PrepareToday!

An excerpt from the EVG Research Team…

Our ears perked up when we saw a Wall Street Journal Op-Ed penned by Alan Blinder.  In just a few paragraphs he basically called for the Federal Reserve to put the final inflationary nail in the coffin.

And if Ben Bernanke took his advice, we’d be in big trouble.

Of course, Alan Blinder doesn’t think he’s calling for hyperinflation.  But we think he’s playing with dangerous materials in a chemistry set he doesn’t fully understand.

Here’s why we think Alan Blinder is about to blow us all up. 

First, Forget Their Definition of Inflation...

Mainstream economists define inflation as the rate at which prices of goods and services rise.

But we favor the definition used by the Austrian school of economics. They define inflation as an increase in the money supply.

The reasoning is a simple case of supply and demand. 

When there’s less supply of something in high demand, the price goes up. But as you add to the supply, there's more to go around and the price falls.

So when the Federal Reserve increases the money supply, the dollar falls in value, just as the law of supply and demand tells us it should.

Yet for some reason… 

Tripled the Money Supply Lightning Fast

In September of 2008, on the verge of economic crisis, there was $844 billion dollars of actual currency in existence.

In response to the crisis, the Federal Reserve rapidly DOUBLED the amount of currency in circulation. In just 3 months it reached $1.69 TRILLION.

By May 2011, the money supply reached $2.56 - tripling 2008’s numbers.  

And we’re currently sitting with $2.65 trillion.

That’s more than 3 times the amount of currency in 2008.

But if our definition is accurate, and the money supply has increased three-fold since 2008... why haven’t prices gone up three-fold?

There’s Money Sitting on the Sidelines

First of all, an increase in the money supply doesn’t always raise prices evenly across the board.  Because money tends to enter the economy unevenly, it affects prices unevenly.

Big banks, Wall Street investors and their friends are usually the first ones to access the excess money. 

And so usually it’s an investment asset class that rises in price first. Afterwards, the money continues to circulate around the economy and prices go up across the board. 

However, that’s not the real reason prices haven’t doubled or tripled... yet.

The real reason is, the banks haven’t let the money flow into the economy.

Of the $2.65 trillion currently in existence, $1.5 trillion exists as excess reserves banks are not lending out.

The Federal Reserve actually pays the banks interest of .25% - or 25 basis points - to keep their money on reserve.

This has kept the money from entering the economy and causing inflation.  But...

Now There Are Calls to Release 

That Money into the Economy

Mainstream economists, with their foolhearty view on inflation, are calling on the Federal Reserve to force banks to “start lending again” and release these reserves into the economy.

Here’s exactly what Alan Blinder said in a recent WSJ piece:

“Lower the interest rate paid on excess reserves. The basic idea is simple. If the Fed reduces the reward for holding excess reserves, banks will hold less of them—which means they will have to find something else to do with the money, such as lending it out or putting it in the capital markets.

“My suggestion is to push it lower in two stages. First, test the waters by cutting the interest on excess reserves… to zero. Then, if nothing goes wrong, drop it to, say, minus-25 basis points—that is, charge banks a fee for holding their money at the Fed. Doing so would provide a powerful incentive for banks to disgorge some of their idle reserves.”

Alan Blinder is begging the Federal Reserve to essentially force banks to start lending... unleashing $1.5 TRILLION dollars into the economy.  That’s double the entire money supply in existence less than 4 years ago!

Hold Onto Your Hat...

Once that money hits the markets, inflation will flood into the economy.

The money inside your checking account will appear smaller and smaller.

And the worst part is... this isn’t some radical plan or conspiracy theory.  This is exactly what countries like Denmark are already doing.

The European Central Bank - the equivalent of our Federal Reserve - just dropped their interest payments on reserves to zero.  That’s the first step in Alan Blinder’s plan, and charging banks on their reserves seems the obvious next step.

If the US Federal Reserve decides to follow their lead, then you need to duck, cover...

and Get Prepared For Inflation 

Thanks, EVG Team! 

Folks, the BEST way to hedge against inflation: Get Gold and Silver

The best TIME to get Gold and Silver? NOW!

Friends, EVERYONE can afford to do this. 

Gold and Silver are NOT merely for the wealthy… I am living proof!

Send an eMail with the word "RICH" in your Subject Bar and I'll fill you in!

Don't delay, please.