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NIA's Top 10 Economic Predictions for 2011
1) The Dow/Gold and Gold/Silver ratios will continue to decline.
In NIA's top 10 predictions for 2010, we predicted major declines in the Dow/Gold and Gold/Silver ratios. The Dow/Gold ratio was
9.3 at the time and finished 2010 down 15% to 8.1. The Gold/Silver ratio was 64 at the time and finished 2010 down 28% to 46.
We expect to see the Dow/Gold ratio decline to 6.5 and the Gold/Silver ratio decline to 38 in 2011. Later this decade, we expect to
see the Dow/Gold ratio bottom at 1 and the Gold/Silver ratio decline to below 16 and possibly as low as 10.
2) Colleges will begin to go bankrupt and close their doors.
We have a college education bubble in America that was made possible by the U.S. government's willingness to give out cheap
and easy student loans. With all of the technological advances that have been taking place worldwide, the cost for a college
education in America should be getting cheaper. Instead, private four-year colleges have averaged 5.6% tuition inflation over the
past six years.
College tuitions are the one thing in America that never declined in price during the panic of 2008. Despite collapsing stock
market and Real Estate prices, college tuition costs surged to new highs as Americans instinctively sought to become better
educated in order to better ride out and survive the economic crisis. Unfortunately, American students who overpaid for college
educations are graduating and finding out that their degrees are worthless and no jobs are available for them. They would have
been better off going straight into the work force and investing their money into gold and silver. That way, they would have real
wealth today instead of debt and would already have valuable work place experience, which is much more important than any
piece of paper.
Colleges and universities took on ambitious construction projects and built new libraries, gyms, and sporting venues, that added
no value to the education of students. These projects were intended for the sole purpose of impressing students and their
families. The administrators of these colleges knew that no matter how high tuitions rose, students would be able to simply
borrow more from the government in order to pay them.
Americans today can purchase just about any type of good on Amazon.com, cheaper than they can find it in retail stores. This is
because Amazon.com is a lot more efficient and doesn't have the overhead costs of brick and mortar retailers. NIA expects to see
a new trend of Americans seeking to become educated cheaply over the Internet. There will be a huge drop off in demand for
traditional college degrees. NIA expects to see many colleges default on their debts in 2011. These colleges will be forced to
either downsize and educate students more cost effectively or close their doors for good.
3) U.S. retailers will report declines in profit margins and their stocks will decline.
Although most analysts on Wall Street believe retailers will report a major increase in holiday season sales over a year ago, NIA
believes any top line growth retailers report will come at the expense of dismal bottom line profits. NIA expects many retailers to
report large declines in their profit margins for the 4Q of 2010 and first half of 2011. Retailers have been selling goods at bargain
basement prices in order to generate demand. Americans, being flush with newly printed dollars from the Federal Reserve, have
been eager to buy up supplies of goods at artificially low prices. However, shareholders will likely sell off their retail stocks on this
news. As share prices of retail stocks decline, retailers will begin to rapidly increase their prices by mid-2011.
4) The mainstream public will begin to buy gold.
Although the mainstream media continues to proclaim we have a gold bubble, it is impossible to have a gold bubble when
mainstream America isn't buying gold. The average American is more likely to be a seller of gold through companies like
Cash4Gold, in order to raise enough dollars to put food on their table. Most Americans today don't even know the price of gold.
During the next 12 months, we expect to see a huge ramping up in the public's knowledge about gold. More Americans than ever
will know the current price of gold and understand that it is real money. By the end of 2011, we expect the general public to begin
looking at gold as an investment, just like they began looking at Real Estate as an investment in 2003. Sometime during the next
six months, we believe you will overhear a stranger at a restaurant talking about investing into gold. We believe the price of gold
could surge to as high as $2,000 per ounce in 2011.
5) We will see a huge surge in municipal debt defaults.
In the closing months of 2010, we saw yields on municipal bonds rise to their highest levels since early 2009. After 29
consecutive weeks of inflows into municipal bond funds, investors are now pulling money out of municipal bond funds by record
amounts, with $9 billion exiting municipal bond funds in the five weeks leading up to Christmas. NIA believes there could be a
small dip in municipal bond yields over the next couple of months as investors realize that municipal debt defaults might not be
imminent, but we expect municipal bond yields to begin rising again by mid-2011 with a huge surge in municipal debt defaults
coming in the second half of 2011. Although the Federal Government has a printing press that it uses in order to pay its debts,
cities and municipalities do not.
6) We will see a large decline in the crude oil/natural gas ratio.
When we released our top 10 predictions for 2010, crude oil was $73 per barrel and we predicted that oil prices would rise to
$100 per barrel in 2010. Crude oil ended up rising by 26% in 2010 to $92 per barrel, coming short of our outlook. However, it is
possible our $100 per barrel oil forecast might be off by just a month or two. We wouldn't be surprised to see $100 per barrel oil
within the first two months of 2011 and if so, we expect to see a huge movement in America this year towards natural gas.
The crude oil/natural gas ratio currently stands at 20. Historically, the crude oil/natural gas ratio has averaged 10 and based on an
energy equivalent basis, crude oil and natural gas prices should have a 6 to 1 ratio. Brand new fracking technology has caused
natural gas supplies in the U.S. to rise to record levels. Although our country might be flooded with natural gas, the natural gas
fracking boom that is taking place across the U.S. today is causing ground water in the U.S. to become contaminated. Americans
living near natural gas wells that use fracking, are finding that they can now light the water coming out of their faucets on fire. New
government regulations are likely to crack down on natural gas fracking and this will come at the same time as American
individuals and businesses begin to convert their automobiles and machinery to run off of natural gas. A large decline in the crude
oil/natural gas ratio in 2011 is likely, possibly down to as low as 15.
7) The median U.S. home will decline sharply priced in silver.
For the past couple of years, being able to make ones mortgage payment has been the primary concern for the average American.
In an attempt to support housing prices and keep mortgage interest rates at artificially low levels, the Federal Reserve has been
implementing massive quantitative easing and buying mortgage backed securities. NIA believes the Federal Reserve will be
successful at putting a nominal floor under Real Estate prices. NIA also believes that the Federal Reserve's actions will cause a
massive decline in the value of the U.S. dollar, which will allow Americans to more easily pay back their mortgages with
depreciated U.S. dollars.
However, the Federal Reserve will not be successful at reinflating the Real Estate bubble. In fact, in terms of real money (gold and
silver), NIA believes Real Estate prices will decline to record lows. The median U.S. home is currently priced at $170,600 or 5,500
ounces of silver. Priced in silver, the median U.S. home price is down 16% from one month ago and 45% from one year ago. After
the inflationary crisis of the 1970s, silver rose to a high in 1980 of $49.45 per ounce. The median U.S. home price in 1980 was
$47,200, which means the median U.S. home/silver ratio declined to a low of 954.
With the Federal Reserve printing money at an unprecedented rate and record amounts of new homes built during the recent Real
Estate bubble, NIA believes it is inevitable that the median U.S. home will decline to a price of 1,000 ounces of silver this decade
and possibly as low as 500 ounces of silver. In 2011, we believe a decline in the median U.S. home price to 4,000 ounces of
silver is possible.
8) Food inflation will become America's top crisis.
Starting a few decades ago and accelerating in recent years, America has seen a boom in non-productive service jobs, mainly in
the financial sector. Most of these jobs were made possible by inflation. Without inflation, which steals from the purchasing power
of the incomes and savings of goods producing workers, the majority of the jobs on Wall Street would not exist today and our
country would be in much better financial shape because of it.
With most Americans in recent decades seeking non-productive jobs in the financial services sector because that is where they
could access the Fed's cheap and easy money, very few Americans sought jobs in the farming and agriculture sector. In the
1930s, approximately 28% of the population was employed in the agriculture sector, but today this number is less than 2%.
Agriculture currently makes up only 1.2% of U.S. GDP, compared to the services sector, which makes up 76.9% of U.S. GDP.
There is currently a major shortage of farmers in the U.S. and a lot of land that was previously used for farming has now been
developed with Real Estate. To make matters worse, agricultural products now trade on the international market and Americans
must now compete against citizens of emerging nations like China and India for the purchasing of food.
Prices of goods and services do not rise equally when governments create monetary inflation. Inflation gravitates most towards
the items that Americans need the most and there is nothing that Americans need more to survive than food and agriculture. As
the U.S. government prints money, the first thing Americans will spend it on is food. Americans can cut back on energy use by
moving into a smaller home and carpooling to work. They can cut back on entertainment, travel, and other discretionary spending.
However, Americans can never stop spending money on food.
The days of cheap food in America are coming to an end. The recent unprecedented rise that we have seen in agricultural
commodity prices is showing no signs of letting up. In the past few days, sugar futures reached a new 30-year high, coffee futures
reached a new 13-year high, orange juice futures reached a new 3-year high, corn futures reached a new 29-month high, soybean
futures reached a new 27-month high, and palm oil futures reached a new 33-month high.
We estimate that it takes as long as six months for rising agricultural commodity prices to be felt by U.S. consumers in their local
supermarket. Even if food producers and retailers accept substantially lower profit margins in 2011, we are still guaranteed to see
double-digit across the board U.S. food inflation in the first half of the year. That is correct, let us repeat, NIA guarantees that
Americans will see double-digit food inflation in the first half of 2011.
Shockingly, except for Glenn Beck (who was kind enough to feature our food inflation report), absolutely nobody in the mainstream
media is doing anything to warn Americans about the food inflation crisis that is ahead. In fact, left-wing groups like Media Matters
(funded by George Soros) have been working tirelessly to try and discredit NIA's research while reassuring Americans that they
need not worry about food inflation. The truth is, when Americans realize that they can no longer take food for granted, we will likely
see the outbreak of an all out food price panic with everybody rushing to the supermarket to stock up on goods before prices rise
even further. The end result will likely be government price controls and empty store shelves, but NIA doesn't project this to occur
until later this decade.
9) QE2 will disappoint and the Federal Reserve will prepare QE3.
The Dow Jones is now back up to 11,670, which is where it was in mid-2008 before the crash. NIA believes that most of QE2 has
already been priced into the market, before the Federal Reserve even prints the $600 billion. At some point, we expect it to
become apparent to all that the U.S. economic recovery is phony and stock prices are rising solely due to inflation. In our opinion,
we will see some sort of catalyst that causes the stock market to sell off at some point and the consensus on Wall Street will be
that QE2 will not be enough to save the U.S. economy. By the end of 2011, we expect the Federal Reserve to begin planning QE3.
QE3 might be the final dose of inflation that causes the U.S. economy to overdose into hyperinflation.
10) Sarah Palin will announce she is running for President as a Republican.
NIA believes that Sarah Palin has been setup perfectly to run for President in 2012 and that she will announce her candidacy for
the Republican nomination with great fanfare from tea party supporters in 2011. We give Sarah Palin credit for recently speaking
out against the Federal Reserve's QE2 and warning Americans about the food inflation crisis that is ahead. Unfortunately, we
believe Sarah Palin is not a true independent and is being controlled by the Republican establishment, which is just as
responsible as the Democrats are for the financial crisis we have today. As President, Palin would be unlikely to implement the
measures that are necessary to prevent hyperinflation. In our opinion, we need to elect a true libertarian candidate as President
who will cut government spending, balance the budget, and restore sound money. NIA intends to support Ron Paul, if he decides
to run for President.
It is important to spread the word about NIA to as many people as possible, as quickly as possible, if you want America to survive
hyperinflation. Please tell everybody you know to become members of NIA for free immediately at: http://inflation.us
FORT LEE, N.J., Jan. 4, 2011 /PRNewswire/ -- The National Inflation Association -
http://inflation.us - today announced its top 10 economic predictions for 2011: