Thursday, July 8, 2010

Lebron James, Gold And Hyperinflation

The National Inflation Association is advising Lebron James to negotiate a three-year contract and put his assets into gold to protect himself against the increasing risk of hyperinflation:
NBA salary inflation has averaged 11.74% annually over the past 25 years compared to an average U.S. price inflation rate of 7.88% and an average U.S. CPI index growth rate of 3.03%. NIA estimates the real rate of U.S. price inflation to currently be around 5-6%, but NIA projects to see a breakout of double-digit price inflation within the next two years. If Lebron James signs with the Cleveland Cavaliers, his salary increase will be limited to 10.5% per year and if he signs with any other team, his salary increase will be limited to 8% per year.

Coming up this September, the latest doubling of the U.S. national debt will have occurred in just seven years. The previous doubling of our national debt took place in thirteen years. Even though Lebron James' annual salary increase of 8% per year (if he signs with a new NBA team) will be in line with the average annual rate of real U.S. price inflation, NIA projects a very minimum of a doubling of U.S. price inflation over the next five years because it will be impossible for the U.S. to keep up with rising interest payments on our national debt through taxation.

It was just announced on Wednesday that the NBA salary cap for the upcoming season will be $58.044 million. Based on this cap, the maximum salary for the first year of Lebron James' contract can be $17.4 million. Assuming that Lebron James signs with a new NBA team, the final year of a maximum five year contract has the potential to be worth $23.67 million. However, if the U.S. experiences an average price inflation rate of just 15% over the next five years, the final year of Lebron James' contract will only have the purchasing power of $11.76 million in today's U.S. dollars.
Read the rest. Thanks to Bob Unger for the heads-up.

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