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Below is Fitzwilson’s exclusive piece for KWN:
“Alfred E. Kahn was a great man. He chaired the Civil Aeronautics Board among many other public service activities. He is mostly remembered for his role as President Carter’s “Inflation Czar” from 1978 until 1980. He was appointed as the chair of the Council on Wage and Price Stability.
During that timeframe, Kahn worried that economic policies in place would lead to a Depression. His was rebuked for his comments, so he took to substituting the word “banana” for Depression. When the banana producers voiced their objection to the association, Kahn started using the word “kumquat” as an alternative to “Depression”.
He was dead on with his predictions, and did his best to get the truth out in front of the public....
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“His warnings were suppressed by the Carter Administration. He had an irrepressible spirit, a strong foundation in ethics and a great sense of humor as we can see. We were reminded of him last week when the unemployment numbers were announced showing an “amazing” decline in such a short period despite a languishing economy. Will miracles never cease?
Over the weekend, the Associated Press announced another slew of miracles. In a story about Social Security Cost of Living Adjustments (COLA), they reported that the increase for 2013 could be the smallest since 1975. According to the article, the COLA has averaged 4.2 percent since 1975.
There have been only 5 times that the increase was below 2 percent since 1975. It is projected to be between 1-2 percent for next year. As with the unemployment numbers, the COLA is also calculated by the Bureau of Labor Statistics.
The word inflation is commonly associated with rising prices. By that metric, inflation is much higher for anyone who eats or drives. It is just common sense and common life experience. By suppressing the COLA, however, it effectively lowers the Federal deficit at the expense of the seniors. It does extend the life of the program, but not the lives of the beneficiaries. Certainly, their quality of life is increasingly diminished.
Deflation is the natural by-product of a functioning economy. We know about economies of scale. Spreading fixed costs over a greater production run lowers prices. Higher volumes allow for lower input prices. Lower input prices have been significantly impacted in the last 200 years by the introduction of what seemed to be unlimited energy, technology and consumers.
Energy and computer technology are tools, no different than the invention of the plow, shovel, or the wheelbarrow. Tools leverage human and animal capabilities. In the last two centuries, a shift occurred never before seen in human history. The ability to feed and shelter an unimaginable number of people became possible. With dramatic advances in medical technology, life expectancies more than doubled.
One can argue that the crowning of deflation as the natural state of healthy economic environment might have been largely derived from the confluence of these largely magnificent changes to our economy. It can be argued that unlimited resources, energy, and food as well as a radical change in our ability to control disease were the sources of our observation and subsequent belief that deflation was the normal state of affairs.
We have highlighted the possibility that our wonderful 200-year economic nirvana is slowly coming to an end. It turned out that we did not have unlimited food, water, energy and other inputs to economic growth. We are approaching a level where the global population cannot be sustained, certainly from an entitlement view. The money is gone, and the bill is coming due.
What if the natural state going forward will be inflation and not deflation? What if the productivity gains we have enjoyed for 200 years are on the wane? As countries and producers compete for resources, will not the new normal be rising prices? We suspect this to be the case. It will not happen overnight, but the signs are all around us for those willing to look.
If true, a new headwind is heading our way. Productivity gains will be on the decline or even negative in addition to the inflation caused by the grotesque printing of money, ballooning entitlements, and an unwillingness by many to help work our way out of this mess.
If one has savings, the simple way to sidestep the financial implications of what lies ahead is to convert them as soon as possible to real assets. Anything left in the current monetary system that is not absolutely necessary will be severely diminished or destroyed.
We are often asked about how much to keep in precious metals. Our response is to ask “how much of your money are you willing to see destroyed?”. Gold and silver are tried and true forms of wealth preservation, but there are others.
Another question we get is about farmland. Over the long-term, farmland should do very well. However, it is not an undiscovered concept. Prices have skyrocketed in many of the prime food producing areas. It certainly can have a place in wealth preservation and diversification, but it is also critical not to overpay in an overheated market.
The U.S. elections are a few weeks away. Sadly, no matter who wins, the trillion dollar deficits, ballooning entitlements and printing will continue apace. Stay focused on wealth preservation. If we are to eventually turn back from the fiscal cliff, it will be a long and hard struggle. Even if victory is achieved, the existing stock of paper-based wealth will be severely impacted unless protected. Time is running short to take action.”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
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Eric King
Expect Severe Inflation, Time Is Running Short To Take Action
Today 40 year veteran, Robert Fitzwilson, wrote the following piece exclusively for King World News. Fitzwilson, who is founder of The Portola Group, warned, “Anything left in the current monetary system that is not absolutely necessary will be severely diminished or destroyed.” He also cautioned, “Time is running short to take action.”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
October 17, 2012
