Obama Fails to Address Inflation in State of the Union
Politics / Inflation Jan 26, 2011 - 01:03 PM GMTBy: Submissions
President Obama's State of the Union address last night did not make one single mention of inflation, when it is the belief of NIA that massive price inflation (especially food inflation) will become America's top crisis by the end of this calendar year. Obama's speech also failed to mention the Federal Reserve, the Federal Funds Rate being held near 0% for over two years, and the Fed's latest round of $600 billion in quantitative easing. Unless Obama addresses our nation's fiat currency system, nothing else he says has any meaning at all.
After the U.S. lost 8.36 million jobs over a two year period from December of 2007 through December of 2009, our economy has recovered 1.12 million jobs as a result of the Federal Reserve and U.S. government spending $4.6 trillion on bailouts and stimulus programs. That is over $4 million spent for each job created. Instead of bailing out Wall Street and allowing non-productive bankers to receive record bonuses, the U.S. could have sent a check for $550,000 to each middle-class American who lost their job.
When a central bank prints trillions of dollars out of thin air, you are going to see some type of a nominal uptick in economic statistics. Obama can brag all he wants about over 1 million jobs being created, but he continues to ignore what the ultimate cost of it will be. When a government has an annual cash budget deficit of over $1 trillion that cannot possibly be balanced by raising taxes, massive inflation is the inevitable outcome. Our real budget deficit, once you include increases in our unfunded liabilities for Social Security, Medicare, and Medicaid, is already north of $5 trillion. NIA believes the U.S. is now at serious risk of experiencing hyperinflation by the year 2015.
Obama proposed in his speech that "we freeze annual domestic spending for the next five years" saying it "would reduce the deficit by more than $400 billion over the next decade, and will bring discretionary spending to the lowest share of our economy since Dwight Eisenhower was president." The truth is, Obama's proposals, if successfully implemented, would not reduce the deficit by $400 billion over the next decade. They would only cut $400 billion from proposed spending increases. NIA doesn't understand why Obama would even waste his breath talking about reducing the deficit by $400 billion over the next decade, when the Federal Reserve is creating $600 billion in monetary inflation over a period of just eight months. Americans who listened to Obama speak last night wasted over an hour of their time, because until the Federal Reserve raises interest rates and stops printing money, it will be impossible for the U.S. economy to truly recover and become healthy.
Even if the U.S. government cut all discretionary spending down to zero, we would still have a budget deficit from Social Security, Medicare, and Medicaid alone. Surprisingly, Obama admitted that most of the cuts he proposed "only address annual domestic spending, which represents a little more than 12% of our budget." When referring to the Deficit Commission's proposed spending cuts, Obama said "their conclusion is that the only way to tackle our deficit is to cut excessive spending wherever we find it". In what was Obama's most shocking statement of the night, he went on to say, "This means further reducing health care costs, including programs like Medicare and Medicaid, which are the single biggest contributor to our long-term deficit."
This is the closest Obama has ever come to admitting that major cuts to Medicare and Medicaid are necessary, if we want to have any hope of ever balancing our budget. However, NIA is taking Obama's comments with a grain of salt. He immediately changed the subject in the very next sentence, claiming his health care reform law that was enacted last year "will slow these rising costs". He then continued to defend the law saying, "repealing the health care law would add a quarter of a trillion dollars to our deficit."
One week ago, the new Republican-controlled U.S. House of Representatives voted 245-189 to repeal Obama's health care reform law. The House's vote to repeal it is meaningless because it would never pass the U.S. Senate and even if it did, Obama would simply veto it. NIA believes the law should be repealed because it is impossible for government legislation to bring down health care costs. Only the free market can bring down health care costs and the health care reform law will impede the free market more than any piece of legislation has ever impeded the free market in any industry or sector in history. In our opinion, the new health care law is guaranteed to add trillions of dollars to the deficit over the next decade and there is absolutely no chance of Obama ever making the necessary dramatic cuts to Medicare and Medicaid until the U.S. is already in the middle of an outbreak of hyperinflation.
When it comes to Social Security, Obama said we need a "bipartisan solution to strengthen" it and "we must do it without putting at risk current retirees" and "without slashing benefits for future generations". In other words, nobody in Washington is even going to bring up the possibility of cutting or eliminating Social Security, because it would be political suicide for them. We need more honest representatives in Washington like Ron Paul who aren't afraid to speak the truth about the need to cut entitlement programs and inform the American public to the consequences of our government's deficit spending.
Most Americans think they don't have to worry about our country's national debt because our grandchildren are the ones who will ultimately be responsible to pay it off. Unfortunately, it won't just be our grandchildren who feel the pain of our deficit spending and monetary inflation. All Americans with incomes and savings in U.S. dollars along with all foreigners holding dollar-denominated assets will begin to feel the pain of our government's destructive actions in the very near future through massive price inflation and the U.S. dollar losing nearly all of its purchasing power.
One thing from last night's State of the Union address is very clear, Obama is not serious about cutting spending and nobody in Washington has any expectation of the U.S. ever returning to a balanced budget. NIA believes that this past week's dip in the prices of gold and silver is an unbelievable buying opportunity for Americans who already own precious metals as well as those wishing to buy precious metals for the first time. Sure, both gold and silver could dip lower in the short-term, but we can't try to time short-term fluctuations and we need to stay focused on the long-term destruction of the U.S. dollar. In future State of the Union addresses to come in another year or two down the road, the entire focus of the President's speech will likely be on inflation and the collapsing U.S. dollar. When that time comes and mainstream America becomes aware of what NIA members have known for years, we could easily see $5,000 per ounce gold and $500 per ounce silver, and everybody will regret not loading up as much as possible at these levels.
It is important to spread the word about NIA to as many people as possible, as quickly as possible, if you want America to survive hyperinflation. Please tell everybody you know to become members of NIA for free immediately at: http://inflation.us
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