Have you noticed prices going down? Gas is down. Homes are down. Rents are coming down. Gold is down. Stocks are down. Everything is getting cheaper. Yet my income is staying the same. This sounds great! All around the world economies are cooling off as people buy less, waste less and speculate less. Along with that comes unemployment, increased government payouts to the needy and a financial climate that inhibits great new business plans from getting off the ground.

Deflation is not going to last. It cannot. What happens during a deflation is that our GDP declines. Today the GDP calculations are rather meaningless for the most part but the one thing that remains valid about it is that inflation is gobbling up more and more of it even as most people are enjoying this temporary deflation.

The GDP calculations include a compensation for inflation, currently around 4.2%. Using these calculations our GDP growth has been screeching to a halt. I've been told that John Williams at shadowstats.com measures inflation the same way it was measured back in the 70's and 80's. He figures it has been running close to 10%, not 4.2%. If the GDP calculations today used his traditional measure of inflation our “growth” would have turned into “contraction” a couple years ago.

Why can't deflation last? Because deflation means that every month we have to divert a larger percentage of our GDP towards servicing our debt. The Fed and the US Treasury and the corrupt congress (except for Ron Paul) have been acting for most of this year to cause massive inflation. Where is it? How long can they lean on the inflation button before we begin to see the results? Their goal is to inflate the GDP numbers more than the calculated value of inflation. That way, after the calculations are done, it looks like GDP is going up because the raw (fudged) numbers are getting bigger.

The hope is that our creditors will still think the USA is growing and they will be willing to “buy our debt” for a few more months. They aren't fools, they know this is all smoke and mirrors…but they have no choice, the US is setting the stage and they all just have to take their marks and wait for the call to “action”.

If the GDP can be inflated faster than the “official” inflation rate, then each month we can divert less and less of our GDP towards servicing that debt. Eventually, our creditors will refuse to take our worthless paper as payment for the real wealth they loaned us. During the interim, the magnitude of the eventual consequences increase at an accelerating rate. At this time when real productivity is declining, regardless of the “official” calculations, when tax revenues are decreasing and Government welfare obligations are increasing rapidly, there is no way in hell the Fed, US Treasury or the corrupt Congress (except Ron Paul) or the new president will allow deflation to continue. In fact, they couldn't if they did want to. The consequences are inevitable…inflation is coming and inflation eats the future.

This current deflation that is looking so nice to those of us who are still working and buying things is akin to the water receding from the beach prior to a tsunami. Startling and unexpected, with no visible signs of the impending doom to follow, the receding tide will lure the unsuspecting out on to the coastal flats to gape and gawk at all the really cool stuff that has been made assessable. When that tidal wave of inflation comes roaring back to the beach, anyone caught unawares will be crushed, pounded into the dirt, smashed and broken as if they were dolls instead of real people.

Once that tide goes out, there is no magic trick of congress or high finance that can cause it to come back to the beach peacefully and serenely. The tsunami is inevitable and due to the actions of the Fed, US Treasury and the corrupt congress (except Ron Paul) it will be the worst the world has ever seen. The inflation tsunami phenomena is not new. It has helped destroy over 3 dozen empires in the past. Their folly is our folly as we proceed with the same wrong-headed policies and behavior as our predecessors.

Now is not the time to wander the exposed coastal flats in wonder. It is the time to RUN for high ground with supplies and loved ones. There will probably be a rebound in the stock markets, perhaps even a rebound in housing and a decline in unemployment between now and Spring. But maybe not. If there is a rebound, it will mark the last chance for folks who know what is coming to recover a little of their cash and get out. We've never seen a situation so extraordinary so applying folk wisdom to predict the possibility of a rebound is a bit like describing an undiscovered country.

I know the possibility exists that I'm all wrong and I'll eventually look like chicken little. However, I'm not predicting that the sky will fall…the sky will remain untouched by all this human suffering. All I'm trying to do is point to an unstoppable situation that is coming and urge people to take it seriously. When the tsunami hits, there will be no more social welfare programs to tide people over. (no pun intended) Each of our futures will depend on how well we prepared as individuals.

I've been watching this build for at least 15 years and preparing for my own future for the past 10 on a regular basis. Nothing yet has happened to cause me to doubt our country will follow the path of the other great empires. Instead, the actions our nation takes have only caused me to realize that what is coming could be so much worse than I had ever expected…and I'm expecting it to be horrible.

-Jahfre Fire Eater