Is Egypt A Preview of 2015 America?

Tyler Durden's picture

Love them or hate them, only the most self-deluded can claim that the NIA, and its predictions, have been incorrect so far in this monetary 'printing' cycle. Sure they may have an agenda, and yes, Gen Ben may one day pull his money (if he is willing to see the S&P plunge to 666 and well below, so not really), which would kill all commodities, and certainly gold, in their tracks, but focusing solely on their message will have spared many massive real (not nominal) losses as surging commodity prices dwarf the modest pick up in stocks. Today's note from the NIA, while unpleasant, looks at the disastrous long-term consequences of the Chairman's monetary policy, and concludes rightfully so, that absent a diametric shift, which after today's press meeting may well require a revolution as the creature appears to be well on its way to QE3, 4 and so on, what is happening in Egypt is a preview of what will happen in the US in a few short year. Furthermore, the NIA's prediction that rice is up, up and away is in line with what Zero Hedge has been claiming since October (link). Also as a reminder, and as David Tepper just confirmed today, the realization that Rubber is the third and last R-bubble is starting to percolate...

Egypt: Preview of America in 2015, from the NIA
 
The rioting and looting currently taking place in Egypt is primarily a result of massive food inflation and shows what all major cities in the United States will likely look like come year 2015 due to the Federal Reserve's zero percent interest rates and quantitative easing to infinity. On December 16th, 2009, NIA named Time Magazine's 2009 'Person of the Year' Ben Bernanke our 'Villain of the Year', saying he created "unprecedented amounts of inflation in unprecedented ways" and "When it costs $20 for a gallon of milk in a few years, Americans will have nobody to thank more than Bernanke."
 
What started out a few weeks ago as protests in Algeria with citizens chanting "Bring Us Sugar!" and five citizens being killed, quickly spread to civil unrest in Tunisia which saw 14 more civilian deaths, and has now spread to riots in Egypt where 300 Egyptian citizens have been killed. Food inflation in Egypt has reached 20% and citizens in the nation already spend about 40% of their monthly expenditures on food. Americans for decades have been blessed with cheap food, spending only 13% of their expenditures on food, but this is about to change.
 
NIA was the first to predict the recent explosion in agricultural commodity prices in our October 30th, 2009, article entitled, "U.S. Inflation to Appear Next in Food and Agriculture", which said we have a "perfect storm for an explosion in agriculture prices". A couple of months later in 'NIA's Top 10 Predictions for 2010' we predicted "Major Food Shortages" and said, "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". Over the past year, agricultural commodities as a whole have outperformed almost every other type of asset, with silver being one of only a few other assets keeping pace with agriculture. (On December 11th, 2009, NIA declared silver the best investment for the next decade at $17.40 per ounce and it has so far risen 64% to its current price of $28.39 per ounce).
 
The world is at the beginning stages of an all out inflationary panic. Wheat, which NIA previously called on 'NIAnswers' its favorite investment besides gold and silver, is now up to a new 30-month high of $8.63 per bushel and has doubled in price since June of last year. Algeria bought 800,000 tonnes of wheat this past week, bringing their total purchases for the month of January up to 1.8 million tonnes, which was quadruple expectations. Saudi Arabia is also beginning to stockpile their inventories of wheat. Rice futures have gained 8% during the past few days with Bangladesh and Indonesia placing extraordinary large orders. Indonesia's latest rice order was quadruple its normal allotment and Bangladesh plans to double rice purchases this year. Meanwhile, the U.S., which is the world's third largest exporter of rice, is expected to cut production by 25% in 2011.
 
NIA considers rice to be one of the world's most undervalued agricultural commodities at its current price of $15.96 per 100 pounds and forecasts a move back to its 2008 high of $24 per 100 pounds as soon as the end of 2011. NIA believes cotton, at its current price of $1.80 per pound, may have gotten a bit ahead of itself in the short-term. In NIA's first ever article about agriculture on February 17th, 2009, we said that cotton's "upside potential is astronomical" at its then price of $0.44 per pound. NIA pointed to increasing sales to textile companies in China and the fact that cotton was down 70% from its all time high as reasons to be very bullish on cotton at $0.44 per pound. Early NIA members could have made 309% on cotton, but today we see much bigger potential in rice. The recent spike in cotton reminds us of the 2008 spike in oil. Although we believe cotton will ultimately rise above $3 per pound later this decade, we could possibly see a dip to below $1.40 per pound first.
 
Many people in the mainstream media have been criticizing NIA's recent food inflation report, claiming that agricultural commodity prices have very little to do with prices of food in the supermarket. CNBC's Steve Liesman, in particular, claims that "rising commodity prices won't cause inflation". Liesman has it backwards. NIA has never claimed that rising commodity prices cause inflation. Soaring budget deficits that the U.S. government can't possibly pay for through taxation causes inflation when the Fed is forced to monetize the debt by printing money.
 
Rising commodity prices are only a symptom of inflation. The reason NIA was so bullish on agricultural commodities going back two years ago when we produced our first documentary 'Hyperinflation Nation', is because while gold is the best gauge of inflation and is often the best tool for predicting future money printing, agriculture is where the majority of the monetary inflation ends up going after the Fed's newly printed money trickles down to the middle-class and poor. With gold prices already surging two years ago when we produced 'Hyperinflation Nation', NIA said in the documentary "food prices have the potential to surge most during hyperinflation".
 
One thing NIA is almost 100% sure of is that come year 2015, middle-class Americans will be spending at least 30% to 40% of their income on food, similar to Egyptians today. As NIA warned in its latest documentary 'End of Liberty', if you don't have enough money to accumulate physical gold and silver, it is important to begin establishing your own food storage, and store enough food to feed you and your family for at least six months during hyperinflation. Many store shelves in Egypt are now empty after recent panic buying, with shortages of nearly all major staple items throughout the country.
 
The U.S. Treasury is getting ready to sell $72 billion in new long-term bonds next week, as the U.S. rapidly approaches its $14.29 trillion debt limit. The debt limit is now expected to be reached by April 5th and Treasury Secretary Geithner warned the U.S. will see "catastrophic damage" if it isn't raised. With the Federal Reserve now surpassing China and Japan as the largest holder of U.S. treasuries, the real "catastrophic damage" ahead will be hyperinflation as a result of the U.S. government doing absolutely nothing to dramatically reduce spending. It is an absolute joke that Obama during his State of the Union address announced $400 billion in spending cuts over the next 10 years, but then the very next day, the Congressional Budget Office increased its 2011 budget deficit projection by $400 billion to $1.48 trillion.
 
Not raising the debt limit would be a good thing, as it would force Washington to live within its means. Sure, the stock market would collapse and the U.S. economy would enter into its next Great Depression, but at least it would save the U.S. dollar from losing all of its purchasing power. In fact, the standard of living for middle class Americans might actually improve if the government allowed the free market to put our economy into a depression, because goods and services would get cheaper.
 
The U.S. economy has become a drug addict that is dependent on cheap and easy money from the Federal Reserve. While Wall Street bankers took home a record $135 billion in total compensation in 2010, up 5.7% from $128 billion in 2009, this money was stolen from middle-class and poor Americans through inflation. The more monetary inflation (heroin) the Federal Reserve creates in order to satisfy the (in the words of Gerald Celente) "money junkies" on Wall Street, the more middle-class and poor Americans become dependent on unemployment checks and food stamps just to survive. Millions of American students are graduating college with hundreds of thousands of dollars in debt but no jobs. Luckily for them (but not holders of U.S. dollars), NIA is hearing reports from both unemployed and underemployed college graduates with student loans that the government is reducing their required monthly payments by sometimes 90% or more based on their current incomes.
 
China and Japan recently saw their credit ratings downgraded, while the U.S. credit rating remains at "AAA". NIA believes it would make far more sense for the world's largest debtor nation to be downgraded instead of the world's two largest creditor nations. The Federal Reserve's second round of quantitative easing has yet to even reach the halfway point and the Fed already holds about $1.11 trillion in U.S. treasuries. By the time QE2 is over at the end of June, the Fed will own $1.6 trillion in U.S. treasuries, about what China and Japan own combined. Shockingly, Kansas City Fed President Thomas Hoenig is already dropping hints about QE3. According to Hoenig, the Fed may consider extending treasury purchases beyond June 30th, 2010, (the scheduled completion date for QE2) if U.S. economic data looks disappointing.
 
With the Fed taking over as the largest holder of U.S. treasuries, China is beginning to rapidly move away from the U.S. dollar and into gold. In just the first 10 months of 2010, China imported 209 metric tons of gold compared to 45 metric tons in all of 2009, a stunning five-fold increase. While the western world is downplaying the threat of inflation as much as possible, Asian countries understand that hyperinflation is the most devastating thing that can possibly happen to any economy. The demand for gold in Asia right now is the most intense it has ever been, as they look to tackle rising inflation before it becomes hyperinflation.
 
The Chinese are so smart that families are now giving each other gold bullion as gifts instead of traditional red envelopes filled with cash. China is now on track to soon surpass India as the world's largest consumer of gold. The China Securities Regulatory Commission recently gave Beijing-based Lion Fund Management Co. approval to create a fund that will invest into foreign gold ETFs.
 
U.S. stock mutual funds saw $6.7 billion in net inflows during the past two weeks, the most in any two week period since May of 2009. The rioting, looting, and civil unrest in Egypt is now making the U.S. look like the safe haven of the world, even though it should be considered the riskiest place to invest. From the Dow's low in August until now, about $38 billion was actually removed from U.S. stock mutual funds, despite the stock market rising 20%. The Dow Jones has been rising from September until now solely due to the Federal Reserve printing around $350 billion out of thin air. When central banks print money, stock markets often act as a relief valve due to there being too much inflation going into the hands of financial institutions.
 
The U.S. M2 money supply surged by $46.6 billion during the week ending January 17th to a record $8.8623 trillion, following a rise during the previous week of $7.6 billion. The rise in the M2 money supply over the past two weeks of $54.2 billion equals an annualized increase of 16%. The M2 multiplier now stands at 4.218 compared to a long-term average of 10. When QE2 is complete, the Fed's monetary base will likely stand at $2.59 trillion. A return to the long-term average M2 multiplier of 10 means we are due to see a 192% increase in the M2 money supply and that is not even including a possible QE3 and QE4.
 
The U.S. economic ponzi scheme could unravel very quickly in the years ahead, with the velocity of money increasing much faster than anybody expects. As more Americans learn about NIA and become educated to the truth about the U.S. economy and inflation, a complete loss of confidence in the U.S. dollar could occur very suddenly. It is important for all Americans to prepare as if hyperinflation will be here tomorrow. At least in Egypt, their currency still has purchasing power and their citizens are trying to implement a regime change before it is too late. By 2015 in America, it will already be too late and the civil unrest here has the potential to be many times worse.

h/t Robert

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asdasmos's picture

"Gallup Finds U.S. Unemployment Up Slightly in January to 9.8%"

http://www.gallup.com/poll/145922/Gallup-Finds-Unemployment-Slightly-Jan...

Haywood Jablowme's picture

 

Interesting how the purchasing price of military surplus level 2 armor / OTV has gone way up when I first picked some up just 2 short years ago. 

Hell, the gains I could make selling these on ebay today can easily exceed the gains (un-realized) I've made on physical gold / silver in the same time frame.

Surplus armor for the sheep late to the party BIZNITCHES!

 

asdasmos's picture

I sense an insane amount of business prowess.

Thanks for sharing.

/sarcasm

Haywood Jablowme's picture

 

yes, it does take a certain amount of business prowess and business "balls" to put a considerable amount of bullion on the TBTF credit card tab.....   :)

I sense a little bit of envy from a paid government troll.  <sarcasm on>

asdasmos's picture

Make no mistake, there is no government troll here.

 

I am merely commenting on your 'armour' venture.

LowProfile's picture

You don't know anyone who's been in a riot zone (e.g. Rodney King riots in LA), do you?

Let's say your city decides to riot.  The cops are nowhere to be found (they went home to protect their families).

...How much is his spare set of body armor and a shotgun with 100 rounds worth to you now, motherfucker?

 

Cheesy Bastard's picture

That depends. If I already have enough shotguns and body armor, then not so much.  That wasn't really your point, though.  Sorry.

johnnynaps's picture

keep your body armor and your shotgun, you will need them when I drop a piano on your head from 80 floors above!

kengland's picture

Ohhhh suuuree. Our police and military will just stand around and watch. Shit...they can't help themselves over a seatbelt ticket. What do you suppose they'll do when I try taking over?

Michael's picture

Learn about the history of the middle east. Here is a pretty good documentary series.

The Power of Nightmares, (Part 1/3), "Baby it's Cold Outside"
http://video.google.com/videoplay?doc...

The Power of Nightmares Part 2: The Phantom Victory -- by Adam Curtis
http://video.google.com/videoplay?doc...

The Power of Nightmares Part 3: The Shadows in the Cave
http://video.google.com/videoplay?docid=2081592330319789254#

Check out a youtube video I made.

The Precautionary Principle Who Benefits?

http://www.youtube.com/watch?v=4GIkWuuq45I

Mentaliusanything's picture

You will never rise up. Its in the food - Chickens and the cheese now control you. Ingest it ,its good for you.  After You eat you will feel a tiredness come over you and you will lay on the sofa and turn on TV. Its sounds will lull you first by the noise then by the Boredom and it's repetitiousness nature. Then you will sleep in overheated rooms and not feel the shock of freezing cold. You ARE sedated and lulled by all the things that you own but that own you.

When the power goes out, the food shelf bare and the police become not paid but remain a force, Then and only then will you sweat for the preservation of your life. Until then buy the Fucking DIP even though you buy nothing of any value except numbers in space. 

AbandonShip's picture

2015? nah, too soon.

tbd108's picture

Nah. Too late. How about next year when the Super Wal-Marts aren't just busy on the last night of the month with food stamp customers waiting for midnight but are overflowing with food stamp customers angry because the haven't eaten much in the last two weeks.

A Man without Qualities's picture

When was China downgraded?

bunkermeatheadprogeny's picture

I wonder what the Nuevo dollar will look like.

OptionsHedge's picture

How would you play it? Buy commodities? Buy precious metals. Buy TBT? And what would happen to Egypt by then? Save sensationalism. But that's bread and butter.

quasimodo's picture

My thoughts also.....the fat ass MSG laden sheeple will need more time than that to get pissed enough to take it to the streets, as long as we have bread and circus-the game will go on

johnQpublic's picture

ah yes......

BUT,

with the price of bread set to skyrocket and a pending NFL/circus lockout, american idle viewership down 23million folks, mayhap the sheeple go 'dawn of the dead' sooner than later

 

i'm thinking october of this year, 2012 at the very latest

i'm buying silver off of craigslist at 3 bucks below spot for halfs and dollars

6 months food in the house already

the aforementioned body armor

and plenty of shotty shells and sealed russian rounds galore

and the disaster cabin deep in the woods

if shit doesnt go nuts , i'm covered with conventional assets also

straddle playing life

redundancy redundancy redundancy

i dont know how many times i have to say it

I think I need to buy a gun's picture

2011-2012.....not 2015....this thing is coming to a town near us and soon....the monetary system will be backed by gold shortly......

sabra1's picture

look how quickly the riots started. how fast they spread. they know the bernank is responsible. do you all not think that they would want revenge?

GreenSideUp's picture

Monetary system backed by gold?  As in a reset?  2nd time I've heard/read that in as many days.  More info please.  

DoChenRollingBearing's picture

@ I think I need ...      (a drink?)

Yeah, my sense is sooner than 2015.  The Bearing has a poor record of short-term calls, but has a sense that there is too much grit in the system for it to keep rolling until 2015.

I would respectfully have some doubt that a monetary system backed by by gold is coming or even desired.

fofoa.blogspot.com

arkady's picture

When did 300 Egyptians die?  Do they just make these numbers up?

cougar_w's picture

Ha. I suggest adding that in the sidebar under the other "It would be very wise of you... " entry.

Cheesy Bastard's picture

After I make corrections to my comments, how do I get the whiteout off my computer screen?

Pure Evil's picture

Become a screen licker.

 

(Note: not the same as a split licker)

Cheesy Bastard's picture

Cute!  I now know what screen licker means because I googled it.  I'm just gonna guess split licker has something to do with bowling.

OptionsHedge's picture

How would you play it? Buy commodities? Buy precious metals. Buy TBT? And what would happen to Egypt by then? Save sensationalism. But that's bread and butter.

topcallingtroll's picture

Yeah tyler give us some ideas. We want the quant tyler back. Where are you hiding him?

redbud's picture

It you really think everything's going to suddenly freeze up or crash, play it the same as 1978-80. Gold to store, 40% (clad) half dollars and small-bill FRNs for transactions, good set of hand tools, gardening supplies, ammo and such, a well or other water supply, a fireplace or wood stove and chain saw, emergency candles, a store of vitamins and medicines, and enough supplies to eat and stay warm for a year. Gold went from 200 to 800, silver went from 5 to 50, and it didn't take long. And be nice to the old folks in the neighborhood, who can be your best security system ;-). Be prepared, and don't be scared. This too shall pass. 

johnnynaps's picture

stockpile alcohol, buy a motorcycle/bike and read a book on military strategy. Oh yeah, get in shape. Obesity will cost so much more $$$$.

Bicycle Repairman's picture

Get ready to participate in the black market as a buyer and seller.

What do you have to sell?

gwar5's picture

Why wait until 2015?  Things will sink sloooowly..... then boom, it's over. You're screwed! 1929.

That's to get all the suckers to think they still have time. The big fish strike fast. You're the bait.

KickIce's picture

That's how I see it, one of these days we'll wake up and it'll feel like we're in a foreign country.

Pure Evil's picture

I'm already way past the feeling of waking up in a foreign country. I feel like I'm living on an alien planet.

KickIce's picture

It's only going to get worse.  Never could figure out why my team never chose me to give the pre-game pep talk.

DoChenRollingBearing's picture

+ 1

Will get worse.  Prepare!  And try to enjoy these days now, for they will be seen as the Good Old Days...

SgtShaftoe's picture

The NIA should really start thinking multidimensionally.  Yes, inflation is happening, and yes we could have hyperinflation, but the US is unlikely to look like Egypt, It's likely to look like something completely different.  I wrote a post a few days ago about this where I graphed a rolling increase in commodity prices as a percentage of per/capita income: http://freedomofoceania.blogspot.com/2011/01/inflation-impact-to-world-e...

If Bernanke and the other CBs keeps pushing the print button we're going to see more of the same. We've already got inflationary inertia which will be hard to stop.  So we could very well have half of the planet on fire, and China and India near heavily armed conflict, but it probably still won't affect the US like it is affecting the Middle east.  Net, by the time the USA is affected like we see in Egypt, most of the world, including europe will be on fire.

calltoaccount's picture

and what if Americans finally came to understand how badly they have been lied to, cheated, and stolen from by politicians, corporations and others they trusted to be acting in good faith?  

cranky-old-geezer's picture

If nothing has happened by now nothing will happen. Most American will let themselves be reduced to homeless paupers.  TPTB have nothing to worry about, carry on with the looting.

Bicycle Repairman's picture

How do the TPTB loot an underground barter economy?

DoChenRollingBearing's picture

B9K9 earlier today on another thread had a great comment.  He said that we can learn from Egypt's mistakes.  What each of us can do for ourselves when we see first something happen, then the next thing...

SgtShaftoe!  I agree that Europe will get it before we do.  Mostly because of the Muslim underclass and their being further along in Socialism.  But, I really do not see how the USA escapes BIG TROUBLE as we have done NOTHING in solving our financial problems.

Freddie's picture

Why do the kids have bands on their heads?  Obama govt/Google mind control?