Guest Post: How Hyperinflation Will Happen

Submitted by Gonzalo Lira

How Hyperinflation Will Happen

Right now, we are in the middle of deflation. The Global Depression we are experiencing has squeezed both aggregate demand levels and aggregate asset prices as never before. Since the credit crunch of September 2008, the U.S. and world economies have been slowly circling the deflationary drain.

To counter this, the U.S. government has been running massive deficits, as it seeks to prop up aggregate demand levels by way of fiscal “stimulus” spending—the classic Keynesian move, the same old prescription since donkey’s ears.

But the stimulus, apart from being slow and inefficient, has simply not been enough to offset the fall in consumer spending.

For its part, the Federal Reserve has been busy propping up all assets—including Treasuries—by way of “quantitative easing”.

The Fed is terrified of the U.S. economy falling into a deflationary death-spiral: Lack of liquidity, leading to lower prices, leading to unemployment, leading to lower consumption, leading to still lower prices, the entire economy grinding down to a halt. So the Fed has bought up assets of all kinds, in order to inject liquidity into the system, and bouy asset price levels so as to prevent this deflationary deep-freeze—and will continue to do so. After all, when your only tool is a hammer, every problem looks like a nail.

But this Fed policy—call it “money-printing”, call it “liquidity injections”, call it “asset price stabilization”—has been overwhelmed by the credit contraction. Just as the Federal government has been unable to fill in the fall in aggregate demand by way of stimulus, the Fed has expanded its balance sheet from some $900 billion in the Fall of ’08, to about $2.3 trillion today—but that additional $1.4 trillion has been no match for the loss of credit. At best, the Fed has been able to alleviate the worst effects of the deflation—it certainly has not turned the deflationary environment into anything resembling inflation.

Yields are low, unemployment up, CPI numbers are down (and under some metrics, negative)—in short, everything screams “deflation”.

Therefore, the notion of talking about hyperinflation now, in this current macro-economic environment, would seem . . . well . . . crazy. Right?

Wrong: I would argue that the next step down in this world-historical Global Depression which we are experiencing will be hyperinflation.

Most people dismiss the very notion of hyperinflation occurring in the United States as something only tin-foil hatters, gold-bugs, and Right-wing survivalists drool about. In fact, most sensible people don’t even bother arguing the issue at all—everyone knows that only fools bother arguing with a bigger fool.

A minority, though—and God bless ’em—actually do go ahead and go through the motions of talking to the crazies ranting about hyperinflation. These amiable souls diligently point out that in a deflationary environment—where commodity prices are more or less stable, there are downward pressures on wages, asset prices are falling, and credit markets are shrinking—inflation is impossible. Therefore, hyperinflation is even more impossible.

This outlook seems sensible—if we fall for the trap of thinking that hyperinflation is an extention of inflation. If we think that hyperinflation is simply inflation on steroids—inflation-plus—inflation with balls—then it would seem to be the case that, in our current deflationary economic environment, hyperinflation is not simply a long way off, but flat-out ridiculous.

But hyperinflation is not an extension or amplification of inflation. Inflation and hyperinflation are two very distinct animals. They look the same—because in both cases, the currency loses its purchasing power—but they are not the same.

Inflation is when the economy overheats: It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena.

Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money—they want less of the currency: So they will pay anything for a good which is not the currency.

Right now, the U.S. government is indebted to about 100% of GDP, with a yearly fiscal deficit of about 10% of GDP, and no end in sight. For its part, the Federal Reserve is purchasing Treasuries, in order to finance the fiscal shortfall, both directly (the recently unveiled QE-lite) and indirectly (through the Too Big To Fail banks). The Fed is satisfying two objectives: One, supporting the government in its efforts to maintain aggregate demand levels, and two, supporting asset prices, and thereby prevent further deflationary erosion. The Fed is calculating that either path—increase in aggregate demand levels or increase in aggregate asset values—leads to the same thing: A recovery in the economy.

This recovery is not going to happen—that’s the news we’ve been getting as of late. Amid all this hopeful talk about “avoiding a double-dip”, it turns out that we didn’t avoid a double-dip—we never really managed to claw our way out of the first dip. No matter all the stimulus, no matter all the alphabet-soup liquidity windows over the past 2 years, the inescapable fact is that the economy has been—and is headed—down.

But both the Federal government and the Federal Reserve are hell-bent on using the same old tired tools to “fix the economy”—stimulus on the one hand, liquidity injections on the other. (See my discussion of The Deficit here.)

It’s those very fixes that are pulling us closer to the edge. Why? Because the economy is in no better shape than it was in September 2008—and both the Federal Reserve and the Federal government have shot their wad. They got nothin’ left, after trillions in stimulus and trillions more in balance sheet expansion—

—but they have accomplished one thing: They have undermined Treasuries. These policies have turned Treasuries into the spit-and-baling wire of the U.S. financial system—they are literally the only things holding the whole economy together.

In other words, Treasuries are now the New and Improved Toxic Asset. Everyone knows that they are overvalued, everyone knows their yields are absurd—yet everyone tiptoes around that truth as delicately as if it were a bomb. Which is actually what it is.

So this is how hyperinflation will happen:

One day—when nothing much is going on in the markets, but general nervousness is running like a low-grade fever (as has been the case for a while now)—there will be a commodities burp: A slight but sudden rise in the price of a necessary commodity, such as oil.

This will jiggle Treasury yields, as asset managers will reduce their Treasury allocations, and go into the pressured commodity, in order to catch a profit. (Actually it won’t even be the asset managers—it will be their programmed trades.) These asset managers will sell Treasuries because, effectively, it’s become the principal asset they have to sell.

It won’t be the volume of the sell-off that will pique Bernanke and the drones at the Fed—it will be the timing. It’ll happen right before a largish Treasury auction. So Bernanke and the Fed will buy Treasuries, in an effort to counteract the sell-off and maintain low yields—they want to maintain low yields in order to discourage deflation. But they’ll also want to keep the Treasury cheaply funded. QE-lite has already set the stage for direct Fed buys of Treasuries. The world didn’t end. So the Fed will feel confident as it moves forward and nips this Treasury yield jiggle in the bud.

The Fed’s buying of Treasuries will occur in such a way that it will encourage asset managers to dump even more Treasuries into the Fed’s waiting arms. This dumping of Treasuries won’t be out of fear, at least not initially. Most likely, in the first 15 minutes or so of this event, the sell-off in Treasuries will be orderly, and carried out with the idea (at the time) of picking up those selfsame Treasuries a bit cheaper down the line.

However, the Fed will interpret this sell-off as a run on Treasuries. The Fed is already attuned to the bond markets’ fear that there’s a “Treasury bubble”. So the Fed will open its liquidity windows, and buy up every Treasury in sight, precisely so as to maintain “asset price stability” and “calm the markets”.

The Too Big To Fail banks will play a crucial part in this game. See, the problem with the American Zombies is, they weren’t nationalized. They got the best bits of nationalization—total liquidity, suspension of accounting and regulatory rules—but they still get to act under their own volition, and in their own best interest. Hence their obscene bonuses, paid out in the teeth of their practical bankruptcy. Hence their lack of lending into the weakened economy. Hence their hoarding of bailout monies, and predatory business practices. They’ve understood that, to get that sweet bail-out money (and those yummy bonuses), they have had to play the Fed’s game and buy up Treasuries, and thereby help disguise the monetization of the fiscal debt that has been going on since the Fed began purchasing the toxic assets from their balance sheets in 2008.

But they don’t have to do what the Fed tells them, much less what the Treasury tells them. Since they weren’t really nationalized, they’re not under anyone’s thumb. They can do as they please—and they have boatloads of Treasuries on their balance sheets.

So the TBTF banks, on seeing this run on Treasuries, will add to the panic by acting in their own best interests: They will be among the first to step off Treasuries. They will be the bleeding edge of the wave.

Here the panic phase of the event begins: Asset managers—on seeing this massive Fed buy of Treasuries, and the American Zombies selling Treasuries, all of this happening within days of a largish Treasury auction—will dump their own Treasuries en masse. They will be aware how precarious the U.S. economy is, how over-indebted the government is, how U.S. Treasuries look a lot like Greek debt. They’re not stupid: Everyone is aware of the idea of a “Treasury bubble” making the rounds. A lot of people—myself included—think that the Fed, the Treasury and the American Zombies are colluding in a triangular trade in Treasury bonds, carrying out a de facto Stealth Monetization: The Treasury issues the debt to finance fiscal spending, the TBTF banks buy them, with money provided to them by the Fed.

Whether it’s true or not is actually beside the point—there is the widespread perception that that is what’s going on. In a panic, widespread perception is your trading strategy.

So when the Fed begins buying Treasuries full-blast to prop up their prices, these asset managers will all decide, “Time to get out of Dodge—now.”

Note how it will not be China or Japan who all of a sudden decide to get out of Treasuries—those two countries will actually be left holding the bag. Rather, it will be American and (depending on the time of day when the event happens) European asset managers who get out of Treasuries first. It will be a flash panic—much like the flash-crash of last May. The events I describe above will happen in a very short span of time—less than an hour, probably. But unlike the event in May, there will be no rebound.

Notice, too, that Treasuries will maintain their yields in the face of this sell-off, at least initially. Why? Because the Fed, so determined to maintain “price stability”, will at first prevent yields from widening—which is precisely why so many will decide to sell into the panic: The Bernanke Backstop won’t soothe the markets—rather, it will make it too tempting not to sell.

The first of the asset managers or TBTF banks who are out of Treasuries will look for a place to park their cash—obviously. Where will all this ready cash go?

Commodities.

By the end of that terrible day, commodites of all stripes—precious and industrial metals, oil, foodstuffs—will shoot the moon. But it will not be because ordinary citizens have lost faith in the dollar (that will happen in the days and weeks ahead)—it will happen because once Treasuries are not the sure store of value, where are all those money managers supposed to stick all these dollars? In a big old vault? Under the mattress? In euros?

Commodities: At the time of the panic, commodities will be perceived as the only sure store of value, if Treasuries are suddenly anathema to the market—just as Treasuries were perceived as the only sure store of value, once so many of the MBS’s and CMBS’s went sour in 2007 and 2008.

It won’t be commodity ETF’s, or derivatives—those will be dismissed (rightfully) as being even less safe than Treasuries. Unlike before the Fall of ’08, this go-around, people will pay attention to counterparty risk. So the run on commodities will be for actual, feel-it-’cause-it’s-there commodities. By the end of the day of this panic, commodities will have risen between 50% and 100%. By week’s end, we’re talking 150% to 250%. (My private guess is gold will be finessed, but silver will shoot up the most—to $100 an ounce within the week.)

Of course, once commodities start to balloon, that’s when ordinary citizens will get their first taste of hyperinflation. They’ll see it at the gas pumps.

If oil spikes from $74 to $150 in a day, and then to $300 in a matter of a week—perfectly possible, in the midst of a panic—the gallon of gasoline will go to, what: $10? $15? $20?

So what happens then? People—regular Main Street people—will be crazy to buy up commodities (heating oil, food, gasoline, whatever) and buy them now while they are still more-or-less affordable, rather than later, when that $15 gallon of gas shoots to $30 per gallon.
 
If everyone decides at roughly the same time to exchange one good—currency—for another good—commodities—what happens to the relative price of one and the relative value of the other? Easy: One soars, the other collapses.

When people freak out and begin panic-buying basic commodities, their ordinary financial assets—equities, bonds, etc.—will collapse: Everyone will be rushing to get cash, so as to turn around and buy commodities.

So immediately after the Treasury markets tank, equities will fall catastrophically, probably within the next few days following the Treasury panic. This collapse in equity prices will bring an equivalent burst in commodity prices—the second leg up, if you will.
 
This sell-off of assets in pursuit of commodities will be self-reinforcing: There won’t be anything to stop it. As it spills over into the everyday economy, regular people will panic and start unloading hard assets—durable goods, cars and trucks, houses—in order to get commodities, principally heating oil, gas and foodstuffs. In other words, real-world assets will not appreciate or even hold their value, when the hyperinflation comes.

This is something hyperinflationist-skeptics never quite seem to grasp: In hyperinflation, asset prices don’t skyrocket—they collapse, both nominally and in relation to consumable commodities. A $300,000 house falls to $60,000 or less, or better yet, 50 ounces of silver—because in a hyperinflationist episode, a house is worthless, whereas 50 bits of silver can actually buy you stuff you might need.

Right now, I’m guessing that sensible people who’ve read this far are dismissing me as being full of shit—or at least victim of my own imagination. These sensible people, if they deign to engage in the scenario I’ve outlined above, will argue that the government—be it the Fed or the Treasury or a combination thereof—will find a way to stem the panic in Treasuries (if there ever is one), and put a stop to hyperinflation (if such a foolish and outlandish notion ever came to pass in America).
 
Uh-huh: So the Government will save us, is that it? Okay, so then my question is, How?

Let’s take the Fed: How could they stop a run on Treasuries? Answer: They can’t. See, the Fed has already been shoring up Treasuries—that was their strategy in 2008—’09: Buy up toxic assets from the TBTF banks, and have them turn around and buy Treasuries instead, all the while carefully monitoring Treasuries for signs of weakness. If Treasuries now turn toxic, what’s the Fed supposed to do? Bernanke long ago ran out of ammo: He’s just waving an empty gun around. If there’s a run on Treasuries, and he starts buying them to prop them up, it’ll only give incentive to other Treasury holders to get out now while the getting’s still good. If everyone decides to get out of Treasuries, then Bernanke and the Fed can do absolutely nothing effective. They’re at the mercy of events—in fact, they have been for quite a while already. They just haven’t realized it.

Well if the Fed can’t stop this, how about the Federal government—surely they can stop this, right?

In a word, no. They certainly lack the means to prevent a run on Treasuries. And as to hyperinflation, what exactly would the Federal government do to stop it? Implement price controls? That will only give rise to a rampant black market. Put soldiers out on the street? America is too big. Squirt out more “stimulus”? Sure, pump even more currency into a rapidly hyperinflating everyday economy—right . . .

(BTW, I actually think that this last option is something the Federal government might be foolish enough to try. Some moron like Palin or Biden might well advocate this idea of helter-skelter money-printing so as to “help all hard-working Americans”. And if they carried it out, this would bring us American-made images of people using bundles of dollars to feed their chimneys. I actually don’t think that politicians are so stupid as to actually start printing money to “fight rising prices”—but hey, when it comes to stupidity, you never know how far they can go.)

In fact, the only way the Federal government might be able to ameliorate the situation is if it decided to seize control of major supermarkets and gas stations, and hand out cupon cards of some sort, for basic staples—in other words, food rationing. This might prevent riots and protect the poor, the infirm and the old—it certainly won’t change the underlying problem, which will be hyperinflation.

“This is all bloody ridiculous,” I can practically hear the hyperinflation skeptics fume. “We’re just going through what the Japanese experienced: Just like the U.S., they went into massive government stimulus—hell, they invented quantitative easing—and look what’s happened to them: Stagnation, yes—hyperinflation, no.”

That’s right: The parallels with Japan are remarkably similar—except for one key difference. Japanese sovereign debt is infinitely more stable than America’s, because in Japan, the people are savers—they own the Japanese debt. In America, the people are broke, and the Nervous Nelly banks own the debt. That’s why Japanese sovereign debt is solid, whereas American Treasuries are soap-bubble-fragile.

That’s why I think there’ll be hyperinflation in America—that bubble’s soon to pop. I’m guessing if it doesn’t happen this fall, it’ll happen next fall, without question before the end of 2011.
 
The question for us now—ad portas to this hyperinflationary event—is, what to do?

Neanderthal survivalists spend all their time thinking about post-Apocalypse America. The real trick, however, is to prepare for after the end of the Apocalypse.

The first thing to realize, of course, is that hyperinflation might well happen—but it will end. It won’t be a never-ending situation—America won’t end up like in some post-Apocalyptic, Mad Max: Beyond Thuderdome industrial wasteland/playground. Admittedly, that would be cool, but it’s not gonna happen—that’s just survivalist daydreams.

Instead, after a spell of hyperinflation, America will end up pretty much like it is today—only with a bad hangover. Actually, a hyperinflationist spell might be a good thing: It would finally clean out all the bad debts in the economy, the crap that the Fed and the Federal government refused to clean out when they had the chance in 2007–’09. It would break down and reset asset prices to more realistic levels—no more $12 million one-bedroom co-ops on the UES. And all in all, a hyperinflationist catastrophe might in the long run be better for the health of the U.S. economy and the morale of the American people, as opposed to a long drawn-out stagnation. Ask the Japanese if they would have preferred a couple-three really bad years, instead of Two Lost Decades, and the answer won’t be surprising. But I digress.

Like Rothschild said, “Buy when there’s blood on the streets.” The thing to do to prepare for hyperinflation would be to invest in a diversified hard-metal basket before the event—no equities, no ETF’s, no derivatives. If and when hyperinflation happens, and things get bad (and I mean really bad), take that hard-metal basket and—right in the teeth of the crisis—buy residential property, as well as equities in long-lasting industries; mining, pharma and chemicals especially, but no value-added companies, like tech, aerospace or industrials. The reason is, at the peak of hyperinflation, the most valuable assets will be dirt-cheap—especially equities—especially real estate.

I have no idea what will happen after we reach the point where $100 is no longer enough to buy a cup of coffee—but I do know that, after such a hyperinflationist period, there’ll be a “new dollar” or some such, with a few zeroes knocked off the old dollar, and things will slowly get back to a new normal. I have no idea the shape of that new normal. I wouldn’t be surprised if that new normal has a quasi or de facto dictatorship, and certainly some form of wage-and-price controls—I’d say it’s likely, but for now that’s not relevant.

What is relevant is, the current situation cannot long continue. The Global Depression we are in is being exacerbated by the very measures being used to fix it—stimulus is putting pressure on Treasuries, which are being shored up by the Fed. This obviously cannot have a happy ending. Therefore, the smart money prepares for what it believes is going to happen next.

I think we’re going to have hyperinflation. I hope I have managed to explain why.

Comments

[Geoff-UK]

FYI, I'm no longer junking JB--I'm junking anyone who engages him and offers a reply.  He's not going to quit this place while he's still getting so much attention.

"What is your major malfunction, numbnuts? Didn't Mommy and Daddy show you enough attention when you were a child?"--Gunnery Sergeant Hartman

[tmosley]

Wow, I guess I hit a nerve.  Here, lets hit it again.

Get out.

You can't learn simple facts, but instead run around repeating the same lies (people are "throwing away 8% premiums when buying physical gold).  You don't have to think like I do.  You just have to think.  And stop lying.  But you can't.

Get out.

I don't cry to Tyler.  I have suggested that you be banned on one occasion, because you never provide anything productive to any conversation on gold, and at that time, I had never seen you comment on any other topic, leading me to believe that you were just a gold troll.  Since that time, I have seen you post in other capacities (though rarely), so I don't think you should be banned.  I do think that you are not appreciated in any of your opinions or anything you say.  In fact, anything you say will tend to point everyone in the other direction, even if it were right.  When you reach that point, it's time to go.

So get out.

[Johnny Bravo]

The only fact is that nobody is going to give your premium back when gold is decreasing in value.

If gold drops in price, and is continuing to drop in price, who is going to pay a premium to own it?  Not anybody sensible.

Why would I pay 8% more for something than the market price if it is declining?  Would you?  I wouldn't even pay 8% more when it is increasing.

The fact that you would suggest I be banned just shows what a little crybaby pussy you are.  Really.  You don't cry to Tyler, except for one time you did.  What a hypocrite.

Have you even thought about it from this site's perspective?

I post in a thread, maybe 20 or 30 times, and it has FOUR HUNDRED REPLIES.  FOUR HUNDRED.  Yet, when I don't post in a thread, it has about 30-50 at the most.
What is better for a site that relies on advertisements to make money?  Somebody who drives traffic to a thread?  Or somebody that cries like a little baby and tells people to leave because he disagrees with them?

People thought women shouldn't vote in 1800, and people thought blacks were farm equipment.  I'm sure that the people saying "free the blacks" were considered "trolls" then too.  That doesn't make the people who all agreed that blacks were farm equipment right.

Just like the people who think that the dollar will collapse aren't right.

The more you tell me to leave, the more I'm going to post.  The best thing you can do is just go off on your little superiority kick and stop replying to my posts.

[Rusty Shorts]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[ColonelCooper]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[PhattyBuoy]

JohnyJizz²

[tmosley]

Aha!  So you're an attention whore.  Now I see the crux of the issue.  Nothing but a masochistic whore.  I'll tell you what, Johnny.  I will happily send you a hooker, sex of your choice, to step on your balls and verbally abuse you for a few hours a day.  That should replicate your experience here, and save us all a lot of grief.

[LePetomane]

LOL

[Frank Owen]

Should I learn to accept that 2+2 = 17  Is that what they're teaching now? I was pretty sure business schools taught 2+2=5. (George Orwell's 1984)

http://www.youtube.com/watch?v=wTFV9w4B0eg

[Johnny Bravo]

That's goldbug math.

I don't learn that level of math in business school.  I learn calculus and advanced statistics.

10-4+4 is not a net change of 100000%, like hyperinflation people suggest.
10-4+4 is zero, which is the same inflation we have today.

[Rusty Shorts]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[ColonelCooper]

I feel like you and I just lit the first two cigarette lighters at a concert.

BTW Johnny, that's what people did before glowsticks.

http://www.youtube.com/watch?v=VLnWf1sQkjY

[RockyRacoon]

Actually, the Bic lighter was the genesis of the whole concert thingie. 

1975 was the banner year.   Joints passed amongst the crowds!

[Village Idiot]

Free Bird!
Songwriters: Collins, Allen; Vanzant, Ronald;

If I leave here tomorrow
Would you still remember me?
For I must be traveling on, now
'Cause there's too many places
I've got to see

But, if I stayed here with you, girl
Things just couldn't be the same
'Cause I'm as free as a bird now
And this bird, you'll can not change
Oh, oh, oh, oh, oh

And the bird you cannot change
And this bird you cannot change
Lord knows, I can?t change
Bye, bye, baby it's been a sweet love

Yeah, yeah
Though this feeling I can't change
But please don't take it so badly
'Cause the Lord knows
I'm to blame

But, if I stayed here with you girl
Things just couldn't be the same
'Cause I'm as free as a bird now
And this bird, you'll can not change
Oh, oh, oh, oh, oh

And this bird you cannot change
And this bird you cannot change
Lord knows, I can't change
Lord help me, I can't change
Lord I can't change

Won't you fly high, free bird, yeah?

[tmosley]

So why bother sticking around?  Is it just because you are a masochistic boy-whore?  You like to take the abuse?  You like the thought of being shit on by every member of a forum, perhaps in more ways than one?  Just leave, and I'll pay someone to shit on you all day, Johnny.  ALL DAY.  Imagine the jollies.

[Frank Owen]

Johnny, I don't know what is sadder... that you didn't realize I wasn't making fun of you with that Orwell joke, that you've never read 1984, or your 10-4+4=0 equation.

[the_magician]

JB, you ARE an idiot. Nothing to explain here.

[Dreamwalker420]

A codgy old man walked into my store.  His face was frantic.  His conern was real.  He said that the government "had" to bail out Citigroup.  Had to.  No other option.  What he then followed up with was, "it better ... my pension is invested in Citigroup.  If they don't I'll go bankrupt!"

The only surprise was that anyone was surprised.

I laughed.  I asked him if he was serious.  I knew about mark-to-market accounting rules that took affect September 1st, 2008 ... Citigroup and Bank of America were bankrupt ... and by that, so was the remainder of the nations banks.  As the design of the Federal Reserve system requires banks to own part of each other: if one suffers they all suffer.

He was serious.  TARP failed, but found salvation in back door bribes to Congressmen.

Democracy ceased that day.  Oh ... that's right, we actually have a Republic.  Good thing too, else those pesky populists would have destroyed us and our "systemically" important institutions.

I searched the internet for answers to what had just happened.  I talked to everyone I knew ... almost no one from my generation even knew who Ben Bernanke is.  No one understood Federal Reserve Notes.  Very few people understood anything except to accept the decisions of Congress and the Federal Reserve.

Does a man have the right to choose slavery?

When I first started reading ZH, I felt I had stumbled upon the most important news source on the face of the earth!

We have gone from debating strategic wealth creation to a gutter-fight about the perception of reality.  If I have  to educate you and cower to you subtle nuances (lest I accidently offend) then you are not interested in the truth.

Scarcity vs. Fungability.

The actual existence of limited resources vs. the government's de facto decree to control said resources.

The American experience is different in that it seeks to function without the expectation that government will determine the allocation of wealth.  That that determination is a byproduct of a competitive environment.  Allowing us to participate in the market place, we seek alternatives of efficiency and improvement in order to compete against established practices of production and servicers.

The health care debate should disturb the average Capitalist, children of this generation have become so disenfranchised from the American Dream that they now expect government to solve their problems.

The only certainty about our future, is that it will get ugly before it gets better.

[MsCreant]

Good post.

[ATG]

The actual existence of limited resources vs. the government's de facto decree to control said resources.

The good news is man's unlimited creative production.

The bad news is government thinks it's in control...

[stev3e]

2+2 is around 17

[kathy.chamberli...]

Cheeky's who who  ........well at least he is still alive in our hearts.

[kathy.chamberli...]

i junked you.

[ColonelCooper]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[Joeman34]

I don't get it

[ColonelCooper]

Then you haven't read much Johnny.

[RockyRacoon]

He's an easily excited, zit-faced kid, still in college, living in Mom's basement, and has a pizza delivery route to provide discretionary income.  Momma pays him no mind so he comes here for attention.

[PhattyBuoy]

And he is an

A S S C L O W N

[RockyRacoon]

Oh, yeah.  I left that one out.  Thanks for filling out the list.

[akak]

But despite his myriad flaws and personal failings, never forget that JohnnyB's predictions are always correct!  (Even when they are not, like his recent call that gold would top at $1220 before commencing its plunge to $1.39 or whatever.)  Remember, JohnnyB is always right!)

[assumptionblindness]

JB, failure to consider 'cockamamey scenarios' does not make one wise.  The future is rarely a mirror of the past...when change comes, many of us will beforced to accept things that seem implausible today. 

I mean, what if you're wrong?  If you end up having to eat crow you may want to take this advance opportunity to read about what it tastes like?

[Johnny Bravo]

And what if YOU'RE wrong?

Oh wait, I'm the only one who could possibly be wrong, right?

I'd say that a light inflationary scenario as the result of money printing is much more likely than 9 million percent inflation or whatever.  You have to look at probabilities, and most of the "pro hyperinflation" arguments have low probabilities at best, and at worst fit into an "if IFs and BUTs were candies and nuts" scenario... 

[ColonelCooper]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[Turd Ferguson]

The Colonel strikes again!!!

[Goldenballs]

The inflation isn,t because of the then current circumstances,its to crush the debts,because of its results thats why it will happen.

[kathy.chamberli...]

lost my last golden ball to the water on 8, darn. thinking of U .

[assumptionblindness]

JB, my point is that you can't dismiss the hyperinflationary scenario just because it is a low probability event.  If you haven't yet, you should read The Black Swan by Nicholas Nassim Taleb.  It is the 'low probability' events that, when they occur, can have devastating effects simply because nobody prepares for the day when something happens that was not supposed to happen...just buy a few silver coins, my friend.      

[kathy.chamberli...]

ass, what is the origin of cockamamey?

[Spitzer]

So gold is the bubble ? what about the 30 year bull market in treasuries ?

[ATM]

Nobody hopes that gold reachs 54000/oz because that means that our currency has broken, not that gold is some sort of fanatstic investment. You don't seem to get it but you will. 

[Johnny Bravo]

No, I understand just fine.

But then what?  What do you sell your gold for?  Dollars?

Doesn't that defeat the whole purpose of hedging against dollars?

And then, what if 54000 was only a minor blip on the way to 100000000?  What if you sold at 54000?  You'd still lose your ass after selling out.

The problem with gold as insurance is that nobody will sell it when it gets super high.  The only catalyst to sell will be when it goes lower.

Some people will make money, but not those buying at the top.  Downtrends are a lot more steep and severe than uptrends.

[tmosley]

Right, I'm sure no-one has ever used gold to retain purchasing power during monetary regime transfers.

But, so what?  Facts don't matter to you.

[Johnny Bravo]

Purchasing power in WHAT?

The same currency you are hedging against?

[tmosley]

I see.  You think the only thing you can buy is dollars.

There is this little thing called "goods and services" which most of us require to live.  Yes, you retain your purchasing power in terms of that.  Or New Dollars, if you prefer, when the US defaults and revalues its currency, leaving people who weren't able to trade their old currency for new during the extremely short trading window lose much of their purchasing power.  Or hell, you can preserve your purchasing power in terms of the currencies of foreign nations.  Do other countries exist in your little world, JB?

Get out.

[Johnny Bravo]

When are you going to post scenarios that are actually probable, as opposed to hedging against something that isn't going to happen?

Do you really think that the U.S. is going to have any kind of situation comparable to Zimbabwe?

We'll make the world a sea of glowing glass long before you need to trade your gold for new dollars.

"Get out"

Wahhh.... wahhh... somebody disagrees with me!!  I'm going to cry like a baby until they leave.
I already told you why you can't tell me to leave.  If you don't want to talk to me, don't reply to my posts.  Otherwise, deal with it.

I mean really.  Do you spend the rest of your life planning for scenarios that have no probability of occurring?
Do you have lightning strike insurance too?  Do you invest all your earnings into the powerball?

Both of those have higher probabilities of occurring than a US dollar collapse.

[ColonelCooper]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[tmosley]

Right, because no nuclear armed nation has ever collapsed before.

Seriously, nobody needs you.  Your continued presence here produces nothing.  Get out.

[Johnny Bravo]

It produces more clicks on threads than anything you could ever post.

People come here, hate me or not, just to reply to me.

What does your posting do?  Make idiotic assertions that have less probability than a lightning strike of occurring?

"no nuclear armed nation has ever collapsed before"

Name one that has that also had the world's reserve currency and the world's strongest military, and the strongest economy in the world.

You can't because there isn't even a comparable scenario.

[Rusty Shorts]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[ColonelCooper]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[PhattyBuoy]

JohnyJizz²

[tmosley]

Right, you're here for Tyler's benefit, huh?  I'm sure.  You just like getting shit on by everyone you meet.  I can't imagine the stench that permeates every aspect of your being.

Just kill yourself, you masochistic attention-whore.

[stev3e]

I'm kind of new here at ZH but I got to say you people are really weird.  From what I've read this Johnny Bravo guy makes perfect sense.  I may not agree with eveything he says but I can understand his argument and could see how I could discuss the matter with him if I cared to.

You other guys on the other hand, especially the tmosley character, are a bunch of girls.

[trav7777]

Argentina, MFER.

You trade it for whatever paper is when you need PAPER.

You do not dump the whole fuckin lot of it.

You trade it for things, ONE OF WHICH could be paper.  Wanna stockpile cattle, go ahead?

I'm not a goldbug.  It has no special magical properties other than people want it, just like a lot of other shit I may or may not agree with.  Diamonds for example.  USELESS when they are flawless and colorless.  Industrial use as a cutting or grinding tool.  But go figure, people highly covet the ones without color and inclusions.

If you wish to stockpile oil, hell, I would LOVE to do that, but can't.  Can't stockpile uranium either.  Cattle not so much, chickens, etc.  But SOME alternative to paper.  And if you NEED PAPER, you SWAP assets for paper.  If you need chickens and you have cows, SURELY even you can figure out how you could make this happen.

[dogbreath]

"But then what?  What do you sell your gold for?  Dollars?"

Duuuuh

You occupy a vacant Bank with a secure vault maybe buy it in a tax sale and wait.  While you are waiting you survey the situation for some sense of stability under the law of the land and of property rights and the rekindling of some kind of economy.  Before you die of old age you carouse with beautiful young women willing to partake of your wisdom.  You are charitable especially to single moms who were foolish enough to have a kid with an idiot like Jizzbreath who went broke on some ponzi deal.  When the day is right you hang out the sign " DOGBREATHS BANK".  Then you trade your gold for deeds that collect interest.  Then you carouse with beautiful younger women.

[Spitzer]

So 30 year bonds are a fantastic investment ?

When the dollar is done and gold gets used to recap the banks, it will be a fairly good investment.

[Johnny Bravo]

30 year bonds are a ponzi scheme to allow the facilitation of money printing to indirectly monetize debt.

Since the government can't print money on its own, the Federal Reserve does, which it purchases bonds with.  All it does is launder money from the Federal Reserve to the Government.

It's an accounting formality, not an investment.

[ColonelCooper]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[tmosley]

And therefore, buy the dollar.  Save in dollars.  What could possibly go wrong?

Even brief glimpses of truth like this don't do any good, because most people are disinclined to believe anything you say, since you have a track record as being a damned liar.  Just go.

[Johnny Bravo]

Just because I don't believe in paying 8% more than something is worth to invest doesn't mean that I'm investing in dollars either.

You're the king of strawmen, and quite worthless at it.

[Rusty Shorts]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[ColonelCooper]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[PhattyBuoy]

JohnyJizz²

[akak]

I agree ---- JohnnyBravo is the most egregious of trolls, and deserved long ago to be permanently banned from this site for his pointless antagonizing and utterly valueless shitting on every thread in which he participates. 

JohnnyB, you are truly a malicious and malevolent narcissist.  I feel nothing but evil while in your metaphorical presence here.

[akak]

I agree ---- JohnnyBravo is the most egregious of trolls, and deserved long ago to be permanently banned from this site for his pointless antagonizing and utterly valueless shitting on every thread in which he participates. 

JohnnyB, you are truly a malicious and malevolent narcissist.  I feel nothing but evil while in your metaphorical presence here.

[tmosley]

Then what are you investing in, JB?  Tell me, what FIAT currency are your investments denominated in?

Actually, I don't care.  Just get out, you masochistic attention whore.

[ATG]

If you bought them in 1981 at 14%,

they outperformed all other asset allocations including gold.

If you bought them in Dec 2009 at 2.519%, they are still underwater.

http://stockcharts.com/charts/gallery.html?%24tyx

People buying TBT or shorting bonds lost their heads like Highlander...

http://www.youtube.com/watch?v=kq4SqgxIKM0 2:24

[Oquities]

these guys actually think you're mish.

[Goldenballs]

The only way out of the current desperate state of shit.Just getting the smoke and mirrors in place.Economic Breakdown part 37,an oscar winning performance on the cards,book your seat,coming very,very soon.

[Mako]

The author is very confused and can't even get definitions correct.

Inflation is the increase of the money supply.  Hyperinflation is the rapid increase of the money supply.  Deflation is the decrease of the money supply.  Hyperdeflation is the rapid decrease of the money supply.

You use credit as money and the money supply is decreasing, one problem, the system does not function on negative money creation.

The author is an idiot.  There is no way to avoid the result once you go down this path. 

After hyperinflation would be hyperdeflation, the author has no idea what he is vomitting up.   Let me see, I go on a roller coaster, I go up the hill, instead of coming down the author says I will just continue to go up and up and up... hahahaha.

[Spitzer]

No you a wrong

Inflation-money loses value

deflation-money gains value

Hyperinflation-money loses lots of value

If Tim Giethner and Bernanke called a press confrenece and said " the dollar is done, fuck it" would we have deflation or hyperinflation ?

would M2 matter ? would M3 matter, would QE matter ? No

[Mako]

Sorry, us people in the sane world

Inflation is the increase of the money supply.

Deflation is the decrease of the money supply.

So, when you say I am wrong it's like you are saying the moon is made out of cheese and you expect me to believe you. 

[Spitzer]

The money supply eh ?

what if all confidence is lost on "the money supply" ?

What if the economy cannot service the debt, that backs "the money supply" ?

[Johnny Bravo]

Here we go again with the "what ifs..."

What if burglars wouldn't leggo my eggo?

Would we have 9 million percent inflation tomorrow?

[MayIMommaDogFac...]

So tired and idiotic...

[ColonelCooper]

Hey Troll,  back at ya:

http://www.youtube.com/watch?v=VLnWf1sQkjY

[Spitzer]

It would have happened already if there was no bailout.

The dollar would have been done by May of 09. The US government is in debt you know.

[Johnny Bravo]

Actually, if there was no bailout, the prices would have collapsed and we'd have deflation, not inflation.

The bailouts and QE are doing their best to put a floor under prices.  Without them, we'd see the price of houses and other assets imploding right now.

[ColonelCooper]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[Turd Ferguson]

ColonelCooper is my hero.

[ColonelCooper]

Mutual.

[ColonelCooper]

Double Post.

[MayIMommaDogFac...]

FINALLY, I get a good gut busting laugh out this thread!

[Spitzer]

yep, hard core deflation leads to hard core inflation. The dollar would have been done.

[Johnny Bravo]

Hard core deflation leads to inflation that is sufficient to stop deflation.

We've tripled the money supply, and the prices of assets are still below where they were before tripling the money supply.

We've had little to no inflation, despite increasing the money supply by three times.

If the price of assets never increases due to printing money, you don't get inflation.  All you get is a floor under falling asset prices.

If the price of something is 10, and it falls to 6, but you print enough money to get the price back to 10, there was no inflation at all.  That's my point.

[ColonelCooper]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[Mako]

Game over, you are early in the collapse phase, after the collapse phase will be liquidation of the non-performing liabilities.

Of course, the common lemmings like yourself thing the helicopters are going to come in and save them.  Good luck.  The government nor the Fed has any ability to issue
"credit" to infinity, if so, Rome would still be the capital of the world.

There is no Wizard of Oz.

[Spitzer]

And the paper dollar is going to stand strong after this collapse ?

I swear you are an inplanted troll, are you really this dumb ?

[Mako]

Who ever said that?  Are you now down to making stuff up?  Seems so.

A dollar is a non-interest bearing credit instrument, never once said it would stand strong after a collapse.... setting up a strawman is not going to help you.

You call me dumb, yet you still don't even know what inflation or credit is.

[Johnny Bravo]

When in doubt, make insults or attack straw man arguments.  It's the rule of the land.

[tmosley]

I guess JB has his savings in GBP.  He thinks he's safe.

Why do you want to hang out with a bunch of people you think are crazy?  Just get out.  I don't spend my days screaming at people in the loony bin.  What are you gaining from being here?  Just get out.

[Johnny Bravo]

I make much larger returns than anybody who invested in gold, that's for sure.

And then I take the dollars I earn and spend them.

[ColonelCooper]

Yeah, with your $2.32 in risk capitol? 

Go change your pants, Troll.

http://www.youtube.com/watch?v=VLnWf1sQkjY

[tmosley]

On hookers to stomp on your balls and call you shithead as they take a crap on your face while you scream "nuh-uh!"?

Must be quite a bill for that.  Unless you found the right lady.

Why don't you go see her now.  Hell, I'l bet she'd cut it off if you asked her to.  Maybe you'd die of septic shock a few hours later and we could actually have a good thread around here every now and then without the stench that seems to emanate from any thread that is contaminated with the human butt-wipe that goes by the moniker Johnny Bravo.

[MayIMommaDogFac...]

BRAVO!  Helluva performance.

[kathy.chamberli...]

TANGLED UP IN BLUE

[Rusty Shorts]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[ColonelCooper]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[MsCreant]

Consistently people cannot grasp what a loss in confidence of the money itself means. We are so primed for this scenario. The itchy trigger fingers hover as we speak.

[giddy]

...yep... money represents confidence... including the relative confidence in one economy vis-a-vis another... money reflects the "substance of things hoped for, the evidence of things not seen" -- a.k.a.money represents faith... which is simply another word for confidence...

[hack3434]

Define Money Supply

[Johnny Bravo]

the amount of money in circulation

[hack3434]

The definition of money can be so broad...is debt money? Gold? (dont bother answering I already know your answer), FX holdings? (as floating currencies get kicked in the face).  

[redpill]

never go full retard

[ColonelCooper]

He can't help it.

http://www.youtube.com/watch?v=VLnWf1sQkjY

[MayIMommaDogFac...]

I think you have linguistic issues (Mako). 

Take a breath.  Re-read what you're commenting on...

[MsCreant]

I am stunned at the bright people here not getting it.

[Johnny Bravo]

Maybe because it's not going to happen.

Just because somebody disagrees doesn't mean that they don't understand.

I understand what you're saying just fine.  I just don't agree with it.

[ColonelCooper]

 "Bright people" jizzball.  Not you.

http://www.youtube.com/watch?v=VLnWf1sQkjY

[Johnny Bravo]

I can do a lot more than post stupid you tube videos and make personal attacks.

How about you?

[Rusty Shorts]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[tmosley]

Why bother?  Just get out.  It's not that hard.  Just go somewhere else.  Mish seems to like you.  You and he can trade FAZ back and forth.  A great time will be had by all.  I promise, I won't follow you there and call you an idiot for doing whatever stupid crap you're doing.  I will stay right here.  

Can't you tell when you aren't wanted?

[ColonelCooper]

Deleted

[ColonelCooper]

I'm just a worthless troll.  LIKE YOU.

Go change your pants.

http://www.youtube.com/watch?v=VLnWf1sQkjY

[kathy.chamberli...]

Colon, i think you have made your point, well at least to me.

G O T     M I L K  ?

[drheywood]

I believe there are several valid definitions of what inflation is. Sometimes it makes more sense to define it as the increase in money supply, because this makes it an exact measurable scalar usable in formulas, charts etc. Other times it makes more sense to define it as the decrease in value a currency holds for a person, because that makes it an observable and discussable phenomena. I believe the latter is the most popular one.

Further, I don't believe favouring one definition over another automatically qualifies you as either sane or not.

I somewhat disagree with the others--I'm not saying you're wrong in your definitions of inflation/deflation. Then again, I'm not saying the author is wrong either. I do, however, think that your reasoning leading up to conclusion that the article can hold no valid arguments because of its choice of definition of inflation is flawed, and may I say quite stubborn. I'd almost say you were in some sort of denial?

[trav7777]

these are monetarist definitions...and who fkin cares?

What does it MATTER if money supply increases or decreases EXCEPT in what the EFFECTS are out here in the real world?

The fundamental question and argument is whether stockpiling the paper notes of a bankrupt State is a good idea vis a vis stockpiling a shiny metal or other real asset.

At some point when credit-driven production gluts are worked out, new supply will not manifest at affordable prices.  How many McMansions can be sold in Detroit?  There's no INCOME for them and the fundamental energy and materials costs requisite to stand them up cannot be made to be zero.

At some point, products sell for cost of construction.  And production declines.  It's as simple as that.  Those waiting for their FRNs to fetch a house based on oil at $5/bbl will die broke.  Economies can be wrung out, such as manufactured housing, but the fundamental lumber and materials and energy have real costs associated with them that the endeavor CANNOT be sold below.

[web bot]

Listen you idiot...

there is this thing called VELOCIY...

go bang your head on a sharp bookcase, or better yet, try taking a hammer to your head.

[ATG]

If Tim Giethner and Bernanke called a press confrenece and said " the dollar is done, fuck it" would we have deflation or hyperinflation ?

Like the Chinese students in Beijing, we might have lots of laughter with business as usual...

[InfinityZero]

Inflation is the difference between real wealth and pseudo wealth at the present moment. TThat´s mine definition. So you can postpone the inflation to the future at any time, but not forever.

[YouAreBliss]

No, the author has it quite correct.  It is an old fashioned "Panic" of the 19th century, only this time the run on the bank is the US Treasury itself.

No problem, with the ability to monetize all outstanding obligation of the US gov't, the Fed just prints and buys.  They can set rates and prices to any level they like - in Nominal Terms.  Not in Real terms though - that is where he mentions commodites prices begin thier hyperbolic rise.  It not that commodites rise, as much as the purchasing value of the dollar dissolves.

The "run" on the bank is a "run" on the currency itself.  It happen frequently in the 1800s as each bank had it's own bank notes.  Today it's much same except the bank notes are issued by the Federal Reserve, made legal tender by law.  Research "GreenBacks", the US did the same to finance the Civil War, the South did the same with it's Confederate currency.  What are these worth today?  Virtually zilch.  

It's a matter of history, nothing new or shocking, we've been there many times before.  Research the Continental currency - the expression was "not worth a Continental".

Washington printed so many of these they became worthless, but it did help finance the Revolutionary War.

We'll have a new hard currency for a while and our "Greenbacks" will disapear.  Not the end of the world! 

It will shock those who are not educated and know how to protect themselves.

[Gonzalo Lira]

Exactly. Well said. GL.

[Mako]

Sorry you guys don't know simple economic terms. 

Let me see the system is going to hyperinflate, sorry buddy it's going backwards.  You are loony wacko that is very confused.

A bank run is a bank run.  Oh a bank run is hyperinflation, hate to tell you there was a bank run in the 30s and nothing inflated. 

What you are witnessing is a collapse of the global credit system that started in 1944, why? Unable to inflate past the previous peak ie 2007.   What is going to be inflating is the number of graves and body bags eventually. 

"Washington printed so many of these they became worthless, but it did help finance the Revolutionary War."

And yet the money supply is going backwards right now.  Printing is and never was and never could be "credit".  If you can supply your own "credit', there would be no reason to issue said "credit".  

- Expand

-Peak

-Unable to Expand

-Collapse

-Liquidate of the nonperforming liabilities

- Choice... choice till now is rinse and repeat

[Spitzer]

Collapse....Your right

 Tax revenue that is supposed to service the DOLLAR DENOMONATED debt will certainly collapse.

The dollar is backed by the full faith and CREDIT of the US govt.

[Mako]

What does tax revenues have to do with it, the government could have zero debt and the system would still collapse, matter of fact it already would be done collapsing. 

All you lemmings are not taking on the needed new credit to fund your prior existence, now collapse and eventually liquidation of plenty of you lemmings that are non-performing.

[LePetomane]

The government's revenues are dependent on tax revenues - of which higher asset valuations (ie inflation) are preferred to budget/staff cuts resulting from deflation.

[Spitzer]

Check this out, Mako and Bravo on the same thread

If the governemnt had no debt, there would be no treasury market to service and the currency would have a good chance.

[Mako]

The currency is just a credit instrument, I can create dollars anytime I want... I can go to the bank and have them manufacture a million dollars worth this second for a home.  You have no idea how create and dollars comes into existence. 

The banking system isn't collapsing because the government isn't servicing it's debt, it's all you lemmings that are not paying your bills. 

[LePetomane]

The bank doesn't manufacture millions in order to finance your mortgage.  The value of your home is posted as collateral, bundled and sold to counterparties in the form of a debt instrument (Mortgage Backed Security).

ie If your home isn't worth a million dollars you won't get it.

[Johnny Bravo]

How could tax revenue decrease in a hyperinflationary scenario?

Okay, so we print all the money we need, and give it to everybody... and yet the tax revenues would decrease.

You can't default on government spending so long as you have a printing press.  The government can make as much tax revenue as they want by hitting a key on a computer.  You think that they'll run out of money?

HAHAHAHAHAHA!!!

Keep smoking the hopium.

[LePetomane]

You have it 100% backwards.  The tax revenue has already decreased as a result of real estate collapes and increased unemployment.

[merehuman]

cant pay tax if you got no income. Lots of us have no income.

Formerly selfemployed 30 + years. Early retirement and enjoying my garden.

silver is hid. Food for 2 years  and small safe community of good neighbors

12 gauge to insure it stays good  and 4 legged warning system

Cant thank you all and Zerohedge enough for getting me squared away.

Done what i could for my community still in denial.

Some of us get it.

[DoChenRollingBearing]

+ 1000 to you merehuman.

[WaterWings]

I also have you to thank - you are a strong soul.

[Johnny Bravo]

"The tax revenue has already decreased as a result of real estate collapes and increased unemployment"

Yes it has.  But you could also write this sentence as:

"The tax revenue has already decreased as a result of DEFLATION"

If you printed a trillion bajillion dollars, you'd have inflation.

The tax revenues can't decrease under every scenario... and they decrease under deflation.

Under (hyper) inflation, you can have as many digits as you want, and would never run out of money to pay nominal debts.

[ColonelCooper]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[Joeman34]

Still don't get it

[MsCreant]

If you are serious, Johnny Bravo used to post here under the name Master Bates.

[merehuman]

what good is the hyperinflated dollar if i dont have one to give? Sorry IRS , i am broke.

Bye Johnny. And good luck, you will find your place in the world, we all did.

[MayIMommaDogFac...]

You can't default on government spending so long as you have a printing press.

Nobody actually thinks that YOU believe this shit anymore.  Why do you persist?  Oh yeah, you need the billable hours.

[Johnny Bravo]

And just how the hell are you going to run out of money when you can create it out of thin air?

Why don't you tell me that instead of making more insults?

Oh wait... because you can't.

[tmosley]

Aren't you tired of all the insults?  There is an easy way to end them.

Just leave.

[ColonelCooper]

http://www.youtube.com/watch?v=VLnWf1sQkjY

[ColonelCooper]

@ J (usta) B (oy)

http://www.youtube.com/watch?v=VLnWf1sQkjY

[ATTILA THE WIMP]

Dear Mr. Bravo

I was in (the former) Yugoslavia in 1992. I entered an abandoned house which had been looted of everything of value such as furniture. There were high denomination Yugoslav Dinar notes scattered all over the floor, some in denominations of 10,000 Dinar. The various looters hadn’t ever bothered to haul them off. I picked some up and showed them to the local people who just giggled.

I think it’s safe to say that any bonds payable in those same Yugoslav Dinars had been defaulted on in real terms by the Yugoslav government which at that time had shrunken basically down to Serbia.

Real world experience thus tells me that owning a printing press is no protection against default in real terms. If what I saw was not default in real terms could you please explain why.

I would like to talk to you about gold and other matters and I promise no name calling or accusations of being a troll.

[Frank Owen]

Attila, your intentions are good. However you may have lost him when you started talking about history, but "real world experience" would definitely have blown one of his circuits and caused a reset back to whatever textbook he's hammered into his skull. He's been here for a while - Got beat down initially, had a few people try get him to wake up politely (me included), and just keeps playing the same track over and over again.

I think he's a masochist... he's just looking for a fight club to continually get beaten in. If he responds to your reply - good luck, you will need it!

[kathy.chamberli...]

frank say, f o u g h t    c l u b  

remember!

[YouAreBliss]

Yes in the 30's we had a gold backed currency, now it's fiat.  All the difference in the world.

The Fed has grown it's balance the most in history - 270% in two years.  This is high powered money once the multiplier increases (and it will explode at the first sign of reinflation), the money supply will increase a likewise 270% or more, very rapidly.  That's when the mad scramble begins out of the the dollar into anything of "real" value.

Since the Fed was created in 1910, it costs $110,000 today to buy $5,000 worth of goods then.  And their mandate was "price stability"!  History is on our side, they will print and print and print.

[fiddler_on_the_roof]

you sound intelligent. keep it up.

[akak]

Mako, your endlessly simplistic (and incorrect) drivel and perpetually closed mind are no longer worth responding to.  You have become nothing but a one-note troll, as you continue to display all the intelligence, or lack thereof, of your cartilagenous seabound namesake.