Welcome To Hyperinflation Hell: Following Currency Devaluation, Belarus Economy Implodes, Sets Blueprint For Developed World Future

Tyler Durden's picture

"A ‘91-style meltdown is almost inevitable." So says Alexei Moiseev, chief economist at VTB Capital, the investment-banking arm of Russia’s second-largest lender, discussing the imminent economic catastrophe that is sure to engulf Belarus following the surprise devaluation of the country's currency by over 50%, which we announced on Monday. "Unless Belarus heeds Russia’s call for mass privatization
of state assets, it is headed for “hyperinflation, massive un-
and under-employment, and a shutdown of production
" Moiseev concludes. Ah: "privatization" as Greece is about to learn, the lovely word that describes a fire sale of assets to one's creditors, courtesy of a "globalized" new world order. Ironically, this is precisely the warning that will be lobbed at each country in the developed world, as the global race to devalue currencies, first against each other on a relative basis, and ultimately against hard currencies, or on an absolute basis, as the world realizes that there simply is not enough cash flow to cover the interest payments on a debt load, in both the public and private sectors, that continues to rise at an astronomic rate, even as the world prepares to exit from the latest transitory, centrally-planned bounce in the Great Financial Crisis-cum-Depression that started in earnest in 2007 and has been progressing ever since. Ultimately, Belarus will succumb to hyperinflation, as will each and every other government seeking to devalue its currency (hint: all of them): "Unless Belarus heeds Russia’s call for mass privatization
of state assets, it is headed for “hyperinflation, massive un-
and under-employment, and a shutdown of production
,” VTB’s
Moiseev said. The ruble will slide to 10,000 per dollar, he
added." Of course, this is the primary side effect of attempting to avoid formal bankruptcy through currency devaluation. And all those who continue to believe deflation is an outcome that will be allowed by the Fed, need to look just to the former Soviet satellite to see what lies in store for everyone currently doing all in their power to devalue their currency.

First look at the Belarus Ruble chart below: this is what always happens to every country that resolutely continues to live outside its means. Always.

And here are some additional observations from Bloomberg on the country that everyone in the media continues to ignore, yet which will very soon be the model for virtually everyone else engaging in central planning warfare.

The Belarusian central bank let the managed ruble weaken by 36 percent versus the dollar on May 24 as demand for dollars and euros from importers and households threatened to derail an economy already laboring under a current-account deficit equal to 16 percent of gross domestic product. Russia and other former Soviet partners last week agreed to give Belarus a $3 billion loan and urged President Aleksandr Lukashenko’s government to sell $7.5 billion of assets to replenish the state’s coffers.

Finance ministers from former Soviet nations agreed in Minsk on May 19 to give Belarus up to $3.5 billion over three years, with the first $800 million payment expected in the week after a separate meeting on June 4, Russian Finance Minister Alexei Kudrin said in Moscow yesterday.

The Nationalnyi Bank Respubliki Belarus set its official dollar-ruble rate at 4,931 for today’s trading, from 3,155 on May 23, according to its web site. Trading of foreign currency between companies, banks and individuals needs to stay within a 2 percent range of the daily rate, the regulator said May 23, when it announced the devaluation and reintroduced restrictions lifted on the interbank market on April 19 and for households on May 11.

Devaluing the currency will only worsen the situation for Belarus, VTB’s Moiseev said.

“The main problem is that the economy produces goods which consist of little else than a combination of imported spare parts,” he said. “So devaluation only makes things worse.”

Belarus’s economy effectively collapsed in 1991 as the disintegration of the Soviet Union eliminated natural markets for the country’s exports of farm machinery, textiles and agricultural products.

The catalyst for the country's imploding economy: socialism and price controls. Sound familiar?

Lukashenko reintroduced controls on prices and the currency and re-nationalized some companies and infrastructure after coming to power in July, 1994, on a platform of “market socialism.” The nation’s economy returned to growth in 1996, according to World Bank data.

At the Minsk Refrigerator Plant Co. shop in the capital today, about 20 people queued in drizzling rain to use their rubles to buy fridges. While the shop didn’t open on the day of the devaluation, most of the models in the store already had ‘Sold Out’ stickers on their doors.

“I came on Saturday and it was a nightmare, the store was stormed by people who wanted to spend their rubles because of rumors about the devaluation,” said Nikolay, a 74-year-old pensioner who declined to provide his last name. His entire savings of 6 million rubles now buy one fridge compared with three before the devaluation, he said.

The people are not happy...

The devaluation lifted the local price of automobile fuels as much as 24 percent, according to Belneftekhim, an industry group for the country’s oil sector. Last night, about 50 people protested the price increase in the car park of a Minsk hypermarket.

“I can’t describe how I feel without using obscenities, this is all our government’s fault,” said Sergey, a 32-year old attending the protest who works for a computer importer. “The whole world tells them, guys, you have economic problems, you should do something, and all they did was live off getting more and more loans.”

Who can blame the country if it devolves into civil war: as a result of Monday's decision the average salary was "1.6 million rubles
in April, according to the government statistician. Converted
into dollars, it fell to $325 after the May 24 devaluation, from
$507 a day earlier, using central bank exchange rates."

Naturally, the IMF wuz here:

Both the IMF and the EBRD have blamed Lukashenko’s spending before last year’s presidential election for much of the economy’s woes. Lending was increased by 38 percent last year and public-sector salaries rose by about 50 percent, the Washington-based IMF said in a March 9 report.

Belarus got a $3.5 billion bailout loan from the IMF during the global credit crisis and the country has more than $2 billion of ruble and dollar debt outstanding. Foreign-currency reserves hit a 1 1/2-year low in March.

“The ruble is probably still too strong, but devaluation hurts the average consumer through imported inflation and deteriorating purchasing power,” Sanna Kurronen, an economist in Helsinki at Danske Bank A/S, said by e-mail yesterday. “There is really no easy way out of this economic distress and the only way is to do a major reform in the country.”

Here comes hyperinflation...

The price of children’s diapers has “gone completely insane” in Minsk, said Natalia, a 24-year-old mother also queuing outside the refrigerator store. “I used to buy a pack for 69,000 rubles, now they cost 140,000,” or almost half the 343,260-ruble monthly child benefit paid by the government, she said.

“We have become paupers,” said Tatiana, a 70-year-old woman in the line who also declined to give her last name. “We have been squeezed into a corner by this devaluation.”

Belarus’s dollar debt has been buoyed by news of the Russian loan, with the yield on the government’s debt due 2015 dropping four basis points to 9.881 percent by 6:35 p.m. in Minsk, the lowest since March 14. Dollar-denominated notes due 2018 yielded 10.38 percent, down six basis points.

The country has raised its refinancing rate twice since April 20 to 14 percent, the highest in Europe. The central bank also stopped selling foreign currency out of its reserves in March and will continue to stay out of currency markets, spokesman Anatoly Drozdov said by phone in Minsk yesterday.

...And following that, complete socio-economic collapse

Unless Belarus heeds Russia’s call for mass privatization of state assets, it is headed for “hyperinflation, massive un- and under-employment, and a shutdown of production,” VTB’s Moiseev said. The ruble will slide to 10,000 per dollar, he added.

Unemployment was 0.7 percent in December, according to government data. Inflation accelerated to 14 percent in March, the fastest since April 2009 and more than neighboring Russia’s 9.6 percent in April. Imports into Belarus exceeded exports by $7.3 billion at the end of 2009, according to the latest annual data available.

Russian media are creating a “flurry” of speculation about the nation’s asset sales so they can “make good at our expense,” Lukashenko said today in Astana, the capital of Kazakhstan, according to comments reported by state news agency Belta. “But we will not throw anything to anybody for nothing.”

Note the parallels to Greece, which would follow the same fate if it were to make the choice of returning to the drachma.

Alas, there is nothing left to add: this is the future, and it is coming to a developed country near you.

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asdasmos's picture

That is one hell of a dice roll.

TruthInSunshine's picture

Why?

While many who are aware would never be caught dead buying fiat backed government debt, can you honestly dismiss the possibility, or even probability, that in the event of a serious global financial and economic crisis and/or downturn, massive pensions, mutual funds and other high level AUM decision makers would NOT still pile into U.S. treasuries, out of a basic desire to deploy what is conventionally accepted as asset preservation strategy?

asdasmos's picture

I am not dismissing the possibility, but what about the alternatives? Each dollar of debt and each day that passes erodes the conventional wisdom regarding US paper. I am not so sure those people are looking at the US balance sheet with a smile on their face and I am fairly sure they are preparing alternatives. How long can this stale strategy go on?

 

Indeed, what does happen after that next crisis ends and, lets suppose, people pile into U.S. treasuries? Will they stay in them forever?.... Will a game of musical chairs unfold?

 

It seems that the intervals between shocks/crisis for the US are nearer and nearer each time. They may have one kick of the can left......if that.

 

Will the next be the one that 'breaks the camel's back'? The next crisis could, whether warranted or unwarranted, thrust the next country or group of countries to the monetary/financial foreground (albeit after tremendous chaos)..... Or through a managed decent, however unlikely.

 

The old Adage, "Don't fight the Fed", will be wrong one day. And what an epic and phenomenal day that day will be. How many more oscillations will time allow?

 

----------------------------------------------------

For earlier post.

But can they? It seems to me that this a Greek Tragedy (pardon the pun). I believe you are putting too much faith in the elected officials. They seem to be more reactive than proactive. Aside from a Ron Paul type coming in and cutting things left, right and center, I am unsure if any of their changes will be genuine or meaningful.

Democrats want the entitlement programs and 'big government' and the Republicans want lower taxes and want small government (however history seems to go against this as well) yet want defense spending. Both parties have become too entrenched in 'Politics as Usual' with the dog and pony show. Look to the recent praise of their so called 'cut', it sure put a dent in the deficit.

 

Corporations who feed off the government, Defence (Republican), Big Pharma (Democrat) & Finance (Both).......etc... have armies of lobbyists and think tanks that will be in full force to keep their contracts and policies continued. All this talk of dealing with the debt ceiling is just another dog and pony show for the upcoming elections. I would not be so hopeful.

 

I believe David Stockman to be correct when says that the only thing that will make both parties wake up is some sort of crisis, whether it is in the currency/bond market.

 

Then the party stops.....

Fiat2Zero's picture

Rickards actual thesis is the following:

1. People who believe QE ending is going to be the end of the world unless there is QE3 immediately are wrong. This is binary thinking.

2. There are many things the Fed can do, one of which is to play around with its 1.6T in assets to continue monetization.

He doesn't state that QE3 isn't going to happen. Just that if QE3 doesn't get announced in June, that we won't go over a cliff (into deflationary hell).

Congress, and the public is just a side show. The Fed was created to insulation banking policy from politics, i.e. to have the ability to operate without Congressional approval. If Congress can or can't act, it doesn't matter. Bernanke is not going to wait around to get anyone's approval for anything.

Not only that, but since there is an election coming up, the commander-in-chief is going to insist that assets be re-inflated throughout his campaign.

>> Stampede of substitute buyers of U.S. Treasury Debt.

Good luck with that one. Without China, Japan, Bill Gross, Saudi Arabia and those odd transactions from the Cayman Islands (making up 20% of the takedown), I can tell you who will be the buyer of last resort of US bonds (after the Treasury that is). It'll be the US citizens with their retirement funds (although those wouldn't even get us through the elections).

Sophist Economicus's picture

No.   If I may add color commentary

1.   Bernanke gets far too much 'credit' for this QE stuff.   Buying the bad loans off of the bank balance sheets and back-stopping federal programs like Fannie and Freddie were most assuredly done with the blessing of the Federal government folks -- The FED realized it needed to save the banking system and so did the government - lip service aside.    This is a symbiotic relationship and shows the level of cooperation between these two entities.   THey will be partners throughout this debacle

 

2.  The FED monitizes the Treasury debt, because if it didn't, the dollar would be toast and we would be in the news  now as the hyperinflation capital of the world.   It is also absorbing as much debt as it can to tampen down the interest rate shock - if the bond market were to spin out of control (as you know, Treasury doesn't effectively pay interest to the FED)

 

3.   The FED charter has been expanded and it has been given emergency powers -- this is in place for obvious reasons -- it has and will backstop anything that might smell of a credit collapse - and it's balance sheet is accountable to nobody - so it can rescue REITS, pension funds, insurance companies, money markets, etc by flooding those sectors with a fire hose of liquidity at the drop of a hat

 

4.   The amount of transfer payments that exist in the economy today is significant - are given to people/entities that did not create any value (food stamps, welfare, medicaid, corporate subsidies, NGO grants, block grants, state aid, etc) and to others that receive far more than they put in (unemployment, government pensions, etc).   These people/entities compete with productive people/entities in the marketplace for the same goods - putting a floor on on some items -- stopping deflation in  basic commodities

5.   Excess reserves in banks that have been put there by the FED, via purchases of dead debt, is LIVE money.   It can buy equities, commodities, precious metals, etc at a moment's notice.    This is money that was not generated through productive means.   Much like the transfer payments above, this CAN and WILL put a floor on these products

 

6.   There is no possible tax solution to the current debt situation AND unlike the 1930s, there is no WWIII that will pull us out -- we don't have excessive, readily available natural resources that we can independently exploit nor is half the world in tatters (yet) to give us the 'go to' dominance we had back then

7.   Debt is strangling us as a nation.    I'm sure we're not the only people who realize this.  These folks play 'war games' too.   There are various scenarios on the table.   I'm sure the cost/benefit analysis of a hyperinflation scenario .vis a vis. a deflationary scenario has been run with more variables than we can think of in our livingrooms.   They may not choose wisely or execute properly -- but they probably have a ranking of likely outcomes and those they think they could manage

Wiping out all debt and starting from scratch is what governments have always done.   They want to wipe out their debt.   Our debt just comes along for the ride...

 

I was never Chumbawumba

 

asdasmos's picture

On your point 7.

It is definitely interesting, we call these politicians and public servants idiots. However, most of them are not as stupid as they seem or their backing interests. We see their public facade but not the real personalities or exchanges. We have to read between the lines, most of the time (DSK).

 

Jim Rickards touched upon this. http://youtu.be/ckEoUxAjgls

 

I highly recommend watching this if one has yet to see it.

-

I get knocked down, but I get up again.

Quinvarius's picture

Those were real gold backed dollars back then.  The same way we are deflating vs gold now.  If they let the system deflate vs debt backed fiat, the debt backing becomes unservicable and the entire monetary system collapses.

pirea's picture

You are perfectly right. Deflation is happening when the currency is backed by gold, and never with a fiat currency.

francis_sawyer's picture

I'm siding with akak here...

Muir's picture

TruthInSunshine

"All the hyperinflationists fail to give much, let alone quality, analysis to debt destruction, which is the same as money/fiat destruction, when presenting their cases and models for inflation."

Yeap

"ZIRP is the reason for the surge in commodities and other speculative asset classes as of late, more than any other causal force put into motion by the Fed."

yeap

"Presenting a case for hyperinflation in the 'developed world' beginning with events in Belarus is painful to read."

True, but funny nevertheless

"QE is dead with a Do Not Resuscitate advanced directive. QE failed. Everyone knows it."

Very nice.


mt paul's picture

blah blah blah

big bouncing boobies 

blah blah blah..

DK Delta's picture

I talked about the potential for an oscillation between staflation and deflation with Reggie Middleton in my recent interview with him on Sound Money 91.5FM NYC. Here is the link:

 

http://coveringdelta.wordpress.com/2011/05/25/sound-money-podcast-interv...

Shell Game's picture

QE failed. Everyone knows it.

No.  QE is being proven to be the required elixer for market levitation.  Thus much, much more QE is a comin'...

disabledvet's picture

QE is in fact "the elixir that makes European bailouts possible."  Should QE end (and I think it is in fact ending) then "those bailouts will cost real sovereignty now."

Spalding_Smailes's picture

Golf Clap ....

 

I think Gonzo Lira is selling donuts now ....

Quinvarius's picture

I see a lot of people suddenly thinking we are going to get some deflation only because the Euro and commodities got raided again to bounce the comparative decline of the dollar.  I like seeing that because I know most people will be totally on the wrong side.  If you want to define deflation as a bad economy for x quarters and a falling stock market, fine.  But if you want to define deflation as a monetary phenomena, it isn't going to happen.  It is not possible for a debt based fiat system to have deflation without completely dying and going straight to hyper inflation and death.  A banking system, an economy and a tax base is required to keep the debt/fiat system in somewhat of a balance with debt service. 

The only thing more inflationary than QE supporting the Treasury market is no QE supporting the Treasury market. 

Muir's picture

@Emperor Quinvarius

 

"I see a lot of people suddenly thinking we are going to get some deflation..."

-

No... not suddenly.

And only as a possibility, not a given.

Quinvarius's picture

You called me Emperor.  I will let that stand.

disabledvet's picture

where is there even a scintilla of deflation in the American economy?  We have a inflation induced slowdown--but no one is talking deflation ala "going into 9/11."  Europe is a totally different animal--"sound money" from the get-go.  Which of course has been nothing more than "hasta la vista all you non-Germans."  As "the community" tears itself apart since it never made sense to begin with i think the deflationary implications are obvious SHOULD one of "larger nations" actually just say "i quit."  Belarus?  "What is a Belorussian exactly?"  My first thought is "that's Poland isn't it?"  Anywho "here's your bottle of Johnny Walker Red and here's your carton of Marlboro Reds.  Can I tour your country for a week now?"

Fiat2Zero's picture

Try home prices. The mess we are still dealing with.

Stocks would be deflating if measured in inflation adjusted dollars (and this is with massive intervention).

No one is arguing we don't have deflation, but rather what the response will be: nothing (deflationists), print (inflationists)

clymer's picture

food, fuel, heating oil

 

ummm.. yeah, it's inflating here and now.

while jobs and income continue to head south to boot.

oblom's picture

My man, don't let them give you shit. You are right on target -- deflationary forces are too strong and we have nothing but stagflation, followed by deflation ahead of us.

Here is where you got things wrong. After it becomes pianfully obvious the deflation is here, QE3+ will proceed. It has to. This country is build on debt and deflation is the enemy. The crazy mary-go-round will go on until we either jump-start the economy or collapse. 

disabledvet's picture

QE will not be renewed and "suddenly all that inflation will be seen for exactly what it is."  Inflation.  The jury is still out...amazingly...on "what an interest rate is."  Well looked at vis a vis Europe "I'm glad we don't have 24 percent unemployment" with a German monetary policy to boot myself.

malek's picture

"QE will not be renewed"

Right. And the dept ceiling will not be raised and gov't will balance their budget within the next 3 months. And these two events will definitely be deflationary. If you believe in them.

akak's picture

Right. And the dept ceiling will not be raised and gov't will balance their budget within the next 3 months. 

And the lion shall lie down with the lamb, Jon Nadler will scream "Buy Gold Now!", and angels shall fly from my asshole.

disabledvet's picture

the thought of Angles in your asshole is disturbing.  "Is that a fart I hear or tears from Heaven?"  Anywho the debt ceiling will be raised precisely BECAUSE QE is ending.  Tax revenues are rising as the State and local level--though far from evenly--and to say "there's no possiblity of cutting spending" think again.  Call it "Libyan austerity."  It's coming.  Insofar as the existence of deflation "why did the same tires i bought just 4 years ago double in price?"  they are the same tires.  they did not grow little feet and move my big truck without needing fuel after i bought them, either.

Buck Johnson's picture

I disagree with you, there will be Hyperinflation in the US.  Our govt. has to cover up their crimes and their buddies (bankers) crimes.  They paper over the issue and then use the papering over to obfuscate what happened and find something or someone to blame (just how they blamed the homeowners for the problem in 2007).  The US govt. has to many promises on the back burner and not enough money.  You hear it in the political arena already with the changing of SS and Medicare and other benefits.  They know what is coming and they know one thing, those useful idiots are useful while they are able to be feed.  But once they see what these laws they are trying to inact affect them, they won't be so useful, they will be a mob.

 

http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999%E2%80%932002)

ffart's picture

Who's going want to to hold debt money if the debtors are deadbeats?

trav7777's picture

single most prescient comment in this whole argument, and what deflationists fail to understand.

When debtmoney is in a state of cascading, systemic default, it becomes worthless.  The USG which backs is bankrupt.  The FRB is bankrupt but/for their ability to print. 

The deflationists do not understand what deflation is.  Facing a future of aggregate contraction, ALL PRESENT DEBTS must be discounted.  In essence, tomorrow cannot repay today's debts. 

ffart's picture

The FED can raise interest rates and contract the money supply all they want and all it will do is expose the fact that economic calculation using the dollar is no longer possible due to the counterparty risk it imposes on foreign investors. Governments will sell it for anything they can get and the dollar would hyperinflate in a matter of months.

The dollar is mortally wounded. It can die a slow death or a quick death, and steady moderate inflation will let it die a slower death while the central planners determine how to replace it. I don't rule out that they will raise the interest rate at some point, but the rate of return will necessarily be negative because the U.S. taxpayer no longer has the means to service its debt.

THE DORK OF CORK's picture

Wage deflation is the purest form of inflation - its just a inverse mind fuck - the CBs use the false metric of a single dollar/sterling /euro to what a person can buy - this is a deliberately wrong metric.

If they can't pay their credit debt collectively then the CBs will print real money to replace the fake debt money thus devaluing the currency.

This present monetory system is so over.

THE DORK OF CORK's picture

Wage deflation is the purest form of inflation - its just a inverse mind fuck - the CBs use the false metric of a single dollar/sterling /euro to what a person can buy - this is a deliberately wrong metric.

If they can't pay their credit debt collectively then the CBs will print real money to replace the fake debt money thus devaluing the currency.

This present monetory system is so over.

disabledvet's picture

i agree. HOWEVER.  Ireland cannot monetize it's debt--which is why i see the potential for a massive deflation in Europe because "the debt just isn't repaid" and all that remains is "the Remains of the Day."  Basically "national bankruptcy is the result" because without the ability to inflate at all the end is brutally inevitible--you'll take te pay cut basically--as well i would imagine is the mass migration that could result from it.  The USA is a HIGHLY centralized economic system (hence the bailouts being inevitible in my view) so the main question is "have the authorities created a true social unrest inflation or not?"  With the ability (apparently) to keep rolling the debt over at lower and lower rates i say "no."  But i ain't got no FBI badge on my shirt, that's fer sure--but i see nothing to stand in the way of sudden wage inflation.  A banker has to eat, too.

robertocarlos's picture

+1 Mako and a couple of other posters.

Fiat2Zero's picture

Since the vast numbers of historical governments gone bust have been hyperinflationary scenarios, the burden of proof lies on your deflation thesis.

I take it you've explained yourself before because your post doesn't posit any arguments based on fact, simply "I'm mad as hell, and I'm not going to take it anymore." OK, explain why you think deflation will happen rather than hyperinflation.

Now, if by "deflationary collapse" you mean "the S&P loses 15%," then yes, I'd be inclined to agree. We need some sort of event to give Bernanke the cover to do what he has said he would do consistently. Since he is terrified of a repeat of the Great Depression, which he believes was caused by deflation, he will err on the side of inflation (as he has). Incidentally, the idea that the Great Depression was a deflation, and not an inflationary scenario is relatively new (1965?). I'm no expert, and I'm not saying deflations can't happen, but they are very rare. Hyperinflation is the easy, tried and true, "boil the frog in the pot so he doesn't revolt" scenario here.

living on the edge's picture

Truth.

Seriously, don't drink prior to posting on ZH. Thanks

akak's picture

Since the vast numbers of historical governments gone bust have been hyperinflationary scenarios, the burden of proof lies on your deflation thesis.

 

I'm no expert, and I'm not saying deflations can't happen, but they are very rare. Hyperinflation is the easy, tried and true, "boil the frog in the pot so he doesn't revolt" scenario here.

Fiat2Zero, yes, these are the points and historical facts that I keep hammering away at the deflationists about --- apparently, never with any success.  The proponents of the deflationary scenario have one thing in common, I have observed: a complete ignorance of, or denial of, just about ALL of monetary history, and the fact that EVERY government that has found itself in the position in which the USA is today has either resorted or, or been forced into, the debasement or collapse of its fiat currency, wiping out the savings (and living standards) of its subjects in the process.  When confronted with that damning fact, they invariably shut up and slink away.  They would rather debate academic, ivory-tower theories than examine the known and undeniable historical record.

CAUM's picture

"We're going to have a deflationary collapse, before there's any possibility of hyperinflation"

>> Now that's funny. Some people just simply don't understand 101 economics... Sad...

TruthInSunshine's picture

Okay, so tell me how the United States will lose world reserve currency status, military hegemony and the largest base of consumers in any one nation and its assortment of allies in the west and east, which would all be necessary, in order for hyperinflation to occur?

Hyperinflation isn't 4% to 8% inflation per year. Hyperinflation is 4% to 8% inflation per day. On everything. When people buy entire store shelves of products at 8 a.m. because they won't be able to afford to at 8 p.m.

Hyperinflation literally means the U.S. implodes as a nation-state, world economic, military and political actor, leaving a vacuum about 100x the size of the one that the Soviet Union did when it imploded.

You really, honestly believe that this is possible, let alone likely?

If the U.S., which consumes a quarter of the world's oil, protects many OPEC nations, consumes more of the world's exports than any other single nation, has the largest and most advanced military force in history, and possesses the world's reserve currency experiences hyperinflation, the entire globe will be in flames.

I swear that I try to be tolerant of all dissenting viewpoints, but these comparisons to Weimar Germany, Zimbabwe, Argentina, and now, Belarus...they are seriously grating.

It'd be one thing to claim there's historical precedent and some comparative conclusions to be drawn by comparing and contrasting England and the U.S. over the last 8 decades, or so, and to form some theories.

It's quite another to compare and contrast the U.S. to Belarus or Zimbabwe.

I realize ZH takes dramatic license to the extreme to emphasize certain unsavory aspects of the current state of affairs in the U.S. and particular actions of politicians and non-politician monetary policy makers, but the hyperbole is over the top.

The U.S. has serious problems that will be game changers over the long run if they're not addressed in a serious and rational manner, and they may not be.

The U.S. is not going to experience hyperinflation. It's the epitome of idiocy to suggest this.

akak's picture

If the U.S., which consumes a quarter of the world's oil, protects many OPEC nations, consumes more of the world's exports than any other single nation, has the largest and most advanced military force in history, and possesses the world's reserve currency experiences hyperinflation, the entire globe will be in flames.

Forgive me, TiS, but I almost hear echoes of the disingenuous and hyperbolic fearmongering of Paulson, Geithner and Bernanke here.

No, if, and most likely when, hyperinflation DOES come to the USA and Europe, it will NOT be Armageddon meets Mad Max meets cannibal zombie hordes --- that is just central bankster self-serving propaganda.  It WILL be painful, and it will cause immense suffering and the years-long impoverishment of many, many people, but it will NOT be the end of the world; well, it MAY be the end of the world for the sociopathic likes of the central banksters, but it may very well mark a Renaissance for the rest of us.  Yes, the pain will no doubt be immense, but I categorically refuse to believe that the end of the financial and monetary status-quo, as corrupt and unsustainable as it is, is going to somehow mark the end of civilization --- and if it should happen to, then it couldn't have happened to a more deserving bunch, as we would have collectively proven that as a species, humanity is insane.

TruthInSunshine's picture

Hyperinflation is hyperinflation.

It's a collapse in the purchasing power of the nation-state's currency, domestically or abroad, and in the case of the U.S., it would mean the instantaneous collapse of the world's reserve currency, which would be a first ever historical event.

As tortuous it is to watch the complete and total idiocy and sham in D.C. and the debacle of monetary policy of the non-Federal Reserve Bank, there's no credible case to be made whatsoever that the U.S. is at risk, let alone imminent risk, of a bout of hyperinflation.

I think cries of hyperinflation is coming to the U.S. are disingenuous, to put it diplomatically.

akak's picture

We will then have to agree to disagree -- and I appreciate your polite and honest answers and discussion in this thread, which proves that members here can debate and argue without resorting to taunts and childish insults.

While I do not necessarily believe that hyperinflation MUST happen in the USA (and therefore much or all of the rest of the world), I do still sincerely believe that it is entirely possible, and at this point is more likely than not.  And you rightly point out that if it does happen, it will be the first hyperinflation in the world's reserve currency --- but since the last 40 years (shamefully) mark the very first time in world history that EVERY nation has been operating with a purely fiat currency, it can truly be said that no matter what ends up happening with the US dollar, in that respect this time it IS different.

merehuman's picture

loss of faith in the dollar is already happening. In my poor dumshit opinion ..hyperinflation has already begun weeks ago. But i am just a german who shops and cooks, its just my opinion from observing price changes and how folks are buying silver to protect themselves. Average america is still clueless, but its the BIG money boys who get it and control what happens. We are so fucked!

merehuman's picture

loss of faith in the dollar is already happening. In my poor dumshit opinion ..hyperinflation has already begun weeks ago. But i am just a german who shops and cooks, its just my opinion from observing price changes and how folks are buying silver to protect themselves. Average america is still clueless, but its the BIG money boys who get it and control what happens. We are so fucked!

Popo's picture

Akak,  you said: "it MAY be the end of the world for the sociopathic likes of the central banksters, but it may very well mark a Renaissance for the rest of us.  "

Which is plain wrong.  Inflation *favors* banks and anyone who plays with large amounts of debt/leverage.  *Deflation* is the end of the world for sociopathic banksters.  It's why banks don't even want you to think about deflation.  It's not on the menu of options they've put in front of you.

 

 

Fiat2Zero's picture

Truth, your ivory tower, I'm so much more well read than thou attitude is what is grating. Come down out and let your arguments speak for themselves.

Reserve currency status didn't occur overnight and it won't be lost overnight either. There are so many alternative currency agreements already accelerating, that saying it can't happen is foolish. It's binary thinking. The canard is that there needs to be one replacement, but think again. Welcome to the retracement of globalization and reintroduction of the bilateral accord. Yes it's messy, inconvenient, and sub optimal. But it sure beats the fuck out if not gettin paid.

And everyone needs to get paid, right?

The laundry list you mention, again absolutes. We don't need to get defeated absolutely, only checked left and right, the death of a thousand nicks and cuts. Not defeated, merely have our advantages neutralized.

So stop with your hyperbole calling nonsense and make a real argument.

Stop rolling your eyes, you're not lecturing your students.

You're here to fight, not huff and puff indignation.

monkeys.pick.bottoms's picture

Mr. TruthinSunshine, so it seems the other side of an argument is usually lonely. Exactly because you are in the minority here, your views should not be dismissed. There is no opportunity to "unjunk" you, thus the post.

cranky-old-geezer's picture

F*ck this hyperinflation bullshit claim that's been made.

Lots of words, no valid points. Like the meaningless statement quoted.

We look around and see no deflation anywhere ...except housing, experiencing demand collapse of 30%, exceeding undelying 20% inflation, yielding net 10% drop in housing prices. 

But that's it, the only area of falling prices.  

Rising prices everywhere else.

I see now, you're a realtor.  Oh yes, you're going to see lot's of price deflation ahead :)