Thursday, August 04, 2016

Revealing The Real Rate Of Inflation 
Would Crash the System
"The grim reality is that real inflation is 7+% per year .. Unbiased private-sector efforts to calculate the real rate of inflation have yielded a rate of around 7% to 13% per year, depending on the locale--many multiples of the official rate of around 1% per year. So what happens if the status quo accepted the reality of 7+% inflation? Here are a few of the consequences:
1. Social Security beneficiaries would demand annual increases of 7+% instead of zero or near-zero annual increases.
2. Global investors might start demanding yields on Treasury bonds that are above the real rate of inflation. If inflation is running at 7%, then bond buyers would need to earn 8% per year just to earn a real return of 1%.
3. Private-sector interest rates would also rise, crushing private borrowing. 
4. Any serious decline in private and state borrowing would implode the entire system. 
Who's being destroyed by 7+% real inflation? Everyone whose income has stagnated and everyone who depends on wages rather than assets to get by--in other words, the bottom 95%."
- Charles Hugh Smith*
link here to the reference

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