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Can HyperInflation REALLY Hit the US?
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
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take steps to prepare for the Second Round of the Financial Crisis… I highly
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Hey Muppet
I was just over at Jesse's site and looking at charts showing Mxx rising.
His site is only one of many that show the various M(whatever) rising.
Show proof when you say "money supply-it is in fact deflationary".
I went to the food store today ... bread,bananas,milk, coffee, TP ..UP.
Stopped afterwards and got some gas ... UP. Went online and noticed my various insurance ...UP.
I haven't had an increase of income anytime lately ... in fact years, yet my taxes, food,energy,communication costs are .... up.
Money (whatever that means thesedays) is being created into existence by the Fed and it's being diverted to their cronies. Who in turn speculate to goose markets.
That's the reality of these times.
Money isn't being "channeled" from other areas, rather it's being created by the Fed and directed to those in league with it.
The Fed ..must be put down.
Preferably with extreme prejudice.
>>Show proof when you say "money supply-it is in fact deflationary".<<
there is price inflation and monetary inflation. two different phenomena that can, but don't have to be related.
the over goal is to find the root cause of the effects we observe.
here's a graph of the fed's Z1...
http://market-ticker.denninger.net/uploads/2010/Jun/debt-to-gdp1.png
as you can see, credit (money - money is debt in the criminal banking cartel system foisted upon a willfully ignorant populace) has been flat since the peak, although its current slope is up.
a couple notes.
1. the banks are lying about the bad debt. if you include the bad debt on their books, not only are the banks insolvent right now, but the Z1 is well off the bubble highs. i can explain more, but i think most on ZH understand the banks are lying about their bad debt.
2. the government is spending about $1.7 trillion annually on deficit spending and it is increasing as the private economy is collapsing underneath it.
3. the fed is pumping another trillion or more into the economy annually.
2 and 3 combined are $26k in annual marginal debt per federal tax payer (two tax payers in the house, that's $52k). and growing annually.
that's just federal.
the question then becomes, how long can this go on with low interest rates?
i don't know, but i do know the answer is "not forever."
the next question then becomes, "what happens when interest rates are high?"
housing collapses, any left over businesses contract further, jobs are cut, banks go bust, debtors default, debt owners collect assets, etc...
remember, a dollar bill is essentially a debt receipt equal to that dollar plus interest.
BY DEFINITION, THERE IS ALWAYS MORE DEBT IN THE SYSTEM THAN THERE IS DOLLARS TO PAY IT BACK.
ruminate on that FACT for a while. it is an important detail.
business will collapse into a heap well before We, The People see a significant increase in cash payouts to be able to cover increased expenses.
yes, we are going 150 mph... but we will hit the wall.
a doubling of commodities again will wipe out corporate profit margins and the stock market will collapse. layoffs will ensue, housing will collapse, rates will rise...
this mutha is gonna blow.
food, water, health, community, protection, absent from the system that will implode in a heap - and suck everyone in that system dry as it does... all are highly desirable.
^^ Thank you. This is correct. None of the hyperinflationists ever have answers for A) What happens when people cannot AFFORD the increased prices? B) How does that relate to margins/corporate earnings C) They fail to understand that inflation has ALREADY HAPPENED FOR 100+ years and realize this balloon is already blown. It will deflate or pop. It's very simple folks. I suggest you study history because it's already happened exactly like this before. Cheap credit/easy money/asset bubbles/bubbles pop --> earnings suck --> stock market crash --> layoffs/unemployment --> less affordability --> lower demand --> lower prices --> deflationary collapse. Elites buy back assets after they're on "sale" and push everything back into another 100 year inflation. Ususally a world war or two in between. Wake up people. You're being fleeced.
Aren't junks on this site a toggle? Click again and it un-junks?
Hmmm ... hyperinflation. I don't see any in my town. I live near DC and the peeps here are 'wealthy'. DC, you know, government, Treasury, Fannie and Freddie, Defense Department, Treasury, Bernanke, etc...
Even the rich are busted and nobody has cash. Some inflation.
Stay out of Whole Foods and food is cheap. Gas is expensive (but I don't have a car, ha!). Peeps are waiting for big layoffs or a government shutdown which will mean even less money.
Inflation: show me the goddamned $100 million dollar bill or shut the fuck up.
Steve from Virginia. Don't you realize there are TRILLIONS of dollars floating around outside of the country? When other nations decide they don't want to hold that crap anymore IT ALL COMES FLOODING BACK INTO THE US and it will...
Prices are going up where? I just paid $3.70 for gas and I live in a "low cost" part of the country. I just saw that a bag of Ruffles is FIVE DOLLARS. (Don't eat that crap just saying). Steve, don't take this the wrong way, but if I could only pick one part of the US where a giant tsunami could hit, it's where you live.
>>Steve from Virginia. Don't you realize there are TRILLIONS of dollars floating around outside of the country? When other nations decide they don't want to hold that crap anymore IT ALL COMES FLOODING BACK INTO THE US and it will...<<
don't you know that all those trillions were created as debt that has been accruing interest - so the debt owed is always higher than outstanding debt receipts?
you assume that those dollars never need to be paid back.
if the do (and they do!), there isn't nearly enough debt receipts to pay down all the debt used to create them because of something called usury.
IOW, unless the debt based monetary system is annihilated, there is more debt than money BY DEFINITION.
that system can't hyperinflate as there is always more demand for debt receipts to pay back debt than there is debt receipts to actually pay back the debt.
once all the debt receipts are gone, the debt will still exist and the debt holders walk away with the spoils.
we can already see where this speculative inflation leads...
1. higher input costs for business.
2. stagnant wages (wall street stealing everything, even if nailed down).
3. collapsing business profits, unhappy citizens.
4. rising interest rates (which will ultimately be the tour de force that drives demand for dollars to pay off dollar denominated debt.
5. if they keep QEing, commodities will do well, business will collapse, high gas will collapse the economy even more, people will riot and incomes still won't rise (wall street wants slaves).
if you can lay out a similar cook book scenario for hyperinflation, please do.
all i see is 150 MPH straight into the wall of generational collapse.
Sadly, you're wrong. In 1998 a pound of sliced turkey at the deli cost $2.99. Today it costs $9.99. Tuna was 3 for $1 and now it's a buck each for a smaller can of mostly oil.
The only thing on sale here for cheap in DC is our politician's.
Inflation: show me the goddamned $100 million dollar bill or shut the fuck up.
****************
Best answer yet and it gets junked-
Are people short of dollars or do they have boxes full of them-but just can't buy amything with them?
People talk about Hyper-inflation without looking at reality-
Wages are falling-house prices are falling-unemployment is at record levels-
That's a decrease in money supply-at least at a personal level-
Who gives a shit about some crappy house getting cheaper? Housing has to be 3x annual salary, or it's too freaking expensive.
Wages fell during the Argentinian peso collapse, and unemployment surged.
So what?
I hate when some troll from the government shows up and like the fed tries to tell people there isn't inflation when we all know better. you sound like bernanke, krugman, or dudley.
Who fing cares that I pads are cheaper per unti cost of computing power. if you want to buy into the propaganda feel free to do so. but dude you are a troll!!! And that is me being kind
LOL! I read his post and thought it was Geithner.
I hate when some troll from the government shows up and like the fed tries to tell people there isn't inflation when we all know better. you sound like bernanke, krugman, or dudley.
********
From the government-you say?
lol-
If you "know" there is inflation-prove it-
Who cares what you believe?
This isn't a debate. If you think we're in a deflationary environment, fine, invest accordingly. Nobody here is out to do their boy scout good deed to bring you to the light.
I was so close to posting actual numbers and facts, but then I realized, it would not convince the unconvincable.
We should just let Darwin decide. He knows best.
Libya....
patience grasshopper
Graham, take it easy. I know you want everyone to rush to your site and sign up with worthless fiat currency (which you seem extremely eager to receive - you should price your site in gold or silver, just for the sake of consistency), but when you engage in overkill, people get suspect.
Scary, I bet silver may get to $40.00, Graham, Graham..
So is America looking at an export-led boom in the near term? Or are we already in the boom, with our dollar as the lead-export!
Debt is the only thing we know how to make in the USA.
pheonix cap research, "can we REALLY pull our heads out of our asses?"
Another guy vying for a spot on the next Peter Schiff was right video.
Lay off the Crack Pipe. Best wishes Smaug.
Never right....Just like real estate could never crash, the US dollar will never crash. Maybe you should get on TV and maybe you can star in the next Peter Schiff was right video.
excellent bit of information about the etiology of the weimar inflation - i had fallen into the reparations theory trap.....i love truth....it often takes a great deal of effort to unearth, refine, and forge....
"etiology" gives me a stiff neck...unless its "etymology" which gives me the hiccups...you have to go to "anthropology" to make me stiff in the nether regions of Greystroke.
"Go sell CRAZY somewhere else, we're Full Up here!"
http://www.youtube.com/watch?v=qxOwHutnXNA
hyper inflationary
hedge hogs...
Completely fraudulent posting. The Versaille treaty debt was denominated in English Pounds, a gold standard currency, of course. None of this ever happened. The statements made here allow one to determine that we're dealing with un-educated fools, and there is no reason to listen to them.
Your superior IQ has already manifested itself in your statements that "Fukushima could never go into melt down...impossible for anybody who understood basic physics"...my left toe tells me your IQ has been in meltdown...So this is no surprise anymore...
I disagree with your conclusion. Having just finished reading "When Money Dies" there were numerous times when the allies altered the reparations, either by amount or payment method as a result of the economic chaos in Germany.
double post - please delete.
>>hyperinflation occurs when a currency is abandoned all together.<<
for every dollar that exists, there is a dollar + usury in debt that exists to engulf it.
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.
the idea that this demand to pay off debt simply dries up by choice doesn't make sense to me - so if someone can share the mechanics of how this works, i'd appreciate it.
our money is debt. they create principle and principle + interest is owed. there is more debt than money.
it is true that a nation like china could "dump the dollar," but that means not doing business with the USA.
all those dollars owned by china are someone else's debt, though, so even if the china puked those dollars, debtor demand will still be there.
the way i see a continued debasement of the working out is...
1. dollar continues debasement.
2. people lose confidence in the dollar.
3. people will demand a higher interest rate to lend.
4. corporate input costs soar.
5. incomes continue to fall (wall street stealing it all!).
6. interest rates skyrocket,
7. companies raise prices and sales collapse.
8. jobs are lost, companies go bust.
9. people default on debt or pay debt, cash velocity crashes, people start hoarding it.
10. the economy collapses into a heap of Ponzi collapse h*ll.
11. the robber barons use all their insider cash to get out of paper and into tangibles (they buy the whole place up).
12. bond market collapses wiping out bond holders at that time.
13. dollar goes to zero.
14. new world order and world currency sold to the nations by the very criminals that orchestrated this current Ponzi and collapse sequence.
Simple, I'm not paying the $12 back in debts I owe you.
In fact, nobody is paying any of their debts back. Go jump in a lake.
So what does the Fed do? It creates money to make up for the non payments on debt, new money. Money that wasn't earned, simply created.
>>Simple, I'm not paying the $12 back in debts I owe you.
In fact, nobody is paying any of their debts back. Go jump in a lake.
So what does the Fed do? It creates money to make up for the non payments on debt, new money. Money that wasn't earned, simply created.<<
that's not detailed.
1. what happens to the economy when the debts aren't paid.
2. what happens to the assets of citizens when the debts aren't paid?
3. who owns the federal reserve? hint, the same group that is criminally robbing society and economically gutting america.
4. why would the federal reserve hand out trillions to the sheeple and devalue all the assets of its owners? why criminally rob society to give it all back via inflation?
5. who will lend money to america once money is decoupled from debt?
6. if nobody lends money to america, will spending decrease?
7. how long will money have value once money is disconnected from debt and everyone figures out it is being handed out for free by the trillions?
8. what will commodities do? how will incomes in a jobs depression keep up with commodities ramps? exactly. if they can't keep up, how will spending keep up?
9. once SS and MC are wiped clean, will people begin to save dramatically more for retirement? what will this do to spending? how about the economy?
a nation saturated with debt will root for hyperinflation and the debt bailout it implies.
you have to realize that it is the debt owners who will determine if debtors are bailed out at their own expense or if the debtors get the thumb screws.
my calculated answer is that thumb screws will be big.
as buffets buddy munger said...
Munger says the bank bailouts were "required to save your civilization." He suggested that burdening the economy with bank failures would have results similar to the economic collapse in Germany after World War I that led to the rise of Adolf Hitler. Meanwhile, "the culture dies" if you bail out individuals. People in economic distress should "suck it up and cope."
http://www.businessweek.com/magazine/content/10_40/b4197047437598.htm
munger's money is on joe and janet bag-o-donuts having to suck it up without a bailout.
i think munger is very well connected to the criminal syndicate that owns the federal reserve.
when it gets down to it, it is a policy decision. some people think the government stands above the people who funded their elections and who own the media and they will bust big capital and bail out a nation of debt money debtors.
you know, the same criminal big capital cartel that has carte blanche from government to steal homes without paperwork, file fraudulent paperwork before the court, laundery $370 billion in drug mony, sell sh*t as AAA - that big capital.
you know, the big capital that runs the UN and now bypasses congress in their effort to leverage the american military to fight their corporate wars.
yes, that government will rise up in a glorious moment of "hope and change," they will change the monetary system they've covered up for almost 100 years and they will bust the criminal big capital cartel and bail out joe and janet bag-o-donuts out of the criminally inflicted debt h*ll that these same criminals and government put them into...
that's not the way i'd bet. all i see is the big capital crime syndicate running wild all over the laws and apathetic citizens of this country and the government on their knees with drewl running down their chin.