December 21, 2009
NIA's Top 10 Predictions for 2010
The National Inflation Association is pleased to announce its top 10 predictions for 2010.
1) We will learn the 2009 holiday shopping season was a bust.
The Commerce Department reported seasonally adjusted November retail sales up 1.3% from October. However, if you apply the average seasonal adjustments that were used during the years 2006 and 2007, which account for a normal spike in November sales due to the holiday shopping season, retail sales were actually down 1.3% in November.
NIA believes any year-over-year increase in 2009 holiday season retail sales will be bottom bouncing from 2008 and not an indication of an economic recovery. Most likely, adjusted for inflation, retail sales will be flat over a year ago. We expect to see a sharp sell off in many retail stocks, as a full economic recovery appears to be already priced into their share prices.
2) We will see a major decline in the Dow/Gold ratio.
The Dow/Gold ratio is currently 9.3, having bounced from the low of 7 it saw in early 2009. We are likely to see a decline in the Dow/Gold ratio to below 7 in 2010.
Many people who have bought U.S. stocks on the bet of an economic recovery, will soon realize the economy is not recovering and stocks have been rallying only due to inflation. Although some people selling stocks may once again mistakenly move to the U.S. dollar as a safe haven, we believe an increasing amount of people will avoid the U.S. dollar and buy gold as a safe haven.
3) We will see a sharp decline in the Gold/Silver ratio.
The Gold/Silver ratio is currently 64, above the average of the past 100 years of 50. Between the years 1,000 and 1,873 when silver was used as real money, the Gold/Silver ratio traded between 10 and 16. In recent history, the Gold/Silver ratio dipped below 20 on two occasions, once in 1968 and once again in 1980.
NIA believes silver prices will continue to outperform gold in 2010, as the world once again begins looking at silver as money, instead of just an industrial metal. The Gold/Silver ratio could decline to below 50 in 2010.
4) The U.S. Dollar Index will see short-term bounce, then huge crash.
We are at a point where there are more people who are bearish on the U.S. dollar than ever before, which means from a technical standpoint it is overdue for a short-term bounce. However, we would not consider going long the dollar even as a trade. A huge crash in the U.S. dollar could occur at any time.
The world has become flooded with U.S. dollars. Foreigners currently hold over $10 trillion in dollar-denominated assets that can be dumped at any time. With the Federal Reserve continuing to expand its monetary base to record highs, as soon as banks begin lending their excess reserves we could see a spike in consumer prices and a rush to get out of U.S. dollars.
5) Oil will rise back above $100 per barrel.
We expect oil's next rise above $100 per barrel to be fueled almost entirely by inflation. This time around, it won't matter if there's another substantial decline in oil demand from the U.S. We expect oil prices to rise regardless of if Americans can afford it or not.
NIA believes any decrease in demand from the U.S. will be more than made up for by increasing demand from China and India. There hasn't been any major new oil discoveries made in decades and the Federal Reserve's printing of money will surely outpace the discovery of new oil fields.
6) There will be a move towards a Libertarian third-party.
Americans are waking up to the charade that has been taking place in Washington. Power has been going back and forth between two political parties who do nothing but multiply each other's mistakes. Both the Democrats and Republicans are equally responsible for the economic mess our country is in today.
In the last Presidential election, Americans had a choice between two candidates who both supported the government's destructive stimulus plans and bailouts. In the next Presidential election, we believe a third-party candidate will have a serious chance of being elected for the first time in history. We anticipate seeing a new leader emerge and a Libertarian movement begin in 2010.
7) Peter Schiff and Rand Paul will both win Republican primaries and be elected to U.S. Senate.
We are huge supporters of Peter Schiff and Rand Paul who are seeking the Republican nominations for U.S. Senate in the states of Connecticut and Kentucky respectively. They are both Libertarians at heart but realize their best chance to be elected is to run under the title of a Republican.
We need Peter Schiff and Rand Paul to join Ron Paul in Washington so that we at least have three elected representatives that understand the truth about our economy and the need to reverse the hyperinflationary course our country is currently on. Although they may be underdogs because they don't have the support of special interest groups, Peter Schiff and Rand Paul will have huge grassroots support from educated Americans who will travel from all states to volunteer for their campaigns.
8) Large 'End the Fed' Protests.
In 2009, hundreds of people gathered for several 'End the Fed' protests in front of Federal Reserve buildings nationwide. However, the turnout for these events paled in comparison to the millions of Americans who participated in health care protests and town hall meetings.
In 2010, more Americans will realize that it is the Federal Reserve that is the cause of most of our nation's economic problems. While the health care debate divided our nation 50/50, we believe 100% of all Americans will want to end the Federal Reserve as prices of food and other goods needed to live start rising through the roof.
9) Major Food Shortages.
For the past several decades, most Americans went to college to get a non-productive job on Wall Street and nobody went to school to become a farmer. There is currently a major lack of farmers in the U.S. and to make matters worse, the Real Estate bubble destroyed immeasurable amounts of farmland to build houses we didn't need and couldn't afford.
Inventories of agricultural products are the lowest they have been in decades yet the prices of many agricultural commodities are down 70% to 80% from their all time highs adjusted for real inflation. Catastrophic food shortages are possible in 2010, not just in the U.S. but all around the world.
10) Paul Volcker Resigns.
This may be a long shot but Paul Volcker, Chairman of President Obama's Economic Recovery Advisory Board, could become frustrated with the Obama administration and resign in 2010. Paul Volcker, as former Chairman of the Federal Reserve, was responsible for getting our economy out of the inflationary crisis of the 1970s by raising the federal funds rate up to a peak of 20%.
With interest rates currently being held by the Federal Reserve at an artificially low level of 0%, we believe Paul Volcker must know that a currency crisis is coming that will make the inflation of the 1970s look miniscule. If Paul Volcker wants to preserve his reputation and legacy, he must leave the Obama administration, which is unlikely to seriously consider any of his advice.
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