How inflation works.

The concept of inflation and how it works is not clear to many people. And there is a new phenomenon to understand: how statists try to hide it.

Let's start with a hypothetical example so the pure concept can be grasped. Let us take a hypothetical County that is sovereign and issues its own currency: 2 million Talents. The people accept the currency and soon the wages and prices of everything adjusts. There is a problem though: the currency is inconvenient, because the change is difficult to handle. For example, how do people deal with items that cost only a fraction of a Talent? It's difficult. So, the County Council decides to issue a new currency called Dollars. For every Talent turned in, the Bank of the County issues ten Dollars. People are told to adjust wages and prices by a factor of ten. So, prices go up. Is this inflation? The answer is NO. Why not? Because the relation between currency and what it buys remains the same. The ten Dollar you got for one Talent buys what one Talent used to buy.

Now, suppose that the Council is taken over by people voted in by the poorest citizens, who want free education, free health care, free lunches for their kids and so forth. To pay for their promises members of the County Council decide to print another twenty million Dollars to spend on new programs. This makes for forty million dollars total currency. Is this inflation? YES. Why? Because there is more currency without an increase in goods, so the County in fact acquired half the goods and services of the County and the citizens lost half of their property.

The response to inflation is an attempt by the citizens to increase the price of their goods for sale and the wages they get paid.

How about the County Council? If the Council imposes price controls, it will in fact create a Black Market and goods will become scarce and difficult to buy. If the Council does not try to control prices and wages, it will have to issue more currency to keep its promises.

There is a new method for the government to keep prices and wages in check: create a Depression. This is done by instituting the so-called 'mark to market' accounting. The County Council declares that there is no market for houses so the mortgage held by the Bank of the County is worth zero. Commerce pretty much comes to a halt. The County Council issues credit to the Bank of the County so it can keep the economy going. By reducing economic activity, the EFFECTS of inflation (i.e. higher prices and wages) are not seen.

If the citizens remain in the dark as to what is causing the Depression, the Council can keep in power and dole out currency so the citizens do not starve. Inflation now is hidden, but it is there nonetheless. How do we know? Because citizens of other Counties know about the cheapening of the DOLLAR and the value of the DOLLAR with relation to other currencies will decrease. You can see how the Socialists decreased the value of the US dollar with relation to gold. You see, gold has an intrinsic value, which equals the cost of producing it. Ths Socialists in fact had gotten the value of the increase in productivity and spent it on their schemes to buy votes.

Cluless Congress hears from constituents

Watch some amazing recordings of the building Revolution:

http://www.youtube.com/watch?v=a8UjY3YDlwA

Clueless Liberals hear from constituents who are better informed than they are on global "warming," Cap and Tax and Socialized Medicine.

Democrats lie about health care.

I have already posted the lie of Obama (contradicted by his own words as well as others of his party) that we will be allowed to keep our current health insurance if the socialized medicine plan becomes law.

Well, here is another lie by Nancy Pelosi that she suggested the blue dog Dems take home to hoodwink their constituents:

"You have a cap on your costs,
"but not on your benefits."

Only the most credulous, ignorant cretin can imagine that Pelosi is telling the truth. In fact, we already hear from Britain (where socialized medicine is going broke) that health care is rationed so that people with serious illnesses are made to wait and in some institutions patients writhe in pain because they do not have enough tranquilizers.

Where is gold going?

We all know it will go up, it is just the question of when. The reverse head and shoulder formation forecasts the next rally to take gold to $1,300 (because of the size of the head in the formation), but it could do that right away, this fall, or next year. In fact, Sean Broderick forecasts gold to fall near term maybe to as low as $800/oz. So, I decided to look at the technicals myself. The figure shown is GLD, an exchange-traded fund of pure gold that tracks the market. Note the reverse head and shoulder - this implies a near term rise. But, we have seen an upside move from a head and shoulders for the S&P 500 (and that formation implied a drop, which was negated by the bounce from the 200 day moving average. Could something like that happen with gold so the upside move is negated? It could.) So, what else can we deduce from the graph? Apart from the head and shoulders there is the MACD. This is a sort of momentum indicator. Usually, while the MACD is positive, negative indicators are often disregarded. There is one more thing we can learn from the MACD. The near-term indicator in the lower half (blk in color) tends to separate from the red indicator for about two months. Then, whatever move is established by the black line is maintained for about two months. This is a weak reasoning I admit and Broderick could turn out to be right. But, I think that GLD has a month to go before it will further correct.

Obama and Dems want socialized medicine.

Obama's statement that we can keep our insurance (once the govt program is in place) is a lie. Listen to his own words:

http://www.breitbart.tv/uncovered-video-obama-explains-how-his-health-care-plan-will-eliminate-private-insurance/

And the scoop on gold.

I had reported to you the predictions from the Cycle people. According to them, the Stock Market will hit top in 2010 (around April) and crash later like it did in the 20's. Gold will rally by then and hit a top (maybe 1300) in July. The ultimate top gold is predicted for 2011. Details will follow. Let's look at graphs so we can see some data. The first graph is the head and shoulders pattern in the S&P500. The red line is the 200 day moving acreage, while the black line is the 50 day moving average. You see the head and shoulders? (three bumps). It would forecast a drop. The drop did occur, but the graph bounced off the 200 day moving average, negating the formation. Stocks have been advancing ever since.

Now look at the weekly average of gold. It has a reverse head and shoulders which forecasts a rise in gold prices. This predicts a rise in gold prices. But! The reverse of what happened with stocks could occur (gold bouncing down from the 200 day moving average) and the formation will be aborted. The most likely scenario is gold moving to 1,300 soon then move beyond 2,300 by next year.

Silver is said to be slower than gold. Note, though that silver stocks are dropping while demand for silver coin is increasing.

Let's look at the dollar next. The value of the dollar is dropping and that alone will push gold and silver prices higher.

Here are actual gold prices of a gold exchange traded fund. Note that the 50 day and 200 day moving averages are getting further apart. This indicates a long-term continuing rise in gold prices.

Will gold prices bounce off the $1,000/oz resistance again? We will see in the coming weeks.

How the Media demonized G. W. Bush.

Reporting the facts is too important of a job to be left to Reporters and other Liberals. The book of R. Emmett Tyrrell Jr. describes how the Liberal Media demonized "W" with lies.

"Hurricane Katrina became the first hurricane ever to be attributed to a sitting president, namely George W. Bush ... Up there in the Kultursmog the media were very indignant: Ten thousand people perished, possibly 10 million. CNN reported small-arms fire aimed at rescue helicopters. CNN's Miss Paul Zahn mentioned 'bands of rapists going block to block.' On the authoritative 'Oprah Winfrey Show,' New Orleans Police Chief Eddie Compass reported that in the Superdome 'little babies are getting raped' ... Sen. Mary Landrieu notified a national television audience that 'we have gotten reports, but unconfirmed, of some of our deputies and sheriffs that have been either injured or killed' and she expressed her strong and inextinguishable yearning to 'punch' the president. On 'Larry King Live,' Mr. Dan Rather summed up the media's historic moment: '[The media] took us there to the hurricane. They put the facts in front of us, and very important, they sucked up their guts and talked truth to power.' Alas, by the end of September all of the reports [cited] were found to be false."

It became an iconic phrase among Liberals that Bush bungled the hurricane. In the kultursmog, mentally challenged Liberals in the Media forgot to point out that the primary responsibility for preparing New Orleans for the Hurricane fell to Mayor Nagin and the Governor of Louisiana, both Democrats. But, the citizens of Louisiana remembered and elected a Republican for Governor. So, when another hurricane hit New Orleans, people were evacuated, the levees held and Media lies were kept at a minimum. The Media were disappointed.