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2010 Inflation Report
2010 Inflation Report
INFLATION
ASSOCIATION
2010
U.S. Inflation Report
www.inflation.us
June 2010
I
Social Security, unemployment compensation, welfare, and
nflation, simply explained, is the printing of other entitlement programs. The U.S. government had a
money. As the Federal Reserve prints money by budget deficit in fiscal year 2009 of $1.4 trillion, which is
expanding the money supply, the U.S. dollar loses projected to reach $1.6 trillion in fiscal year 2010. Congress
its purchasing power. Since the creation of the recently raised our national debt ceiling to $14.3 trillion,
Federal Reserve in 1913, the U.S. dollar has lost over 95% which we will easily hit in less than one year.
of its purchasing power. Considering that the purpose of the When a U.S. corporation is publicly traded on the stock
Federal Reserve was to end the business cycle and preserve exchange, it is expected to follow Generally Accepted
the purchasing power of the U.S. dollar, the Federal Reserve Accounting Principles (GAAP). GAAP forces companies
has been the greatest failure in American history. to not only report cash earnings losses, but also non-cash
The U.S. constitution stated that only gold and silver losses from the increase in liabilities on its balance sheet.
shall be used as legal lender for payments. The U.S. dollar The U.S. government does not follow GAAP when report-
was backed by gold until the U.S. government defaulted on ing its budget deficit. The official U.S. budget deficit recog-
its gold obligations when President Nixon ended the gold nizes only our government’s cash losses. Once you account
standard in 1971. A shocking number of Americans still for increases in our unfunded liabilities for Social Security,
believe the U.S. dollar is backed by gold today, but today it Medicare and Medicaid, our actual 2009 budget deficit was
is backed only by faith and confidence that it will always be $4.3 trillion, more than triple the reported cash deficit of
accepted as money. The U.S. dollar is now a “fiat currency”, $1.4 trillion.
as is all major currencies in circulation around the world. It took 25 years for our official national debt to double
The very existence of the Federal Reserve and the print- from $257 billion in 1950 to $533 billion in 1975. On Sep-
ing of fiat U.S. dollars is unconstitutional, yet there is still tember 30th, 2003, the U.S. ended fiscal year 2003 with a
no widespread outrage about it. Americans have come to national debt of $6.78 trillion. This means that a few months
accept inflation as being normal. Most Americans either from now, the latest doubling of our national debt will have
remember or hear stories from family members about how occurred in just 7 years! Our official national debt is now
60 years ago it cost only 5 cents for a glass bottle of Coca- growing more than 3 1/2 times faster than decades ago.
Cola, 5 cents for a Hershey chocolate bar, and 15 cents for It is the Federal Reserve’s manipulation of interest rates
a burger at McDonald’s, but inflation is still the last concern that create the booms and busts our economy has experi-
on their minds because these tremendous price increases enced over recent decades. In 2001, the U.S. was faced with
occurred over a very long period of time. NIA believes it is a collapsing dot-com bubble, which was going to send the
possible for the price inflation Americans have experienced U.S. economy into a depression. During the years 1998-
over the past 60 years, to occur all over again on a percent- 2000, companies like eToys.com had market caps of many
age basis within the next 6 years. billions of dollars despite having very little in revenue
America’s financial problems today all arise from the and large net losses. eToys.com had a market cap ($10.3
government having too much debt. The official U.S. na- billion) at its peak that was 2 1/2 times larger than Toys R
tional debt has just surpassed $13 trillion. This does not in- Us (eToys.com lost $29 million that year while Toys R Us
clude the debts of Fannie Mae and Freddie Mac, which are reported a $372 million profit).
now backed by the Federal Government. Once you include Although a depression in 2001 would’ve been painful for
Fannie/Freddie’s debts of $6.3 trillion, our real national many Americans in the short-term, it would’ve been very
debt is now $19.3 trillion. The U.S. also has $60 trillion healthy for the U.S. economy over the long-term. The free-
in unfunded liabilities for Social Security, Medicare and market would’ve cleaned up the excesses that were taking
Medicaid, which bring our total obligations to $79.3 trillion place and we would already have a very prosperous and
or about 5 1/2 times our gross domestic product (GDP) of fundamentally sound economy today.
$14.6 trillion. With consumer spending now making up 71% Instead of allowing the free-market to operate, Federal
of our GDP (compared to the long-term average of 65%), it Reserve Chairman Alan Greenspan was determined to do
is impossible for the U.S. to ever pay its national debt and everything in his power to prevent a depression from taking
unfunded liabilities through taxation. place. Greenspan lowered the Federal Funds Rate from a
Total U.S. tax receipts in 2009 were only $2.105 trillion, high of 6.5% in 2000 to a low of 1% in 2003, but this did
less than the $2.112 trillion Americans received from the not prevent companies like eToys from going bankrupt (KB
government last year in the form of transfer payments for Toys acquired eToys’ assets in Chapter 11 bankruptcy for $5