By Chriss W. Street

Deflation is a concept many Americans have a tough time understanding.  They do understand the concept of Social Security.  As Federal budget deficits soaring, the public is being barraged by late night advertisements to buy gold as an inflationary hedge.  Unfortunately, the deflationary environment we are facing today is the biggest threat to the Social Security check Joe the Plumber is counting on for retirement.

The definition of deflation as a decrease in the general prices of goods and services may be simple, but a Google search for articles on deflation generates 3.5 million “hits”, versus a whopping 354 million “hits” for inflation.  This demonstrates that Americans are 100 to 1 more knowledgeable of inflation!

There have only been three bouts of deflation in the United States since its founding over 200 years ago. The first was the recession of 1836, when the currency in the United States contracted by about 30%.  The second was after 1865, when the Nation returned to a gold standard by retiring paper money printed during the Civil War.  The third period was the Great Depression, when prices and output fell by 25% from 1928 to 1933.  Very few Americans are familiar with the specifics of what happened during these periods, but they know it was a bad time for the “common man.”

Social Security was established during the Great Depression and continues to be the most important income stream for America’s seniors.  A large majority of the 16 million people over age 65 rely on Social Security for at least half of their income.  One-third of this group relies on Social Security for over 90% of their income.  Most retirees have come to rely on the annual cost-of-living increases in their check to make their life better.  In a deflationary environment we are facing today, few recipients are prepared for their check to actually shrink.

Social Security tax collections provide a very reliable gauge of strength or weakness of employment conditions for 160 million U.S. workers.  Ominously, for the first six months of 2010, Social Security Trust Fund collections are down 5% and benefit payments are up 4%.  This is the first cash flow deficit in the history of Social Security.

The 2009 Social Security’s annual report predicted Social Security would exceed payouts through at least 2016 and would continue to be solvent through at least 2037.  However, these erroneous assumptions were based on an average unemployment rate of 8.2 percent in 2009 and 8.8 percent this year.  With nearly 1 in 10 Americans still unemployed, Social Security is accelerating its race towards insolvency – we have finally reached the tipping point.

Ben Bernanke the Federal Reserve Chairman and 2009 “Time Man of the Year”, made his reputation as an expert on the Great Depression.  In a 2002 speech titled “Deflation: Making Sure ‘It’ Doesn’t Happen Here”, The Chairman was asked if deflation was a threat to the economic health of the United States in the near future.  His response:

“So, is deflation a threat to the economic health of the United States? Not to leave you in suspense, I believe that the chance of significant deflation in the United States in the foreseeable future is extremely small, for two principal reasons. The first is the resilience and structural stability of the U.S. economy itself. Over the years, the U.S. economy has shown a remarkable ability to absorb shocks of all kinds, to recover, and to continue to grow. Flexible and efficient markets for labor and capital, an entrepreneurial tradition, and a general willingness to tolerate and even embrace technological and economic change all contribute to this resiliency. A particularly important protective factor in the current environment is the strength of our financial system: Despite the adverse shocks of the past year, our banking system remains healthy and well-regulated, and firm and household balance sheets are for the most part in good shape.”

By the time Congress is asked to battle deflation there will be limited weapons in their arsenal.  With Social Security up side down, $3 trillion in squandered stimulus, credit rating agencies threatening to downgrade the U.S. and 10% unemployment what can Washington do to stave off deflation?  Only two antidotes remain (1) raising taxes and (2) cutting benefits.  If the deflationary disease does not kill the patient, the treatment very well might. The main trouble with Social Security is that it is managged by the government. It should be privatized.

  

Food for Thought

BushThe Democrats’(Socialialists) hate of Bush is greater than their dislike of Al Qaeda. This certainly provides comfort to the terrorists, and they are hoping for a Democrat as president in 2008. Obama would suit them fine since he was against the war from the beginning.

"John Stuart Mill had penned his thoughts with prophetic brilliance: War is an ugly thing, but not the ugliest of things; the decayed and degraded state of moral and patriotic feeling which thinks nothing worth a war, is worse. A man who has nothing which he cares more about than he does about his personal safety is a miserable creature who has no chance at being free, unless made and kept so by the exertions of better men than himself." Insurance

Insurance is nothing more than a collectivized way of getting someone else to pay your bills.

First it was health care people couldn’t afford, now its insurance they can’t afford. The insurance companies, politicians, doctors and bankers are in bed together; all of this and the elaborate, environmentally friendly, hospitals most can’t afford. It is little more than an attempt for a government take over of health care. And we can judge by Katrina what a catastrophe that would be. We are more than half way there now with Medicare, Medicaid, and CHIP.Global Warming:

"Many eminent scientists agree that global warming and other environmental scare stories are just unproven theories. Prior to the Earth Summit meeting in Rio de Janeiro in June 1992, scientists from around the world issued the Heidelberg Appeal. In the Appeal, scientists asked government leaders at the summit to be careful. They asked the leaders not to make serious environmental decisions based on pseudoscientific arguments or false and non-relevant data. More than 250 scientists, including 27 Nobel prize winners, issued the Appeal on June 1, 1992. Today, 2,300 scientists from 79 countries, including 65 Nobel prize winners, have signed the Appeal ." Global warming is political rather than scientifical.

When assessing the clean-up sites the environmentalists do not take into consideration the bioavailability and Chirality of the so-called pollutants, especially in sandy clay like soil. Over time the microbes in the soil degenerates the pollutants. This also true of certain pesticides. PCB, copper, zinc,nickle, et.al, have proven to enhance the growth of certain fish and crustaceans. PCBs have also been produced by nature in our oceans. These heavy metals and so-called pollutants are not as dangerous to our health as the pseudo scientists suggest. The C Word

Morris Zeitlin, a communist writer for the Communist Party’’s Daily World said in an article entitled ""Planning is Socialism’s Trademark,"" November 8, 1975:

"Dictatorship can be established only by a victory of socialism in different countries or groups of countries, after which there would be federal unions of the various groupings of these socialist countries, and the third stage would be an amalgamation of these regional federal unions into a world union of socialist nations." (Ed note: The third stage is taking place right now as we in the United States of America become part of a federal union, the North American Union, which will in the near future become part of a world union of socialist nations.) They hate the C word (Communism), it exposes them for what they are.

The affluent believe they are exempt from the vagaries of a collectivist dictatorship. In fact it is their belief that they will be the dictates, along with their sycophantic bureaucrats." :