People are running around trying to figure out why in the heck the price of everything from gas to food to electricity is going nuts.

Many, including some not so well educated financial analysts call this inflation.

The truth is, inflation is not the price of things increasing. When prices rise, this is merely the symptom of what true inflation is: adding more currency to the money supply.

This is not rocket science. When you have more of something, it is worth less. Therefore, if you add more dollars to the available supply of dollars, obviously each dollar is worth less. Preposterous you say? Well let me put it another way, if dollars were as common as rocks lying on the ground, how valuable would they be? Obviously they would not be worth much. Therefore one of the key requirements of any form of currency is that it remains somewhat scarce. So, when the Fed pumps billions of dollars into the economy to rescue our financial system, people cheer because the system goes on for another day.

What many do not realize, is that every time they do, it raises the costs of everything from bread to gasoline.

This of course causes devaluation of the dollar, and inflation, which are essentially the same thing. Devaluation means the dollar is worth less, and inflation means (to most people) that things cost more. It is not that the things we buy are actually worth more, its just that our dollars are worth less, so it takes more dollars to buy the same thing that less dollar bought in the past.

My dear reader I know you are a smart cookie, and you arent so dumb that you will actually fall for the governments reported statistics on inflation. Especially since they have chosen to change the way inflation is measured, by leaving out little things like the cost of food and energy.

The chart below shows the rate at which the Fed is continuing to add dollars to the available pool of currency. As you can see, it is approaching 20%, yet the government reports “core inflation” (a term that is applicable only to the aliens living on planet Washington, because they obviously dont shop for groceries where you and I do) at less than 4%.

Now we come back to my ‘forever rant’. Gold and silver are some of the only ways you can protect the value of your wealth given todays financial landscape. If you are storing it in dollars, I feel sorry for you because it is being devalued at a horrendous rate. If you are storing it in the stock market, again, I feel sorry for you, because it is only a matter of time before the baby boomers who put all their retirement money into the stock market, causing it to rise, start taking their money out to finance retirement, which will obviously cause it to fall. The question is, will you be the first, or the last to get your money out?

Gold on the other hand has retained its purchasing power for thousands of years. Did you know, that an ounce of gold would clothe a man in the finest clothing available thousands of years ago? Guess what, today, an ounce of gold will still, clothe a man in the finest clothing available. 75 years ago $20 would likewise buy you an entire wardrobe, yet what can you buy today with that same $20?

Got gold yet?

Join our newsletter if you want the inside scoop on what is really happening in the gold and silver markets. Or you could of course just stick your head in the sand like everyone else, and pretend it will all just go away. Youre smarter than that!

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This chart shows best and worst performing sectors. I find it interesting that even after a massive correction in march, gold still stands out as second best performer over the last 52-weeks. Add to that the historical average for oil:gold of around 15:1, and gold should probably be closer to $1680.00.

Many think the bull market in gold is over. I beg to differ. If you want to know the real fundamentals behind why gold, silver, commodities and energy arent done yet, join our newsletter.

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By ANDREW BATSON
April 10, 2008; Page A1

Inflation is back.

After several years of relative stability, a wave of rising prices is washing over the world economy.

It comes at a most inconvenient time. The Federal Reserve is sharply cutting U.S interest rates — the opposite of the usual response to rising inflation — to prevent the housing bust and credit crisis from causing a deep, prolonged recession. That’s making the global response to inflation more complicated.

Consumer prices in the U.S., Europe and other rich countries are projected to rise 2.6% this year, the highest inflation rate since 1995, the International Monetary Fund said Wednesday. In the U.S., consumer prices in February were 4% above year-ago levels. The 15 countries that share the euro currently see inflation of 3.5%, a decade high and well above the European Central Bank’s preferred range. Even Japan, long plagued by flat or falling prices, is seeing modest inflation.

Rising prices for food, energy and other raw materials account for much of the pickup in inflation rates. High food and energy costs hit developing countries — where consumers spend a larger share of income on those necessities — particularly hard. In recent weeks, protests over rising costs have shaken countries from Vietnam, where prices are up 19.4% from last year, to Egypt.

On Wednesday, the World Bank estimated global food prices have risen 83% over the past three years, threatening recent strides in poverty reduction. The IMF forecast consumer prices in emerging and developing countries will rise 7.4% this year, the most inflation since 2001 though still well below the double-digit levels of the recent past.

Some of the factors driving inflation vary from country to country: union-negotiated wage hikes in Germany, pork shortages in China, an electricity squeeze in South Africa, pay rises for civil servants in India.

But the fact that inflation is rising almost everywhere suggests some of its causes are global. As crops are sold for alternative-energy production, food prices have soared: The price of rice, the staple for billions of Asians, is up 147% over the past year. Increasing demand for natural resources among developing economies such as India and China has pushed up prices for raw materials world-wide. Oil-supply constraints have sent crude-oil futures surging above $112 a barrel Wednesday, a new record, resulting in rising fuel and transportation prices.

The weakening U.S. dollar is another source. Not only is it pushing up prices of American imports, it is transmitting inflation to the dozens of economies that link their currencies to the U.S. dollar, from Saudi Arabia to Hong Kong to Mongolia. Because of their currency pegs, these economies are forced to track Fed rate cuts even if they aren’t facing recession. That is putting upward pressure on their prices. Additionally, years of easy credit earlier this decade — the result of a global quest to avoid falling prices, or deflation — are a contributing factor.

An increasingly global economy may also be a culprit. Globalization got some credit for low inflation in recent years: The economic rise of China, India and the former Soviet Union helped expand the global work force and increase manufacturing capacity, holding down the prices of many goods. But the economic boom in emerging markets also means their currencies and prices are steadily rising, boosting the prices rich countries pay for imports from those poorer countries.

“Overall, the effects of globalization have ceased — probably in the long term — to be spontaneously disinflationary,” Christian Noyer, governor of the Bank of France, said last month.

Rising prices cut consumer spending power, especially among the poor. They can also stir bad memories of dislocation caused by previous bouts of inflation. Fears of inflation, in turn, can spur more of it: If households and companies come to think of rising prices as normal, that can create self-fulfilling expectations that keep inflation high. Inflation clouds the price signals that let market economies function and makes it harder for businesses to plan.

“It’s hard to reverse inflation expectations once they’ve risen,” says Kenneth Rogoff, a Harvard University professor and former chief IMF economist.

Food and Energy

For now, rising food and energy prices are inflation’s prime drivers. Core inflation, a measure that excludes volatile food and energy prices, is not rising as quickly as overall inflation. But commodity-price gains are beginning to work their way through the global economy. Even if commodity prices stay where they are, global inflation could continue rising for months to come as companies react to previous price rises.

The world’s largest iron producer, Brazil’s Companhia Vale do Rio Doce, known as Vale, got its customers to agree to a 65% price increase on ore from its main mine this year, far larger than last year’s 9.5% increase. That led steelmakers like Baosteel Group Corp., China’s biggest, to raise product prices by 17% to 20% in recent months.

“It will have a pretty big effect on our material costs,” Jim Owens, chief executive of Caterpillar Inc., the big U.S. maker of construction equipment and engines, said on a recent visit to Beijing. Caterpillar is preparing price increases of up to 5% on its products to take effect by July.

In St. Louis, Solutia Inc. is raising prices for resins used to make laminated glass by up to 40%, blaming climbing costs for materials, energy and transportation. “We are now at a point where sourcing raw materials at continuously higher prices makes no sense for our business, unless the effects are passed on,” said Solutia Vice President Luc De Temmerman.

Kimberly-Clark Corp., maker of household goods, began raising prices in February between 4% and 7% for some paper products, including Huggies diapers, Cottonelle bath tissue and Viva paper towels. Hershey Foods Corp. raised the selling price of its chocolate bars 13% in February after boosting prices between 4% and 5% in April 2007. Hanesbrands Inc., which owns the Champion and Hanes apparel lines, has warned that sustained high cotton prices could filter through to retail prices.

Pricey Cab Rides

In Temecula, Calif., Gary Byler, owner of Southwest City Coach, has raised the fares for his four-taxi fleet for the first time in the 10 years he has been in business. His base fare has gone from $1 to $2.50 and the per-mile charge from $2.50 to $2.75. “Insurance costs have gone up 40%. Fuel prices have doubled,” he said.

Just as there is variation in the level of inflation — from 1% in Japan to 17% in Latvia — countries’ responses to it vary. Central bankers in the U.S and the United Kingdom are focusing on the risks of recession, so they are cutting rates even at the risk of fueling inflation. Others are attempting to drive inflation down: Central bankers in Australia, Chile, China, Colombia, Hungary, Poland, Russia, South Africa, Sweden and Taiwan all have raised interest rates recently.

The trade-off between maintaining growth and fighting inflation is particularly difficult in Europe, where banks are also under strain and inflation is picking up. The European Central Bank considers inflation a bigger worry than the fallout from the U.S. credit crisis. It fears soaring energy and food prices will spill over into wages and other prices. So despite persistent money-market tensions, the ECB has refused to cut rates. It is expected to hold that line in its meeting Thursday.

Flash Point

Germany’s recent wage gains are a flash point. Last week, some two million German public-sector workers won a nearly 8% pay raise over two years, their biggest settlement in 16 years. In March, some 93,000 German steelworkers won a 5.2% wage hike, while train drivers picked up an 8% pay increase spread over two years.

In Slovenia on Saturday, some 10,000 protesters from across the Continent gathered at a conference of central bankers to agitate for higher wages. They got a cold response. “It would be an enormous mistake to imitate Germany,” ECB president Jean-Claude Trichet told a news conference afterward, noting recent German wage restraint allowed workers there some space to catch up.

In the U.S., Fed officials are concerned that food and energy prices have increased inflation even though the economy is sliding into recession. But they are generally confident that inflation will recede as rising unemployment prevents workers from winning wage increases.

Handling social pressures from inflation is tricky. China has raised minimum wages to moderate inflation’s impact on living standards, but Premier Wen Jiabao has also promised the government will ensure that average inflation this year won’t accelerate past last year’s 4.8%.

That’s intended to reassure people like Monica Li, a 40-year-old travel agent in Beijing. She says her daughter’s kindergarten just raised its fees to cover higher costs for lunches. Now Ms. Li is worried that costs for health care and housing are also headed upward. “It could really be a problem for us if inflation today, which is mainly in food and other necessities, leads to a series of chain reactions,” Ms. Li says.

Countries have long tried to buy stability by fixing their currencies, more or less tightly, to the U.S. dollar. Now those decisions are contributing to inflation in Asia and the Middle East. Central banks in countries with strict dollar pegs must follow the Fed’s rate cuts: If they don’t, investors seeking higher returns would move money to these countries, placing upward pressure on their currencies and imperiling their dollar pegs. Hong Kong has mirrored the Fed’s recent rate cuts, igniting the local property market. Housing prices there were up 31% from a year earlier in January, and rising rents are now feeding inflation.

Countries that both peg their currencies and export commodities are experiencing an inflationary double whammy. As nations from the Middle East to Mongolia earn income from selling resources, rising commodities prices are stimulating the local economy and feeding inflation. Meanwhile, these economies are feeling the effects of rising global prices for food and raw materials. Inflationary pressure is further heightened as their central banks match Fed rate cuts.

Problems in Mongolia

This complicates life even on Mongolia’s steppes, where many people are nomadic herders and food prices tend to fluctuate by season and weather. The country’s currency, the togrog, is unofficially pegged to the U.S. dollar, boosting prices. As the country’s income from copper exports surged, inflation reached 15.1% at the end of 2007.

Similarly, inflation is stoking instability amid the Middle East’s energy-fed boom. In Qatar, a rich emirate jutting into the Persian Gulf, surging revenue from natural-gas sales have led to more government spending. This year’s budget is 46% higher than last year’s, and more than four times the spending of just six years ago. Much of that is going to build highways, airports, infrastructure and schools. Says Yousef Hussain Kamal, Qatar’s finance minister: “The surplus is huge.”

So is inflation, at 13.7% on the year in the last quarter of 2007. In part that’s because Qatar followed its currency peg and moved in step with the Fed’s rate cuts. The region’s low-paid expatriate work force was hit hard. While local inflation means higher food and housing costs, the value of workers’ savings — which they often send home to families — is sinking with the dollar. That has triggered strikes and riots in the United Arab Emirates by construction workers.

Commodity exporters with more flexible currencies have been better at containing rising prices. Inflation in Canada, a big oil producer, has been lower than expected, at just 1.8% in February year-on-year. The central bank attributes that in part to the surge in the Canadian dollar, up 17% against the U.S. dollar in 2007. Australia, a major exporter of coal and iron ore, has also seen its currency rise, and its central bank has been steadily raising rates to cool the economy. Inflation was 3% in December.

“Australia has done all right because the currency has been quite strong, and interest rates are high,” says Ben Simpfendorfer, an economist for Royal Bank of Scotland. “The Gulf might have looked more like Australia if it weren’t for the pegs.”

Absorbing the Pain

Central banks, especially the Fed, are hoping that slowing growth in the U.S. and Europe will ease inflationary pressures globally, especially when fast-growing emerging economies begin to feel the slowdown’s pain. Some economists argue that current commodity prices are higher than underlying demand can justify, and predict they could fall sharply if speculators retreat and global growth eases. And, at some point, the Fed will stop cutting U.S. rates, helping arrest the decline in the dollar and the inflationary side-effects.

“Inflation almost always falls during economic downturns. The Fed has history on its side,” says Julian Jessop, an economist with Capital Economics in London. He expects inflation to be much lower globally a year from now, and the new IMF forecast does, too. Nonetheless, he says, “The outlook for inflation is much more uncertain than it has been for a while.”

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What Will Drive Gold Price Higher?

by Thomas Tan, CFA

Even we are now in the middle of a correction of a great bull run on gold, I expect this consolidation will take less time to finish than the last correction between mid-2006 to last August.

By the time it is done, we should see gold decisively breaking the $1,000 level at both weekly and monthly charts. Meanwhile, I would like to discuss the new demand driving gold this time which is different than 1970s.

Most of the people refer the current gold bull market as the repeat of 1970s. This is true, especially there are many similarities of price movement between the two. For commodities, at the end of the day, it is demand and supply which drives the prices. I see the demand for gold is more robust now than 1970s. In 1970s, before abandoning the gold standard, gold had been fixed at $35. Once this cap was lifted, we saw gold exploded to over $200 in 3 years. Then there was a severe correction bringing gold back to around $100. After 2 years of correction, similar to mid-2006 to last August, gold again took off in a spectacular run, from $100 all the way to over $800 in 3 years. At the peak of this bull market, people were waiting in line outside the banks to purchase gold. However, in 1970s, the participants were mainly people living in the west hemisphere, particularly in the US, Canada and Europe, with some limited participation from a few other Asian financial centers such as Hong Kong, Japan, Singapore and Taiwan.

This time, I see the participants have been much wider and broader geographically, because the financial market is a lot larger, more global and liquid today than 1970s. It includes the so-called BRIC regions such as Asia (China and India), Eastern Europe (Russia), Latin America, and don’t forget about the oil rich Middle East. This should not be a big surprise since these countries such as China have already been the driving force beyond the current boom of many commodities, just look at what has happened to oil, steel, copper, coal, agricultural products, to name a few.

From demand standpoint, the situation of heavy debt consumers in the US may not have as much spare money as 1970s to buy gold this time, however I expect this reduction in demand on individual basis will be more than offset by our now larger population and larger capital base than 1970s. If US dollar falls fast against other foreign currencies, coupled with higher inflation, people in the US will feel a strong need to diversify from paper assets in their nest eggs. They will dump stocks and bonds to purchase gold for protection and safehaven reasons, since commodities, especially gold, will provide better hedge than stocks and bonds in a inflationary environment with falling currency.

There have been some newspaper articles discussing the lost decade by comparing current credit crisis with either 1970s in US or last decade in Japan. There are some differences. US family was actually a lot more affluent then than now. In the 1970s, a single income from a family of 4 could live very comfortably and afford a higher living standard than today. People were not as leveraged, and housing, credit card, auto loan were not an issue at that time. People had a much higher saving rate, more discretionary spending. Interest coverage ratio per average family was much higher, so was the payback ability. Same thing can’t be said today. In that sense, it can be argued the current credit turmoil is more painful and difficult than 1970s.

Same thing for Japan in the 1990s. Even more and more Japanese got into the negative housing equity problem due to falling real estate price, as we are facing today, Japanese were never as heavy in debt as us, neither their government. What they chose to do was to use the incomes (both household and banks) to write off the bad loans, year by year slowly and gradually. This is why recession in Japan had prolonged for over a decade, mainly reflecting an inefficient financial system by their government not allowing commercial banks to fail. But this process, even it is long, is less painful short term, as far as there is still net income in the family and net profit for banks.

US will not take the same route as Japan, so I expect the process here will be a lot faster but more painful. Living standard will be lower, assets, especially houses, will lose more value, general equity and bond market will suffer further losses, and inflation will be a lot higher in double digits, at the end of this process. At the same time, I am very pessimistic on the greenback, and see US dollar falling much further in next several years, at least another 25% before we run through the whole process.

This process itself would fuel gold and silver to new all-time highs well into 4 digits. Meanwhile, I see new players not in 1970s mentioned above will drive gold even higher. After many years of gold bear market, in general, investment level in gold is still at a very low level. Let us just look at China. After many years of government controlled market and ration, Chinese citizens have minimum personal assets until recently, let alone gold. This is why you see that China’s private and public sectors are already gearing up for increased business in gold trade.

The China Banking Regulatory Commission (CBRC) just issued permits allowing Chinese commercial banks to trade gold futures on the Shanghai Futures Exchange (SHFE). Commercial banks are required to be members of the Shanghai Gold Exchange (SGE), China’s sole spot gold trading platform, and the SHFE, before conducting gold futures trading through the SHFE. Chinese commercial banks are spot gold trade dealers, and some of them are granted gold import and export qualification enabling them
participate in the global spot gold trade. All these changes are driven by gold demand from both individual investors and institutions. Due to long tradition of using gold as currency, and modern history of several hyperinflation periods and government changes, Chinese have a strong trust in gold, but not any other paper currencies or assets. The current sluggish stock market probably triggers some rush to invest in the yellow metal. When prices hit a record of $1,030 an ounce recently, people rushed out to buy $300M worth of gold alone in one day. The roughly 10% drop recently does not seem to have dampened enthusiasm among Chinese investors, because they believe there is still lots of rooms for further gains. Meanwhile, many investors are also buying paper gold, a relative new form of gold investment. Figures from the Shanghai branch of the Central Bank show that trade in paper gold products has surged dramatically since the start of the year.

A commonly purchased unit of physical or paper gold in China is one small gold bar, 5 tael, or roughly 6 oz. here. Just do a simple but conservative calculation, 2% of 1 billion people own a single gold bar, it translates to 120 million oz of gold. I think it is a conservative estimate, the ultimate demand in the future including paper gold can be several folds higher cumulatively. Keep in mind that the whole world produces only about 75 million oz gold per year.

Moreover, there is evidence and news China’s Central Bank is methodically diversifying its foreign reserves out of the US dollar into other and hard currencies which will include gold, as one of the ways to diversify away from dollar-denominated assets. This kind of activities have been reported by other central banks as well. According to the latest report, China’s foreign exchange reserves rose by $118.9B in the first two months of the year to $1.65 trillion. Even a 5% conversion into gold will turn into about 85 million oz of gold, again more than a year’s production by the whole world. A 5% in gold is relative small by central bank standard. In 1970s, Central Bank of Taiwan had actually almost all their foreign reserves in gold.

I even see the day when international gold will be quoted in Renminbi along with US dollar and Euro, due to trading activities. China’s exponentially growing gold demand alone will influence the gold price dramatically, not talking about other regions. Don’t get scared by the current correction on gold. It is a typical and healthy correction before gold assumes its run again.

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Alex’s Notes: Every now and then I run across an article where someone is seriously indignant, and irritated to the point where they go off on a flame that looks almost as if the person writing it has gone stark raving mad.

Until I read it and it occurs to me that most of it is the truth.

This of course would be terribly depressing if I didn’t own gold and silver. Do you?

—————————-

The Forbidden Financial Topic: U.S. National Debt
Mike Adams
NaturalNews
Wednesday, April 02, 2008

As we wind our way towards an election between the numerous professional liars who have been put forward as candidates for U.S. President, it seems to be a great time to remind us all about the financial issue being routinely ignored by virtually everyone (except Ron Paul, of course, who was never really embraced by the “please lie to me” mainstream public). To what financial issue am I referring? The national debt, of course.

Americans don’t want to hear about the national debt. It’s like a family living paycheck to paycheck, maxed out on their credit cards, trying to pretend the collection notices are all being lost in the mail. They don’t want to admit they have no ability to actually pay off the debt they’ve incurred by pursuing a flamboyoant lifestyle, blowing wads of cash on high-priced wines, luxury vehicles, and an occassional line of coke — they desperately want to imagine they can keep living on money that appears from nowhere, regardless of how much they owe to everybody else and the fact that their incomes don’t even come close to matching their expenditures.

See the related Counterthink Cartoon on this topic at: http://www.naturalnews.com/022931.html

Too bad every household in America doesn’t have its own Federal Reserve, huh? If it did, we could all just print money to pay off our debt, save our skins, and ignore the fundamentals of economics. But even in Washington today (and New York), the Federal Reserve is too busy bailing out greedy, criminally-operated banks to turn much attention to the much larger issue of the United States’ national debt. Apparently, saving the banks is more important than anything else, and the Fed is now committed to destroying the U.S. dollar through runaway hyperinflation in order to prevent a few rich bankers from facing the consequences of their outrageous sub-prime lending sprees.

America runs its finances like a crack addict

But let’s get back to the national debt for a moment. The United States government is broke. The only reason it’s been able to operate for this long is because other nations and foreign central banks have been foolish enough to keep lending the U.S. government more money. It’s like giving cash to a crack addict and hoping he will somehow seek out a drug rehab center on his own.

This is the person who never gets a job, never makes an honest living, but yet somehow manages to hit up everybody else for cash. You know how it works: “I need to buy a car to get a job,” they say. And then when you pony up the cash for their car, they get drunk and wreck the car, and they never try very hard to get a job in the first place. They keep spending and spending, tossing money down the drain on blows of crack, meth, heroin or booze. They promise to go into rehab someday, if you’ll only help them through “the next month” with a little more cash. This is the life of a drug addict. (Do you know one? Everybody does, it seems…)

America is that drug addict. It borrows cash from the central banks around the world, blowing it all on Medicare prescription benefits signed into law by Bush (money for drugs, see?). It spends trillions on military campaigns that accomplish nothing positive, yet enrage the global community and recruit lifelong enemies of this nation. Notice how the price of oil has more than tripled since the war with Iraq started? It’s so bad now that truck drivers are going on strike over the price of diesel.

America spends money not merely like a drunken sailor, but like a crack-addicted sailor with a wheelbarrel piled high with one-hundred dollar bills, locked in a room full of Gov. Spitzer’s favorite hookers and a suitcase spilling over with blow.

Don’t dare explain the national debt to anyone

But try to explain the simple workings of finance, debt and economics to the uninformed, and you’ll be accused of being a doomsayer, a pessimist, or — the worst insult in today’s fear-based society — unpatriotic! How dare you point out the economic truths that will soon bring this country’s federal government to its knees! Such blatant truths shall not be tolerated… especially not in a country whose entire financial system is based on a cascade of fictional financial instruments propped up by nothing more than wishful thinking and Enron-style accounting fraud.

Let me translate all this for you in serious terms: The United States is already broke. The Federal Reserve is destroying the currency. The U.S. dollar will soon be virtually worthless. There is no saving the dollar, and there’s no saving the savings of any U.S. citizen foolish enough to be holding dollars when the music stops. The Federal Reserve has already decided to do anything in its power to save the rich bankers; even if it means destroying the value of all the dollars held by hard-working Americans. The day will come, folks, when your savings accounts will all be “recalibrated” and you’ll be given ten cents on the dollar while the Fed slinks away with 90% of your savings, using it to bail out overpaid bank owners.

And the federal government? Under a long string of presidential crooks — Democratic and Republican alike — it has decided to pursue a dangerous experiment called, “What happens if we never pay our debtors while running up more debt?” That experiment, not surprisingly, will end in the financial demise of this nation. (But there’s good news: A new, better system may emerge from the dust of the greenback… keep reading…)

You can’t defy the laws of gravity… nor economics

These aren’t careless predictions, by the way. These are simple observations the follow the fundamentals. Why are the nations of the world fleeing the U.S. Treasury debt auctions? Why are dollars increasingly worthless everywhere except in the United States itself? The answer is because the Fed is hyperinflating the currency to save the banks, even while the government is snorting yet more crack and spending unprecedented levels of increasingly-worthless dollars on drugs and war (or, as they call it, “medication and defense”).

Hence the bumper sticker: Annoy everyone. Explain the national debt. People don’t want to hear this. They’d rather imagine none of these problems exist; that debt doesn’t matter; that unlimited dollars can be created out of nothing with zero impact on peoples’ savings; that the U.S. government is wise enough to avert financial disaster. These are the hopes of the deluded. These are precisely the ramblings of Enron’s accountants before the crash, or dot-com stock pushers before that crash. They’re the slobbering blatherings of all the people who said housing prices will never fall, and therefore everyone will get rich off the never-ending housing price booms!

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