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Can HyperInflation REALLY Hit the US?

Phoenix Capital Research's picture




 

I know that many deflationists believe that we cannot experience
hyperinflation in the US due to our obscene debt levels. The belief here is
that all the money thrown into the US financial system will be swallowed by
another round of debt deflation.

 

The problem with this belief is that it doesn’t understand how
currency crises work. Inflation occurs when a currency falls in value relative
to other currencies. And as noted by other astute commentators, hyperinflation
occurs when a currency is abandoned all together.

 

On that note, I would like to refer some extraordinary research
from Bill King of RamseyKing Securities.
King recently presented a portion of
Niall Ferguson’s book, “The Ascent of Money” regarding what REALLY happened in
Weimar Germany (King’s emphasis added in bold).

 

Yet it would be wrong to see the
hyperinflation of 1923 as a simple consequence of
the Versailles Treaty. That was how the Germans liked to see it, of
course…All of this was to overlook the
domestic political roots of the monetary crisis
. The Weimar tax system was
feeble, not least because the new regime lacked legitimacy among higher income
groups who declined to pay the taxes imposed on them.

 

At the same time, public money was spent recklessly, particularly on generous wage
settlements for public sector unions
. The combination of insufficient
taxation and excessive spending created enormous deficits in 1919 and 1920 (in
excess of 10 per cent of net national product), before the victors had even
presented their reparations bill… Moreover,
those in charge of Weimar economic policy in the early 1920s felt they had
little incentive to stabilize German fiscal and monetary policy,
even when
an opportunity presented itself in the middle of 1920.

 

A
common calculation among Germany’s financial elites was that runaway currency
depreciation would force the Allied powers into revision the reparations
settlement, since the effect would be to cheapen German exports
.

 

What
the Germans overlooked was that the inflation induced boom of 1920-22, at a
time when the US and UK economies were in the depths of a post-war recession,
caused an even bigger surge in imports, thus negating the economic pressure
they had hoped to exert. At the heart of the German hyperinflation was a
miscalculation.

 

So Weimar
was really the product of the financial elite engaging in insane monetary
policies using public funds without care and trying to devalue the currency in
order to inflate away the debts.

 

Gee… what
major country is engaging in similar practices today?

 

Prepare Now!

 

Graham
Summers

 

PS. If
you’re getting worried about the future of the stock market and have yet to
take steps to prepare for the Second Round of the Financial Crisis… I highly
suggest you download my FREE Special Report specifying exactly how to prepare
for what’s to come.

 

I call it The Financial Crisis “Round Two” Survival
Kit
. And its 17 pages contain a wealth of information about portfolio
protection, which investments to own and how to take out Catastrophe Insurance
on the stock market (this “insurance” paid out triple digit gains in the Autumn
of 2008).

 

Again, this
is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com
and click on FREE REPORTS.

 

PPS. We ALSO
publish a FREE Special Report on Inflation detailing three investments that
have all already SOARED as a result of the Fed’s monetary policy.

You can
access this Report at the link above.

 

 

 

 

 

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Fri, 03/25/2011 - 14:25 | 1100528 boiltherich
boiltherich's picture

can someone explain the detailed mechanics of how one can "abandon" the dollar?

let's keep this simple. $10 exists, but $12 exists in debts.

there is, BY DEFINITION, more demand for dollars to pay back debt than there are dollars that exist.

 

It seems to me that nobody above quite got the hang of double entry bookkeeping in business school.  One is a liability and the other an asset.  Along with other ledger entries they will always match because liabilities always equal assets.  My specialty was finance not accounting though you have to have a working knowledge of accounting to get a finance degree, I will leave it to the CPA's here to explain the "other" accounting entries, but I do know one thing about money that everyone seems to have forgotten, it is three things, a store of value, a unit of account, and medium of exchange.  It is NOT created when it is printed but rather when it is borrowed/lent.  If the Fed is today "printing" like there is no tomorrow electronically or otherwise, dropping the shit from helicopters or just giving it to bankers, it is still not "creating" money, the money was created in the past, especially post 9/11 in the form of mortgage debt, uncontrolled that money creation was what caused the bubble in housing and to a degree other commodities.  Printing, dropping it from helo's is simply monetizing existing money. 

 

The difference between inflation and hyperinflation is really just a reflection of just how badly the system had been gamed in past years with out of control lending/borrowing, seeing wheelbarrows filled with bricks of cash to buy a loaf of bread is little more than an increase in the velocity of money, it is not the creation of money. 

 

Cut consumers off of credit and you cut them off of money, less money = less demand and thus supposedly lower prices.  Cut companies off of credit and they will raise prices no matter what till sales are reduced to the point where they no longer can stay in business, a prime example locally is Harry & David which has but days as a going concern.  This is the cruel fact of deleveraging that was supposedly the motivation for the Stim's and the QE's, but virtually none of that went into the hands of the people, in fact real wages and household wealth have dramatically dropped, therefore the receipts business can get from us will also have to drop, that is economic black letter law.  This is a spiral upward in price even as units sold collapses, hyperinflation is just the end point in the spiral (call it debt default, that is really what it is).  Paul Volcker knew it and did the hard thing, he raised interest rates to the point of depression, and where I lived it was a depression, 30%+ unemployment in my home county. But with debt levels and the nature of the holders of the debt even that will not be enough now, there has been a massive transfer of wealth upward to the top 1% and now it has to be transferred back down, debt defaults, and what is not defaulted upon outright will be defaulted upon via inflation.  It will happen, deny it or learn to cope and invest for it, your choice.  Just because it does not hit all in one day, it is maddeningly slow, still it is here. 

Fri, 03/25/2011 - 14:03 | 1100421 LawsofPhysics
LawsofPhysics's picture

Inflation/deflation are irrelevant.  repeat after me; "Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power,Buying Power"

Fri, 03/25/2011 - 07:54 | 1098805 michigan independant
michigan independant's picture

It already has. "engaging in insane monetary policies using public funds without care" I will see the Township Supervisor who just talked to the Senator. Locally we have stressed per capita and disconnects on levels. We have not hit bottum yet overall and it is a sad discourse. Measures have been taken to acount. Overall the taxpayers are tired of being pissed on and they say it raining above. We will fight the good fight in honor and carefully protect the very young and very old since we choose to serve the Lord. The far left looking and far right looking souls walking off the cliff as they are of a bent of mind so goes there days stripping the meat off the bones of the taxpayer. Can these dry bones speak as a servant as it was said in the old book. Yes we will fight for the young and the old. As for you man of the Dust there is famine of the word in these days so it it up to you.

Fri, 03/25/2011 - 04:42 | 1098671 AUD
AUD's picture

Niall Ferguson is an idiot & financial 'elite' bootlicker. Read The Ascent of Hooey at goldensextant.com

Hyperinflation is the complete loss of value of the obligation of whoever issues it. Like a bounced cheque. In fact for practical purposes it can be thought of as a bounced cheque.

In the case of Germany it was the complete failure of the credit of the Weimar government, whose obligations formed the sum total of the 'assets' of the Reichsbank.

And quantity has nothing to do with it.

Fri, 03/25/2011 - 03:29 | 1098632 Jack Sheet
Jack Sheet's picture

Tell all that to Mish Shedlock......if it doesn't get censored from his comment list

Fri, 03/25/2011 - 02:53 | 1098612 USGrant
USGrant's picture

Note the best measure of US money supply, TMS (true money supply), has increased at an average of 6 %/year, compounded since TMS began to be computed in 1959. Last year it increased at a 10% rate. Lacking money supply numbers but fitting the value of the mark to the dollar from Jan. 1918 to Jan. 1922 gives a rate of increase of 90%/year compounded. The data are fit by a simple exponential derived by integrating the differential equation dV/dt=-kV which for the value of the currency V states that the debasement of the currency value with respect to time is dependent on the value of the currency. Another way to say this is that a banker can't bebase the currency of the past, nor the future, only the currency of the present.

There is a transition in early1922 in the Weimar where the fitting exponential is derived from the expression dV/dt=-kVt^a. Time itself as an exponential becomes necessary for a satisfactory fit. There is no need to invoke a discontinuty but rather a functional change as the bundles of bills as a day's pay thrown over the fence to awife has to be spent ever more urgently.

Note also that the member banks who own the FED through the reserved stock, receive a dividend of 6%/year. I doubt this is a coincidence with the money supply increasing by 6%/year. Once one recognises the ongoing scam, no investment that returns less than 6%/year after taxes is worth holding.

 

Fri, 03/25/2011 - 00:24 | 1098418 dick cheneys ghost
dick cheneys ghost's picture

Fannie/Freddie were warned about foreclosure problems in 2006.....accuracy for speed...

 

http://nakedempire2.blogspot.com/

 

Thu, 03/24/2011 - 23:50 | 1098333 Number 156
Number 156's picture

Good work Phoenix. However..

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.

 

PPS. We ALSO publish a FREE Special Report on Inflation detailing three investments that have all already SOARED as a result of the Fed’s monetary policy.

 

 

Quite honestly, Ive got all the free reporting I need right here.

Thu, 03/24/2011 - 23:54 | 1098315 Ska Himself
Ska Himself's picture

Graham and every Weimer humper (I'm looking at you Beck) is forgetting a few things:

The United States could nuke the capitals of every country several times over. 30x over if you want to be exact (5,133 nukes / ~170 countries). Weimer Germany didn't have that firepower. Whether you want to admit it or not, the United States can (and will) take resources by force or realign the world in our "financial favor".

Granted, the past decade hasn't worked out so well on that front but still ... I would venture to argue that Iraq and Afghanistan have been "practice".

At this point, no country on earth can successfuly oppose us militarily. Not even China. If it comes to war (and it may), we will win.

Furthermore, the United States citizenry has close to 300 million firearms (registered and unregistered) amongst them. That is nearly one firearm for every man, woman, and child. You don't bankrupt a country where everyone is armed.

Now there are those who would argue that the U.S. military would be complicit in rounding up U.S. citizens and, to a point, they may be right. But just like the defecting generals in MENA there will be large swaths of the U.S. military that will stand behind their families and neighbors - not to mention there are large numbers of active militairy personel who consider the banksters to be just as treasonous as their civilian counterparts do. 

Finally, the U.S. has long engaged in a policy of letting the other countries of the world deplete their natural resources while those of North America (including Canada) have been being "preserved". Some argue that The U.S. does this because of the treehuggers and "liberals". I would venture to argue that it is part of a long-term strategy.

What strategy is that? Economically and environmentally decimate our "enemies" (non-allies) while engaging in a a direct deflation of assets among the American Class in order to ultimately return the country to a manufacturing / mining / logging superpower. By allowing our non-allies to decimate their own reserves while continuing to siphon off the largess of the baby boomers, America will gradually turn insular and in doing so strengthen our position on the world state 10 fold*. 

Of course, TBTB could ultimately be looking to rape our children and drink our blood. Who knows...

* per gwar5: Stated Rationale: devalue the USD so that the US can pay back sovereign debt to China, et.al., with inflated (worthless) dollars and simultaneously make USA exports more "competitive" by making them cheaper, hence spurring economic growth.

 

 

 

 

Fri, 03/25/2011 - 06:22 | 1098717 rich_wicks
rich_wicks's picture

The United States could nuke the capitals of every country several times over. 30x over if you want to be exact (5,133 nukes / ~170 countries).

You neanderthals are such morons thinking you can keep the world using US dollars at the end of a gun.

Let me give you a more likely scenario.

China makes a trade pact with Russia for trading oil and energy for goods and services.  Later the Middle East joins in to purchase Chinese made goods and services, then India, then Europe.

Is the US going to drop a nuclear bomb on the world if this happens?  Why?  How does it help the United States?  Won't help US businesses overseas.  It won't help international bankers overseas.

You morons also forget that China and Russia can literally destroy the world as well, and they don't even need to drop a bomb on the United States to do it, they can detonate it right their in their own country, and let the fallout kill every bit of life on the planet.  Using nuclear weapons today just ends all life.  Nobody wins, and nobody is better off doing it, so nobody does it.

Fri, 03/25/2011 - 11:28 | 1099649 Ska Himself
Ska Himself's picture


Whether or not you want to admit it, everything has always been done at the end of a gun (bow, sword, rock, stick, or fincancial instrument). Politics are for appearances only.

That's the way it always has been, that's the way it always will be. 

I'm not saying I like it or it's a good thing. I'm simply acknowledging reality.

********
It's entirely possible (and plausible) that such a deal could happen between China and Russia. However, this will only further strengthen their currency against the dollar and subsequently make what we owe them less (in real terms). So it if happens, then the US gets to pay off it's debt for less and the value of our goods / services become more attractive.

  Pendelum swings one way and then back to the other side.

 

 

 

Thu, 03/24/2011 - 23:27 | 1098267 Leo Kolivakis
Leo Kolivakis's picture

There will be no hyperinflation in the US and the greenback will never collapse. Please stop posting this nonsense.

Fri, 03/25/2011 - 04:08 | 1098657 akak
akak's picture

"Rome is forever!"

"It is the divine right of kings to rule over men."

"If man were meant to fly, he'd have wings."

"The threat from the Soviet Union will last for at least the next century."

"Housing prices never fall."

 

Man-made paradigms, much like the cowardly and myopic kneejerk deference to corrupt authority of Leo Quislingasskiss, are fragile and ephemeral things with little supporting them except blind and desperate belief in the permanence of the status-quo.

Thu, 03/24/2011 - 22:18 | 1098010 Rogerwilco
Rogerwilco's picture

I'm thinking the excess USD supply would simply find its way overseas, inflating and destabilizing other economies that don't have the luxury of a magic printing press.

Thu, 03/24/2011 - 21:50 | 1097883 bbq on whitehou...
bbq on whitehouse lawn's picture

A little known fact about the Weimar tragedy.  The money supply shrank.  Thats why they printed more, it was shrinking and businesses were running out of it.

In hyperinflation few actually have any and what they do have wont buy much.

The big numbers come later because of a shrinking supply and a growing demand for money.

You simply run out of money.  When this happens to a government they print more and more and more.  Untill no one accepts because the people ran out of money so they moved on to other systems, kinds of money.

Its like drinking sea water the more you drink the more you need to drink, in order to keep you alive. It will work untill it doesnt too.

 

Fri, 03/25/2011 - 00:49 | 1098471 Burnbright
Burnbright's picture

Exactly, hyperinflation happens because supply of goods dry up causing cost push inflation. You can see it in how the government reacts to a loss of revenue. The government when it is bleeding due to lost tax revenue, because of a decline in economic activity, will simply raise taxes in order to try and stop the bleeding. Only instead the government causes cost push inflation, keeping the minimal cost of goods and services high creating a money supply crunch and people will demand inflation but because supply is actually dropping during this time period it creates a double wammy as inflation picks up.

Thu, 03/24/2011 - 21:43 | 1097870 JimboJammer
JimboJammer's picture

The  US  Dollar  could  drop  50 %  in  one  day.   Portugal  could  be  the  Domino  that  does  it..  Japan  Radiation  is  a  Domino  too.

Thu, 03/24/2011 - 22:28 | 1098051 Gregor MacGregor
Gregor MacGregor's picture

I must be missing something. Portugal's default = devaluation in USD?

Fri, 03/25/2011 - 06:02 | 1098705 falak pema
falak pema's picture

Yes Christiano Ronaldo gets transferred to NY and the US football market caves in as he is too expensive for them...but they'll pay with the devalued dollar. Only the best for USA!

Thu, 03/24/2011 - 20:43 | 1097688 reader2010
reader2010's picture

so what's after the hyperinflation this time around?

Thu, 03/24/2011 - 20:48 | 1097699 disabledvet
disabledvet's picture

you're looking at it:  Syria?  Lebanon? the Gaza Strip?  Iran?  Turkey?  Gives new meaning to the 2014 Winter Olympics, no?

Fri, 03/25/2011 - 06:00 | 1098701 falak pema
falak pema's picture

Hey don't knock the 2014 olympics, I want to see Poutin's naked butt be kicked by his hench-mate Medvedev or vice versa! Some mega Sochi spectacle in perspective. Sushi at Sochi of a russian shashlik...wow my mouth waters!

Thu, 03/24/2011 - 20:58 | 1097721 reader2010
reader2010's picture

Fuck, no! I wanna get back to FDR or Nazi Germany instead. And 1936 Berlin Olympic Games before WWIII, bitchez!

Thu, 03/24/2011 - 20:40 | 1097676 ddtuttle
ddtuttle's picture

One of the great misconceptions of modern economics is that inflation and hyperinflation are different degrees of the same thing.
Or possibly, hyperinflation is the most improperly named phenomenon in economics.
Everyone (here) knows that rising prices is a symptom of inflation. Inflation itself is an increase in the money supply, usually caused by a credit bubble.
During this phase credit is increasing and everybody wants more money. People love money.

Hyperinflation, on the other hand is due to people coming to hate money. It is an abandonment of the currency; everyone trades all their money for hard assets driving up their price. In this world, credit dries up too because you will be paid back in worthless currency (not assets), and the interest rate you would need to charge is astronomical. But if credit has dried up, doesn't the money supply shrink? Well, nominal terms the money supply is increasing, but in real terms it is shrinking. What causes hyperinflation is the government pouring money into the system to offset the lack of credit. But they can never keep up, and they just keep printing until the currency is worthless. The end game is a death spiral that cannot be escaped from, except by reissuing the currency.

Nominally, in hyperinflation, the GDP is going up, but in real terms it is going down. That's right, hyperinflation is form of DEFLATION. In fact, it is created from a normal deleveraging process that the government, for whatever reason, tries to stop by printing money. Hyperinflation begins during deflation and hides the deflation nominally, but actually makes it worse in real terms. In fact, money system becomes so dysfunctional, the whole economy grinds to a halt.

Obviously, the Fed is going down this path. However, the US dollar is the world's reserve currency. Everybody knows that, but what does it really mean? It means the world's money begins as dollars, and gets mirrored in other currencies. Like the Fed creating base money and the banks multiplying it up through fractional reserve lending, US banks create money that other countries use as collateral to multiply up in their own currencies. That is, all the world's money is backed by dollars, and if the dollar collapses, the collateral for everything evaporates. A collapsing dollar will take everything down with it. That means SDRs based on a basket of currencies would be worthless too.

So the world has always hated the dollar because it is the reserve currency. But the fact is we need a reserve currency, and nothing else is as solid as the dollar. The world would NEVER accept the Yuan, Yen or Euro as a new reserve currency. So to get rid of the dollar is desirable, but there is NO alternative ... accept gold. But the very idea of a gold reserve is so hated by central banks, it will be a long time before they would accede to it.

So dollar hyperinflation means global hyperinflation, sparing nobody. It's the logical outcome of a "race to the bottom". And you can see it: everybody is deleveraging and is fighting the consequent deflation with money printing. We're all circling the same drain. Right now we are all beginning to get some stagflation, but that's just a polite word for incipient hyperinflation. Only when the abhorrence of money gets bad enough, and commodity prices go to the moon, will the world be forced back to some kind of modern gold standard. Not that gold is so great, it's just always there, and has always been the money of last resort.

Fri, 03/25/2011 - 02:08 | 1098576 linrom
linrom's picture

You echo the thoughts of a brilliant Internet poster that goes by the username mannfm11. He makes the same argument that US Dollars serve the role of collateral for other currencies. In fact, you might be mannfm11.

Have you given any thought to my theory that gold backed currency is just another banker swindle to ultimately distribute their gold holdings for new currency, which will mean that that there won't be any wealth redistribution that would normally occur during depression. If gold back currency is intoduced, bankers will emerge as the biggest winners.

Fri, 03/25/2011 - 02:41 | 1098607 All Risk No Reward
All Risk No Reward's picture

>>Have you given any thought to my theory that gold backed currency is just another banker swindle to ultimately distribute their gold holdings for new currency, which will mean that that there won't be any wealth redistribution that would normally occur during depression. If gold back currency is intoduced, bankers will emerge as the biggest winners.<<

absolutely.

youtube the "secret of oz."

it isn't what backs the currency that is the problem, it is who controls the quantity.

the problem we face is a cartel of psychopathic criminals controls the issuance of credit and currency.

they also own most of the gold.

if they control a gold backed currency, they will continue to strip the wealth and assets of society just as they do today.

btw, the federal reserve has broken section 2a of the federal reserve act for the last 25 years.

they lie about their mandate (read it yourself) and they lie that "stable prices" means unstable, inflating prices.

once you ruminate on how obvious this criminal really is and how every major establishment entity on planet earth will never put this information before you - THEN you will know the power and the control of this group of psychopathic criminals and the narcissism of the criminals who run these organizations.

not a single soul amongst them.

Fri, 03/25/2011 - 00:36 | 1098443 SimplePrinciple
SimplePrinciple's picture

I just got back to my computer after a couple hour break, and your words were on my screen.  I was going to rate your piece 5 stars, but then realized it was a mere comment.  Yes, it is easy to forget that inflation is when you want to buy stuff before it rises in price, but hyperinflation is when you want to offload your currency in a hurry while somebody else will still give you anything for it.

Thu, 03/24/2011 - 21:36 | 1097835 bigmikeO
bigmikeO's picture

Nice post, ddtuttle - worthy of it's own blog

Thu, 03/24/2011 - 21:09 | 1097774 steve2241
steve2241's picture

One Ounce Of Gold = $35 "New" Dollars. Nixon Dollars!

Thu, 03/24/2011 - 20:40 | 1097675 ddtuttle
ddtuttle's picture

One of the great misconceptions of modern economics is that inflation and hyperinflation are different degrees of the same thing.
Or possibly, hyperinflation is the most improperly named phenomenon in economics.
Everyone (here) knows that rising prices is a symptom of inflation. Inflation itself is an increase in the money supply, usually caused by a credit bubble.
During this phase credit is increasing and everybody wants more money. People love money.

Hyperinflation, on the other hand is due to people coming to hate money. It is an abandonment of the currency; everyone trades all their money for hard assets driving up their price. In this world, credit dries up too because you will be paid back in worthless currency (not assets), and the interest rate you would need to charge is astronomical. But if credit has dried up, doesn't the money supply shrink? Well, nominal terms the money supply is increasing, but in real terms it is shrinking. What causes hyperinflation is the government pouring money into the system to offset the lack of credit. But they can never keep up, and they just keep printing until the currency is worthless. The end game is a death spiral that cannot be escaped from, except by reissuing the currency.

Nominally, in hyperinflation, the GDP is going up, but in real terms it is going down. That's right, hyperinflation is form of DEFLATION. In fact, it is created from a normal deleveraging process that the government, for whatever reason, tries to stop by printing money. Hyperinflation begins during deflation and hides the deflation nominally, but actually makes it worse in real terms. In fact, money system becomes so dysfunctional, the whole economy grinds to a halt.

Obviously, the Fed is going down this path. However, the US dollar is the world's reserve currency. Everybody knows that, but what does it really mean? It means the world's money begins as dollars, and gets mirrored in other currencies. Like the Fed creating base money and the banks multiplying it up through fractional reserve lending, US banks create money that other countries use as collateral to multiply up in their own currencies. That is, all the world's money is backed by dollars, and if the dollar collapses, the collateral for everything evaporates. A collapsing dollar will take everything down with it. That means SDRs based on a basket of currencies would be worthless too.

So the world has always hated the dollar because it is the reserve currency. But the fact is we need a reserve currency, and nothing else is as solid as the dollar. The world would NEVER accept the Yuan, Yen or Euro as a new reserve currency. So to get rid of the dollar is desirable, but there is NO alternative ... accept gold. But the very idea of a gold reserve is so hated by central banks, it will be a long time before they would accede to it.

So dollar hyperinflation means global hyperinflation, sparing nobody. It's the logical outcome of a "race to the bottom". And you can see it: everybody is deleveraging and is fighting the consequent deflation with money printing. We're all circling the same drain. Right now we are all beginning to get some stagflation, but that's just a polite word for incipient hyperinflation. Only when the abhorrence of money gets bad enough, and commodity prices go to the moon, will the world be forced back to some kind of modern gold standard. Not that gold is so great, it's just always there, and has always been the money of last resort.

Fri, 03/25/2011 - 14:23 | 1100523 whaleoil
whaleoil's picture

A-freking-men!  Hyperinflation is the most deflationary outcome(in real terms) possible. 

Fri, 03/25/2011 - 14:25 | 1100540 whaleoil
whaleoil's picture

Oops! This was supposed to be for tuttle underneath.

Fri, 03/25/2011 - 09:19 | 1099033 falak pema
falak pema's picture

A good way to define inflation :

A man's hard on and subsequent short orgasm. We love that sweet sexy fulgurant feeling amongst men! To push analogy : money = sexy feeling short and sweet.

 

A good way to define hyperinflation :

A woman's desire for orgasm and subsequent unending quest repeated and forgotten in the mist of the afternoon. Long and unfruitful...for most speculators. We come to hate money now in this form...oh, for the good old days of short, sweet knock ons!! Life so simple...until a woman says, "triple helpings for me honey...and don't stop until you hit the red light!!"... Back to the salt mines, guys!...damn hyperinflation!

A bit like the day at the shopping mall...

Fri, 03/25/2011 - 07:13 | 1098729 Zero Govt
Zero Govt's picture

DDTuttle

very interesting post regards inflation, deflation and hyper-inflation (or is it hyper-deflation?). I disagree though that the US Dollar is reserve currency to the world and every other currency.

The real reserve currency are assets (materials/resources and old or stored productivity) and new materials/resources and productivity being produced. The currency (and there are hundreds) are merely an accepted means of exchange for that wealth, be that paper like Dollars or Euros or electronic denominations of such, which is a step up the ladder (easier way to exchange) from bartering.

It matters not wether we store or exchange value in Dollars, Yuan, Euros or barter that exchange. So a Dollar meltdown would simply be sign it is no longer socially accepted as a store or exchange of value, most likely because the central bank had trashed it (as they all do ultimately). You could simply swap to Yuan or Euros or back to 'hard' currency back to another store of value like a resource such as Gold or Silver to store or exchange your value.  

The Dollar is reserve for nothing, we can take it or leave it, and its centralised bank is powerless (except for its criminal legislative monopoly) to stop society moving to another store/exchange of value when it loses confidence in it. A Dollar meltdown would simply be society moving from one means of exchange to another. It would take the last people holding the baby (Dollars) down with it in that short hyper-active period where it collapsed and of course take the valueless/worthless bunch of crones at the Fed down too

Fri, 03/25/2011 - 06:12 | 1098712 rich_wicks
rich_wicks's picture

This is a very good post.

Or more properly, the post with with I am responding, was a very good post.  Seriously, it was.  It gave me a perspective I've been missing for a long time.

Fri, 03/25/2011 - 02:36 | 1098603 All Risk No Reward
All Risk No Reward's picture

>>Everyone (here) knows that rising prices is a symptom of inflation.<<

it can be, but it doesn't have to be. it can be caused temporary shortages, for example.

>>Hyperinflation, on the other hand is due to people coming to hate money. It is an abandonment of the currency;<<

i don't think you understand that money is debt.

let's get a few facts straight.

1. money is lent into existence at interest - it is debt.
2. due to the interest, there is always more debt owed than money to pay it off (now you know why the fed always expands the money supply and why it is IMPOSSIBLE to achieve a steady state in the criminal banking cartel federal reserve system).

"losing confidence in the money" is equivalent to saying "not gonna pay back my debts."

do you see the problem here?

if $10 exists and $12 is owed ($2 accrued interest - the $10 was lent into existence), how, EXACTLY, can the system that owes $12 simply "lose confidence" in the $10?

be detailed.

what i see is in such a "lose confidence, refuse to pay back debt" scenario is a complete collapse where the debtors walk away from their debt in poverty and the debt holders take possession of all the tangible goodies associated with that debt.

hint - there are a lot more debtors than debt holders - BY DESIGN!

oh, and the government doesn't "print money."

rather, the government takes out national "cash advances" that have to be paid back, with interest.

the crime is that all the proceeds of these cash advances are going to the criminal money power cartel that controls the media and the politicians and the poor schlub citizens gets the debt.

no benefits for society, just the debt.

all the benefits to the criminal class, none of the debt.

the private sector is debt saturated - NET, NET, THE PRIVATE SECTOR CAN'T AFFORD MORE DEBT.

the public sector has to be approaching debt saturation.

what then?

does money become disassociated with debt - a REQUIREMENT for hyperinflation?

who will do that?

who do you think controls the money in this country?

it is the private banking cartel - and they will not cut their wealth off as debt holders and bail out debtors.

no, they are cutting the throats of debt holders and society as a whole why disguising their criminal theft of the national cash advances they take out annually.

the honest way of doing this would be to show up at every federal tax payer's door, knock, put a gun to their head, take them to the cash advance machine, force them to take a $26k cash advance, take the cash and exclaim, "same time, same place next year, alrighty?"

guess what? they would do this to each federal tax payer in your home!

is this sustainable?

i think not.

we will have our day with the wall.

be prepared.

Thu, 03/24/2011 - 22:43 | 1098112 SwingForce
SwingForce's picture

Gold = SHIT 

It wil be defaulted upon by the people that own it.

Fri, 03/25/2011 - 04:04 | 1098656 akak
akak's picture

I like how a truthful proposition often needs a fair amount of verbiage to be properly and fully expressed, but sheer nonsense can be stated with 13 words and one arithmetic symbol.

Thu, 03/24/2011 - 23:58 | 1098350 Burnbright
Burnbright's picture

Sarcasm? I don't get what you just said, makes no sense.

Thu, 03/24/2011 - 21:16 | 1097786 Billy Bob
Billy Bob's picture

I have a client who has 30 history as a very successful c ommercial real estate investor.  His net worth in 2007 was in excess of $15MM, and he had a substantial cash position.  The the nature of the commercial RE market began to change, and as his first 2 mortgages came due, he had to bring nearly $700,000 to the closing table for the refis.  At that time, he had an additional 6 properties that were due for a refi by the end of 2010.  He could not sell any of his properties, and he realized that he could not raise money to meet the refi requirements when they came due.

One day at lunch, he looked at me and said   "Bill, I don't care how much money they print... .we are going to run out of money."  He meant of course that the economy was destroying more credit/equity/debt than they could replace... so don't worry about how much they are printing.. it won't matter......

 

 

Bill

Thu, 03/24/2011 - 23:35 | 1098304 Calmyourself
Calmyourself's picture

Bill, that is the point, when that comes Bernanke will not allow the deflationary cycle to take hold.  He is a Depression era scholar after all, they will fire up physical printing presses.   Print one side only if need be but the cash for hyperinflation will appear more quickly than you thought possible.

Thu, 03/24/2011 - 20:54 | 1097716 MrPook
MrPook's picture

interesting

Thu, 03/24/2011 - 20:29 | 1097640 jimmyjames
jimmyjames's picture

Gee… what major country is engaging in similar practices today?

 

*****

A few differences between now and Wiemar-

The rest of the world was locked to Gold when Germany Hyper-inflated-

Germany abandoned Gold Standard and freely printed-against Gold-

Germany had a "peg" to Hyper-inflate against-

Today there is no peg in a floating currency system-

So the question is--

Hyper-inflate against what?

Thu, 03/24/2011 - 20:42 | 1097684 disabledvet
disabledvet's picture

chives. and "the vicyssoise."

Thu, 03/24/2011 - 20:39 | 1097682 taraxias
taraxias's picture

Wild ass guess: wheat, corn, oats, rice, soybeans, cocoa, sugar, coffee, copper, lead, zinc,aluminum, nickel, and..........may be.........just may be........oil and........you guessed it......gold.

Thu, 03/24/2011 - 21:20 | 1097794 jimmyjames
jimmyjames's picture

Wild ass guess: wheat, corn, oats, rice, soybeans, cocoa, sugar, coffee, copper, lead, zinc,aluminum, nickel, and..........may be.........just may be........oil and........you guessed it......gold.

***********

Sorry--i junked you and i didn't mean to-

Prices are going up as you say-but that does not increase the supply of money-

It has no bearing on money supply-it is in fact deflationary as it channels money from other areas of the economy into necessities and that narrows the velocity band and velocity collapses further-

 

Fri, 03/25/2011 - 06:07 | 1098708 rich_wicks
rich_wicks's picture

Prices are going up as you say-but that does not increase the supply of money-

Just because YOUR supply of money isn't going up doesn't mean there isn't an increase in the supply of money.

It doesn't need to trickle down to you.

Thu, 03/24/2011 - 23:54 | 1098344 Burnbright
Burnbright's picture

Prices are going up as you say-but that does not increase the supply of money-

With comments like that who needs logic?

Fri, 03/25/2011 - 01:44 | 1098553 jimmyjames
jimmyjames's picture

Prices are going up as you say-but that does not increase the supply of money-

With comments like that who needs logic?

 

*********

Explain how prices increse the money supply-

I know you can't clueless fuckwit-

 

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