by “quantitative easing”, as they call it.

The turmoil in the housing market demonstrates how disastrous it is to flood the economy with fiat money.  Latest events with foreclosures are good examples of mistakes made in the market, in this case, by the banks, in the rush to soak up manipulated currency.  This is why the truly free market depends on sound, honest money, free from false signals of artificially low interest rates.

The government finds ways to spend money even faster than the Fed can create it, bringing our national debt well past the point of the taxpayers ever being able to pay it off.  Other nations who, in the past, have eagerly bought up any amount of debt we produced are now starting to resist.  We are reaching a crucial point at which the dollar will no longer function, and in the absence of a functioning dollar, restoring sound money will be the only alternative.

The truly scary notion is that those in power might allow our system to collapse so chaotically to the detriment of so many people rather than simply obey the Constitution.

Posted by Gerald P. O’Driscoll

Over the weekend, Liu Mingkang, a senior Chinese official, blasted the economic policies of the Obama Administration.  He identified low interest rates in the U.S. as the cause of “massive speculation” that was inflating asset bubbles around the world. The U.S. dollar is being used in what is known as a carry trade and is borrowed cheaply to finance the purchase of real estate in Asian cities like Hong Kong and Singapore. The easy money policies of the Fed are also fueling a boom in commodity prices.

The ordinary American, if not the political class, recognizes that neither the Fed’s monetary actions nor the trillions in spending have helped them. Unemployment is in double digits. Former senior Bush economic adviser Larry Lindsey is reported to have estimated that Americans’ net worth has dropped $13 trillion since the beginning of the recession in December 2007. Americans suffer while speculators profit.

We are on the cusp of a dollar crisis.  President Jimmy Carter faced a similar crisis in his presidency. Carter ousted his own choice for Chairman of the Fed and appointed Paul Volcker to that position. Volcker recognized that the dollar crisis needed to be ended and instituted painful but necessary sound money policies.  President Reagan re-appointed Volcker and together they restored American prosperity. Volcker advises President Obama and can explain to the president why he must act now.

By the way, just a reminder from Mark, silver picked up almost a dollar today, closing at $18.42 per oz.  GoldMoney offers a digital silver account and so does Anglo Far East Bullion.