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Real inflation pegged at 8.4%?

'We are on trajectory to crush middle class within 5 years'

The government's Consumer Price Index recently announced that inflation over the last 12 months has been 2.7 percent, so why does there seem to be so much month left at the end of the paycheck these days?

Perhaps it's because the actual inflation – the dollars and cents that consumers have to pay to cover their living expenses, food, clothing, utilities and such – actually are well above 8 percent, not 2.7 percent. And one expert says that's not an accident.

"The reality is that we are following virtually the same economic playbook as we did 80 years ago in dealing with the Great Depression, which resulted in a false recovery, followed by the most painful contraction in U.S. history with a 25 percent unemployment rate,” says Craig Smith, of Swiss America Trading Corp. and the author of "Crashing the Dollar: How to Survive a Global Currency Collapse."

"In 1929 we decided to borrow, print and spend money that we did not have in order to prompt a 'recovery.' It didn't work then and it will not work now. In my opinion it is going to take not only a credit downgrade, but the potential loss of the U.S. dollar's Global Reserve Currency status before the proper decisions are made to address the underlying problems."

"Get ready to have the value of your time, labor and dollar assets also headed for a major downgrade!" says Smith.

He cited the work of Shadowstats.com, which reveals that the Producer Price Index increased 0.7 percent last month, which equates to an 8.4 percent annual wholesale inflation in the pipeline for consumers.

The group reported, "Prices are rising much faster than wages by any standard."

John Williams of Shadowstats explained that since 1980, the federal Bureau of Labor Statistics has changed the way it calculates the Consumer Price Index – in order to account for the substitution of products, improvements in quality and other things.

Recalculating the data without the methodological changes BLS began in 1990 reveals inflation getting worse, the organization said.

"Near-term circumstances generally have continued to deteriorate," said Williams. "Though not yet commonly recognized, there is both an intensifying double-dip recession and a rapidly escalating inflation problem."

"Until such time as financial-market expectations catch up with underlying reality, reporting generally will continue to show higher-than-expected inflation and weaker-than-expected economic results in the month and months ahead," the group's report said.

Smith said his organization has released a white paper that explains to consumers just exactly how difficult the scenario is becoming.

"What this means to consumers is scary indeed," Smith's report suggests. "Inflation data last month confirms that the cost of living is rising much faster than wages. We are on a trajectory to crush the middle class within five years unless urgent, decisive action is taken now. The traditional safety net of home equity today no longer exists."

Smith noted many consumers have been deceived into thinking that high inflation is the inadvertent byproduct of misguided or unlucky government policies.

But the white paper reveals "inflation IS the government policy. The approaching tidal wave has been deliberately set in motion."

It explains that beneath the surface, inflation is being used as a government tool for: 1) helping political friends and harming enemies, 2) advancing an ideology, 3) secret taxation, here and abroad, 4) social engineering, 5) wealth redistribution, and ultimately 6) absolute power.

Smith notes that Americans know inflation can be dangerous, so why do politicians and central bankers keep printing money?

"The answer is that inflation is many things in addition to devaluation of the currency," Smith said. "Inflation is literally becoming a new kind of governance," an "Inflatocracy," he said, "that imposes its own sinister rules and alternative values, values quite different from those of America's Founders."

http://www.wnd.com/?pageId=297657

May 11, 2011

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