Tax Withholding

http://www.theburningplatform.com/?p=55702

Ben Bernanke Just Told a Massive Lie About Milton Friedman and I Can Prove it

http://libertyblitzkrieg.com/2012/10/01/ben-bernanke-just-told-a-massive-lie-about-milton-friedman-and-i-can-prove-it/

Inflation is pending--but when?

According to Milton Friedman and his fellow monetary theorists, an increase in the money supply precedes consumer price inflation--but with a time lag.

http://www.caseyresearch.com/library/articles/3037/when-will-inflation-really-hit-us?/

Excerpts:

What the monetarists (or the first of them to be equipped with computers) found was that when the growth rate of the money supply rises:

* The initial effect is on the prices of bonds and stocks, an effect that comes within a few months.

* The peak effect on the growth rate of economic activity comes about 18 to 30 months after the pick-up in the growth rate of the money supply.

* The peak effect on the rate of consumer price inflation comes about 12 to 18 months after that, which is to say it comes 30 to 48 months after the peak growth rate in the money supply.

Specific to this financial cycle:

If you apply the findings of the monetarists to the present situation, here's what you get. The peak growth rate in the money supply occurred last December, so based on the general monetarist schedule:

* Some of the effect on stocks and bonds should already have been felt.


* The peak effect on economic activity should come between the middle of 2010 and the middle of 2011.

* The peak effect on consumer price inflation should come between the middle of 2011 and the end of 2012.

Investment implications:

1. When you hear would-be opinion leaders cite the current absence of rising prices at the supermarket as proof that all the new money isn't a source of inflation, don't believe them. It is much too early for the inflation bomb to be going off, even though the powder has been packed and the fuse has been lit.

2. If the large and growing federal deficits and the Federal Reserve's unprecedentedly easy policies tempt you to leverage up on inflation-sensitive assets, such as gold, give the idea a second thought. It likely will be a year or more until price inflation becomes obvious and undeniable (which is what it would take to bring the general public into the gold market). In the meantime, your inflation-sensitive assets could get paddled rudely as the deleveraging that began last year continues.

For at least the next year, the simple, fire-and-forget strategy is 50-50 gold and cash – gold for what looks to be inevitable but on its own schedule, cash to be ready for the bargains that may show up while we're waiting for the inevitable to arrive.

Time to look up Merriam-Webster Dictionary

Out of curiosity, I looked up the definition of "counterfeiting". According to Merriam-Webster:

counterfeit - to imitate or feign especially with intent to deceive ; also : to make a fraudulent replica of.

The Federal Reserve Bank and US Treasury are printing dollars out of thin air, at an alarming rate. They've done so repeatedly. How is this any different from counterfeiting?

In fact, since the Federal Reserved Bank was formed in 1913, the dollar has declined 97% in value. In other words, today's $1 bill is equivalent to $0.03 almost 100 years ago.

Meanwhile, an ounce of gold 5,000 years ago got you some nice threads. Today, it still enables you to get a nice suit. The US Dollar? Not sure you can get a brand new Calvin Klein suit for $15 these days.

Deficit spending is essentially government-sanctioned counterfeiting. And as Milton Friedman correctly surmised, "Inflation is taxation without legislation."

Ludwig von Mises--why you should know him

The great Austrian School Economist, Ludwig von Mises wrote, "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The question is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

In other words, Mises, unlike the followers of economist John Maynard Keynes, is of the opinion that governments (and central banks) should stop trying to interfere with market forces. Government intervention via fiscal and monetary policy cannot "control" markets, and cannot prevent booms or busts--they occur naturally, and hence, should be allowed to run their course. All intervention will do is compound and exacerbate said credit expansions and subsequent busts. In other words, they not only create bubbles--they make them bigger, and when they pop, they create bigger busts.

Obama, as bright and insightful as he is, is naturally bending to human nature--the consensus is to solve this huge private, corporation, and institutional debt crisis by replacing it with much larger government debt. In other words, we are compounding a billion dollar debt problem into a trillion dollar debt problem.

While stimulative short-term (public and private works, for instance), it is detrimental long-term, as our generation and future generations are saddled with huge debts and high taxation. Despite cosmetic rhetoric, we are merely deferring out debts into the future, letting them compound at an alarming rate.

The resulting inflation reduces that debt amount into the future, but inflation also punishes savers and investors. Eventually, investors will demand higher rates of return. The combination of capital flooding the markets, and said capital chasing fewer resources (commodities, crops, oil, basic metals, and precious metals), will also cause interest rates to rise.

Inflation is the furthest worry of policymakers and the general public right now, but it will eventually rear its ugly head.

In the immortal words of the recently mortal Milton Friedman: "Inflation is taxation without legislation."