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Hyperinflation – 10 Worst Cases

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Inflation is hot property today, hyperinflation is even hotter! We think we are modern, contemporary, smart and ready to deal with anything. We’ve got that seen-it-all-before, been-there-done-it attitude. But, we are not a patch on what some countries have been through in the worst cases of hyperinflation in history. Here’s the top 10 list of worst cases in history. We’ll start with the worst first…let’s think positive!

Hungary 1946

Inflation at its peak reached a staggering figure of 13.6 quadrillion % per month! That’s 13, 600, 000, 000, 000, 000%. The largest denomination bill was a 100 Quintillion note. Prices ended up doubling every 15 hours at the time.

Zimbabwe 2008

Prices doubled here every 24.7 hours in November 2008 and inflation reached levels of 79 billion-odd %. They eventually stopped using the official currency and switched to the South African Rand or the $US. A loaf of bread ended up costing $35 million. This is the most recent case. It was Mugabe’s land-redistribution program that caused this.

Yugoslavia 1994

In just the one month of January 1994 inflation rose by 313 million %. Prices doubled every 34 hours (which is nothing compared to Hungary). The currency ended up getting revalued 5 times in all between 1993 and 1995, all to no avail. The cause? A recession triggered by overseas borrowing and an on-going political struggle in the 1980s and the following decade.

Germany 1923

Adolf Hitler rose to power as a consequence of hyperinflationary pressure (at least one of the reasons). Prices doubled every 3.7 days and inflation stood at 29, 500%. Germany was crippled with the reparation payments after the Treaty of Versailles and the end of World War I.

Greece 1944

Prices started rising by 13, 800% in October 1944 and they doubled every 4.3 days. The trouble was the debt incurred by World War II.

Poland 1921

Prices rose in 1921 by 251 times in comparison with those of 1914. They doubled every 19.5 days. The Zloty was introduced as the new currency in 1924 in an attempt to start afresh. Inflation stood at 988, 233% in 1924.

Mexico 1982

Mexico had a rate of inflation of 10, 000% in 1982 (due mainly to too much social expenditure).

Brazil 1994

Inflation was 2, 075.8% at its worst in 1994. The Real was adopted in 1994 and it managed to calm inflation down.

Argentina 1981

The highest denomination bill was the one million pesos note. The Peso was revalued three times.

Taiwan 1949

This was a knock-on effect from China and the Chinese Civil War. The New Taiwan Dollar was issued in June 1949. The monthly rate of inflation stood at 399%

Inflation can be creeping (mild or moderate inflation) or galloping. We can talk of Hyperinflation and stagflation (inflation and recession). Deflation is not better. We have so many names for it.

Hyperinflation means prices doubling in such a short space of time that we can’t keep up with it all. Hyperinflation comes about at times of trouble, war, conflict, upheaval, change on unprecedented levels. It comes about because we still haven’t learnt how to control it. History repeats itself, we hear people say. Thankfully, it doesn’t repeat itself too often. Fingers crossed.

Originally posted: Hyperinflation – 10 Worst Cases

You might also enjoy: Death of the Dollar | You’re Miserable USA! | Emerging Markets: Lock, Stock and Barrel | End of the Financial World 2014 |  Kristallnacht on Wall Street? Bull! | China’s Credit Crunch | Working for the Few | USA:The Land of the Not-So-Free  

 

 

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Fri, 02/07/2014 - 20:25 | 4413881 Mad Muppet
Mad Muppet's picture

Inflation can be creeping (mild or moderate inflation) or galloping. We can talk of Hyperinflation and stagflation (inflation and recession). Deflation is not better. We have so many names for it.

 

 

Seems like bullshit to me. Why would falling prices be anything but a boon to we poor bastards that foot the bills?

Fri, 02/07/2014 - 13:52 | 4412338 nofluer
nofluer's picture

Germany 1923

... Germany was crippled with the reparation payments after the Treaty of Versailles and the end of World War I.

Wrong. Germany was only rarely required to actually make the payments, which were eventually disolved. The German hyperinflation was caused by the decision (Second Empire/pre-Weimar, pre-WW I) to pay for WW I by deliberately inflating the money vs the Western power's decision to raise taxes on their people.

The Generals and politicians thought they would be paying their war expenses with revenues from they anticipated from the countries they conquered... so no harm, no foul. Didn't quite work out that way. I suggest an excellent little book on the subject - "When Money Dies."

Fri, 02/07/2014 - 08:27 | 4411047 AdvancingTime
AdvancingTime's picture

During the "boom times" when asset values are going up lots of people think they are getting rich. In inflationary times, government tax revenues do well. Not only does government get to spend the money they print, the side effects of inflation on taxes are good for government, though bad for their subjects. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. said John Maynard Keynes.

As the central banks print like crazy to control interest rates on bonds they devalue the currency. While there are not many Bond Vigilantes there are many Currency Vigilantes. The post below delves deeper into when inflation will strike.

http://brucewilds.blogspot.com/2014/02/when-will-inflation-strike_1.html

Fri, 02/07/2014 - 12:40 | 4411956 Holden Caulfield
Holden Caulfield's picture

Do you have any statistics on how those holding gold or silver made out during hyperinflation?

Fri, 02/07/2014 - 15:41 | 4412833 nofluer
nofluer's picture

One of the main problems with PMs is that once it's gone, once ypu've spent it, it's gone and you get hungry really fast. It's not like you can plant it and grow some more. The key to surviving in a hyperinflation environment is to have something set up that generates CURRENT income, and that the revenue stream from that something increases with the decrease in the value of the currency.

Example: If you had a milk cow and a field to pasture it in, then you get milk and butter and cheese, which are all trade goods. The cow gives you milk today, you sell it today at the going rate. Then you spend what you've earned or change it into a more durable form of wealth - like PMs or corn seeds. Tomorrow you milk the cow and the cycle is rolling around again.

 

Fri, 02/07/2014 - 13:13 | 4412131 Tall Tom
Tall Tom's picture

They became poor. Everybody else became totally destitute.

Fri, 02/07/2014 - 07:43 | 4411005 RhoneGSM
RhoneGSM's picture

Printing money is to bankers and politicians as Apple's are to Eve.

 

Fri, 02/07/2014 - 06:37 | 4410966 Sudden Debt
Sudden Debt's picture

Hyperinflation affects you when you ignore all the signs.

Thu, 02/06/2014 - 22:26 | 4410352 koncaswatch
koncaswatch's picture

"Deflation is not better." Really?

Not if your an "investor." But the people that work for a living could use a little deflation. A correction at this point is either deflationary or debt repudiation, both painful to "investors." I'm too cynical to care about debating either scenario; let's get on with it, whatever "it" is.

Fri, 02/07/2014 - 13:22 | 4412113 Tall Tom
Tall Tom's picture

I wish that you had replied directly to me. There will be no debate as you will understand where I am coming from. Then you will see what I mean.

 

Deflation is not any better than Inflation because it creates instability in Markets and does not promote equitable trade. Like Inflation favors the debtor deflation favors the creditor. The gain is realized through Money Changing rather than by providing a necessary Good or Service.

 

A stable foundation is what is necessary for a foundation of trust and confidence which is necessary for any healthy and vibrant Economy. Instability cracks the foundation and leads to the conditions which promote Structural Failure and subsequential Structural Collapse. This is as true for a Physical Building as it is for any structure...including an Economy.

 

Personally I opt for growth, productivity and advancement in Truth. Deflation and Inflation are antithetical to that which I promote as it is built upon Dishonest and Fraudulent Money Changing practices.

 

Your word, "investor" would be more properly termed as a SPECULATOR. An investor seeks to place Capital in an environment where it will PRODUCE TRUE AND HONEST GAIN dependent upon PRODUCTIVE LABOR.

 

No I am not a Speculator and there is nothing at this point where I can place my Capital as a true investment. So I opt out and hold Gold and Silver, real money, and wait out the storm.

Wed, 02/12/2014 - 22:08 | 4430732 koncaswatch
koncaswatch's picture

Tom, I saw your reply days later. I basically concur with your reasoning. The 'investor" is a speculator as you've demonstrated we've all been reduced to that moniker by the massive manipulation of markets. I'm no big time player. Like you, I'm solid with a blend of PMs and some productive land. I live in a storm (hurricane) prone area and have learned that once one is prepared, the anticipation is the hardest part of living through a storm.

cheers

Thu, 02/06/2014 - 22:24 | 4410346 AdvancingTime
AdvancingTime's picture

After much thought I have come to the conclusion that while inflation appears tame and is not showing up in a big way the seeds have been planted, and the number of them is somewhat shocking. Inflation lurks beneath the surface and is hidden away in the dark corners of our future. Want to know where the real cost of things is going, just look at the replacement cost from recent storms and natural disasters.

Several things to consider when trying to understand inflation come to mind, first competition tends to keep price increases in check, and our slow growth economy is helping the consumer in many areas. People concerned about inflation down the road point out that an increase in the speed or velocity that money moves about the economy or where money flows could change all that. More on this subject below,

http://brucewilds.blogspot.com/2013/06/inflation-lurks-beneath-and-hidde...

Thu, 02/06/2014 - 21:52 | 4410225 Rising Sun
Rising Sun's picture

DEFLATION FOLKS!!!!

 

The masses are broke - if prices rocket, the masses will buy even less.

 

There is far too much production and far too little demand right now (been this way for several years) - that's deflationary.

Fri, 02/07/2014 - 10:33 | 4411470 Tall Tom
Tall Tom's picture

As PRICES skyrocket for that which people need then there is less Discretionary Income available to spend on that whiche people do not need. Thus you get Price Stability, or, even Price Deflation in the prices of luxuries like new automobiles, Home Upgrades, Computers, Smart Phones, and other Goods and Services (Discretionary Sector) while you get a Price Inflation in Food, Energy, and Shelter (necessities).

 

When Price Inflation continue to skyrocket in necessities there will be a Price Deflationary Spiral in Discretionary Sectors. As this increases then Unemployment in these Discretionary sectors will grow unabated.

Specifically even more Specialty Retail Stores will layoff employees and close their doors. This feeds into a Deflationary Spiral of the Discretionary Sector. Thus it is a Stagflationary environment.

 

Both Price Inflation and Price Deflation are happening concurrently with elevated unemployment.

 

We are currently in a Stagflation. There is no Growth and General Economic Decline while, concurrently, the Currency loses its Purchasing Power. This fact is obfuscated by Government Reporting using revised methods of calculating Economic Data. Food and Shelter Prices are eliminated from the Consumer Price Index. If they had not been, and if the Inflation Rate was reported as it was reported in the 1970s then currently we'd be running a Price Inflation of 9% instead of the less than 2% which the Government currently reports.

 

But it is even worse. This also tells me that Food, Energy, and Shelter Prices have been inflating at a much Higher Rate than the Official Rate of less than 2%, It also tells me that Food, Energy and Shelter Prices are iinflating at a much higher rate than the Shadowstats adjusted rate of 9% because that rate IS AN AVERAGE.

 

If the Inflation Rate of non-essentials is less than 2% and the Average Inflation Rate is 9% then it stands to reason that Food, Energy and Shelter Price Inflation must be substantially higher than 9%.

 

The Price Inflation of necessities has been running at 17% or more.

 

Here is a small anecdotal example for you to consider. I went to the Grocer yesterday and bought some String Cheese Sticks. They sold at the same Price of 33 cents per stick. However they used to weigh One Ounce. Now they weigh 0.83 Ounces. That is a 17% Inflation, hidden as a reduced weight.

I usually eat out and rarely shop. I bought other Groceries. But for what I used to spend $30 on, and not too long ago, I paid $40. That was about 33% more out the door.

When I asked the Cashier if the Club Card had worked she made sure that it had. I was astonished. You could see the worry and concern in her face. Her body language spoke volumes.

 

As to your assertion that Americans are broke...I agree.

 

It was the peasants in Weimar Republic Germany that HAD SAVINGS and when they divested those savings in a panic then the Monetary Velocity spiked and that set off the Hyperinflation. 

 

Yes I agree. Americans are not only broke but they are in debt. So the Hyperinflationary Spark will NOT be set off in the United States. They do not have the capacity to set off the panic.

 

What you fail to consider is that FOREIGN CENTRAL BANKS will take on the role of the Peasants of Weimar Republic Germany as they have SAVINGS in US Dollars. And as their Economies melt down, and as they need CAPITAL to shore up their Balance Sheets, then they will DIVEST of the US Dollar SAVINGS...IN A PANIC.

 

The Emerging Economies will play the role of the Weimar German Republic peasants and spark a Hyperinflationary Inferno in the United States in a magnitude not ever seen before.

 

What you fail to understand is that DEFLATION and INFLATION are two sides of the same phenomena. The American consumer is broke. Yes I agree. Employment in non essential sectors has declined if not vanished. But it is Moot when considering the cause of the Hyperinflationary Inferno.. 

 

But when the American Consumer cannot afford food then ALL HELL BREAKS LOOSE.

 

You can deny that all that you want. I really do not care if you do. Your denial will not serve you well.

 

BTW...There is a lack of Snow Pack and California is in a Drought. As California contributes a substantial portion of THE FOOD SUPPLY and needs WATER to grow that food there is a FAMINE coming soon to the United States.

 

When people go HUNGRY that is when revolutions happen. A Hyperinflationary Inferno will only serve to guarantee that outcome as the American is already broke.

 

Got Gold and Silver?

 

Fri, 02/07/2014 - 06:00 | 4410941 cynicalskeptic
cynicalskeptic's picture

We are currrently seeing DEFLATION in things people really DON'T NEED - prices of new cars, new houses high end retail and such.  I keep getting all kinds  of invites to car dealera and offers to 'trade in ' my old cars (Isn't happening - we buy and hold until they die, at least 10 years, none of this lease for 3 business).   I'm getting regular calls from the place I bought a couch a year back practically pleading with me to go shop for furniture (not happening - I can make do fine with what I have).   COntractors regularly leaving fliers or knocking on the door aooferring free quotes on a new roof (which we really DO need) and painting (I'll do that myself after doing having the roof done).  Home Depot has people in the aisles accosting you about kitchen makeovers.   The very few who are raking it in are spending - Mercedes had a good quarter  but GM is channel stuffing inventory.

Meanwhile INFLATION is rampant and severely understated in things you DO NEED and costs you cannot escape - FOOD for example.  Prices keep going upwhile package amounts keep gettign smaller.   Sugar comes in 4lb bags now instead of 5lb.  My Dial soap jhas a big scoop out of the bar and cereal boxes are half full these days.  One rib roast cost more than your parents used to spend on a week's worth of groceries.    Heating oil is 4-5 times what I first paid when I bought my hoiuse - though propane and natural gas are going up pretty fast this winter.  RENTAL costs for housing are going up even though housing costs to buy are still below what they were in 2005.  Used cars cost far more on average than they used to - and there are not all that many good ones to choose from (people are keeping cas and ruinning them until they die).  Meanwhile local property taxes - which you cannot escape) have more than tripled in 20 years though the politicians are starting to realize this is really pissing people off - hence things like state limits on increases.  

With past cases of Hyperinflation you also had a similar pattern.  Prices went DOWN on things that were not necessary while prices went up on things you DID need.  Then when hyperinflation hit you had a rush to pruchase ANYTHING of value with currency as soon as you got it because it would be worth less and less the longer you had it.  On payday you'd stock up on food and then go buy SOMETHING - ANYTHING of value (tires, appliances, whatever) if you were lucky enough to have any cash left.

Fri, 02/07/2014 - 02:00 | 4410129 are we there yet
are we there yet's picture

Historical note. THe US used to print a one thousand and a ten thousand dollar note. Oen of the signs of hyper inflation is when this note is returned to circulation. One legal problem is that it is illegal to engage in a private off the record cash transaction over $10,000 cash. There were signs to that effect in las Vegas casinos. Easy to adapt to by buying poker chips.  The purpose is to track the flow of money.

Fri, 02/07/2014 - 10:30 | 4411516 Temporalist
Temporalist's picture

The genius PhDorks floated the idea of one $1 Trillion coin... One coin! 

Thu, 02/06/2014 - 19:43 | 4409731 Vincent Cate
Vincent Cate's picture

Yes, hyperinflation happens when there is trouble.   That is really not telling us much.  If you want to really understand how hyperinflation works, check out this:

http://howfiatdies.blogspot.com/2013/09/hyperinflation-explained-in-many...

Thu, 02/06/2014 - 19:27 | 4409672 LongSilverJohn
LongSilverJohn's picture

John Williams at Shadowstats recommended "Fiat Paper Money: The History and Evolution of Our Currency." So I bought a copy and am glad i did. I have read a LOT about these issues, but this book traces paper fiat currency, and human nature to print "too much of a good thing," all the way back to ancient China.

It is amazing how familiar the stories are (across time and across different ages). What doesn't change is human nature, I guess. It will truly convince you that we are at the precipice and headed over the edge!

Very glad I got a copy. If you want a copy (which was available for about the cost of printing, from what I could tell), you can contact the author (Ralph Foster) by email at: tfdf@pacbell.net 

Thu, 02/06/2014 - 18:46 | 4409515 seataka
seataka's picture

There is one difference

Barcodes and electronic pricing make inflationary events managable by most businesses.

During the oil price spike during the 70's , a man had to go out, get on a ladder and change the numbers hanging on the sign.

Grocery stores had price labels that all had to be changed.

Now... it can all be done instantaneously. Which might make TPTB feel a little hyperinflation would be managble...

Thu, 02/06/2014 - 19:37 | 4409706 SilverIsKing
SilverIsKing's picture

What does that have to do with economics?  Does the fact that a retailer can change a price more easily today make it easier for the customer to afford things?

Fri, 02/07/2014 - 06:08 | 4410945 cynicalskeptic
cynicalskeptic's picture

One of the knee-jerk government responses to hyperinflation is PRICE CONTROLS - which only guarantees empty shelves in stores.  Farmers won't sell crops at a loss and retailers won't sell goods at a loss. So, instead of 'protecting consumers' you end up with a thriving black market with even HIGHER prices paid willingly by those that can afford them while the masses do without.

Freezing gas prices in the aftermath of Sandy did nothign to improve supply - only more shipments and power restoration helped.  When peopel could buy 'affordable gas' tehy made sure they kept their tanks topped off.  Meanwhile there were people willing to go to great lengths to go get gas elsewhere and bring it in - for a price.  You could pay it or not but if you were running a generator and had a fridge and freezer full of food it was still worth the price.  Better to have some gas at a higher price than waiting in line for hours and then getting nothing.   Free Market does work better than controlled prices in gettign goods to markte.

 

Thu, 02/06/2014 - 18:36 | 4409456 SgtShaftoe
SgtShaftoe's picture

My only trouble is the countries that suffered hyperinflation were all marginal economies at the time. None were reserve currencies.

This time might actually be different, if the US went into hyperinflation with things configured how they are presently, the whole world explodes.

Interesting times.

Does anyone have data on reserve currencies, or former reserve currencies hyperinflating? Hyperinflation is largely a modern outcome, so the data is pretty thin. France hyperinflated, but they weren't a dominant power at that time.

Thu, 02/06/2014 - 21:18 | 4410118 Tall Tom
Tall Tom's picture

The USA has been Hyperinflating the Currency Supply since the Financial Meltdown in 2008 and continues to do so to this day. It is EVIDENTIAL when one looks at the Exponential Growth Curve in the Base Currency created per Time. However the Nation does not feel the affects of Price Hyperinflation. There are some reasons behind that which will be considered.

 

But first we will consider Inflation, Differentiate and Define some terms. 

 

There is a DIFFERENCE between CURRENCY INFLATION and PRICE INFLATION.

 

Now PRICE INFLATION is the genneral RESULT of a CURRENCY INFLATION.  But it is more complex than that. One must consider the VELOCITY OF CURRENCY. This is dependent upon the CONFIDENCE in the Currency.

 

If people BELIEVE that the Currency will lose PURCHASING POWER, which is the inherent VALUE of any Currency (Why have it without it having Purchasing Power???), then they will spend it quickly before it loses VALUE. Thus Monetary Velocity increases as a result.

 

(In this thesis when the term VALUE is used it means PURCHASING POWER. Far too many people CONFUSE the concepts of Price and Value as they are two separate attributes. Generally VALUE means UTILITY but the only utility of any Currency is to provide a means of stored Purchasing Power and it is that which gives it VALUE.)

Likewise if people BELIEVE that the Currency will keep the VALUE, or, gain VALUE (Which is another monster as Currency Deflation is just as damaging as Currency Inflation to any economy as it only serves to DESTABILIZE IT) then People stop Purchasing and Monetary Velocity ceases or decreases.

 

So the Monetary Velocity component is an indicator of how much Confidence, or, lack of confidence there is in a Currency.

 

This is the REASON why the Central Bank is so intent on the Management of Perspective of the Economy because a loss of confidence, any loss of confidence at this point, can shake the FRAGILE Confidence in the Currency. And when the Masses wake up and realize that the Emperor has No Clothes it is at that point when things will get really interesting...eh....if you get my drift.

 

Of course at Zerohedge the contributors are doing all that can be done to "help" people realize that the Emperor has No Clothes. The contributors, probably in all liklihood, will be a victim of our own success. Now this DOES NOT MEAN that the Contributors caused the Hyperinflationary Inferno. They have absolutely NO CONTROL in any of the decisions made by the US Government, or, the Federal Reserve Bank. Most here do not...except that WE BUY GOLD. Now GOLD is the absolute ENEMY to the Ponzi Game Operators.

 

The public is well aware that the price of Gold is an indicator which is diectly correlated to PERCEIVED INFLATION. The masses may be asleep but, while Financially Ignorant, the average investor will watch the price of Gold and the Dow Jones Industrial Average to give him an indication of the relative Economic Conditions. Those numbers are posted in the Business Section of every large Newspaper in America. That is the extent of their knowledge.

 

So the Federal Reserve stomps on any uptick in Gold Prices because if they were allowed to appreciably rise then the fact that the Emperor Has No Clothes would become very apparent, very quick, and Monetary Velocity would grow very rapidly.

 

With the preceding as a background now we can address the reasons that the Nation does not CURRENTLY feel the affects of Price Hyperinflation.

THERE HAS NOT BEEN A MARKED LOSS OF CONFIDENCE IN THE UNITED STATES DOLLAR DOMESTICALLY.

Perspective of Management policies instituted by the Federal Reserve and broadcast through the Main Strem Media outlets, propaganda, has been extremely effectictive in managing the General Population's BELIEFS.

They have successfully contained any rise in Gold Prices through the Naked Shorting of Paper Contracts.

They have used QE quite well to keep the Dow Jones Industrial Average at elevated levels, recently declining off of new highs. But those new highs are still fresh in the public's mind and they are told to see the recent declines in the Dow Jones Industrials as an "expected cyclical correction"

The public is continually bombarded with the propaganda that the Economy is on the road to Recovery and everything is under control (well...the Control aspect is true. We do have Controlled and Manipulated Markets.)

The United States of America EXPORTS the HYPERINFLATED CURRENCY OVERSEAS TO EMERGING MARKETS.

The USA runs Trade Deficits. In 2013 it was forecast that the United States would incur a $500 Billion Trade Deficit with China. (I have not seen the results of the Tade Deficit with China. The Deficit MEANS that we imported ONE HALF TRILLION DOLLARS more Goods and Services  from China than we exported to them. Well those excess Goods and Services from China which we imported were paid for in US Currency...US Dollars.

And can this figure be higher? Probably. What did we export to China by the Hundreds of Metric Tons last Year?  Did we export $1300/ troy oz. Gold to China? Did that serve to keep Gold Prices depressed? How is the Management of Perspective working out? At what cost shall we Manage the Perspective?

Just where did this ONE HALF TRILLION DOLLARS ORIGINATE? Well QE III was about ONE TRILLION PER YEAR. Is it a possibility that ONE HALF OF THAT TRILLION WENT TO CHINA? Is it a possibility that the OTHER HALF WENT TO OTHER FOREIGN NATIONS to FINANCE TRADE DEFICITS?

I know that QE Funds changed hands numerous times over the past year and was shuffled by the Banks through the Stock Markets and into the hands of Corporations and not all of it went to Foreign Nations...Maybe not all of the QE. But if the Trade Deficit is financed diectly from QE or other sources, Private Equity, Sales of Bonds, Government purchases, the NET EFFECT IS THE SAME THING as if we were to hand them the CASH DIRECTLY.

(So I do not want to hear the obfuscatory nonsense that well part of the Balance of Trade with China was financed through XYZ Corporations Trade of Bond for...BULLSHIT. It is nonsense meant to OBFUSCATE THE POINT. I am not looking at this with extreme precision. But I am exposing that which is BASICALLY HAPPENING)

Now this is EVIDENTIAL that QE was flowing directly into Foreign Bank coffers because when we began to TAPER QE SPENDING then the EMERGING ECONOMIES TANK. There is NOTHING more evidential than THAT FACT.

So we have been EXPORTING our Hyperinflated Currency. In turn this has created large Bubbles in Foreign Equity and Real Estate Markets. And as we withdraw the QE it is those Foreign Bubble Markets which will DEFLATE FIRST.

 

THE UNINTENDED CONSEQUENCE OF THE TAPER...

As those Foreign Markets CRASH...and they will crash...as Foerign Central Banks become INSOLVENT because of the OVERVALUED (remember what VALUE means), THEN they will dump US Treasury Bonds onto the World Market. They will sell their least VALUED ASSETS FIRST. They will divest of the US Dollar and attempt to buy HARD ASSETS that have VALUE.

 

There will be a Tsunami of US Treasuries and US Dollars swamping World Bond Markets and World Currency Markets. The price will plummet as the Yields rise in a large unprecedented spike. The flood of the available TWELVE TRILLION DOLLARS held as Foreign Reserves will make the US Dollar VALUELESS.

 

Every Foreign Central Banker knows this. The First ones out will get something in return. Those who are the last ones out will receive nothing. So it will be a madhouse in whom can dump US Treasuries and Dollars first.

 

The locale for the first lack of Confidence in the World's Reserve Currency will not be domestic. It will occur in the first Asian Economies to have a their Bubble Markets IMPLODE. Right now it is a Toss Up whether that will be China or Japan. It doesn't really matter as the result will be the same.

 

And the United States and Federal Reserve Bank cannot manage their perspective as they VALUE GOLD over that of Paper. They will only sell Gold as a LAST RESORT as they understand that after their Paper Economies crumble that they will have to have something of VALUE with which to conduct trade.

 

BTW...France was a Dominant Power in 18th Century Europe. They held a vast area of the New World territory and they were also an Imperialistic Superpower. After the John Law experience and the Rvolution they had to sell it.

They reached their Blow off Top, their Pinnacle, in the early 19th Century with Napoleon. Of course the British Empire became totally dominant afterwards.

Fri, 02/07/2014 - 06:26 | 4410952 cynicalskeptic
cynicalskeptic's picture

Good explanation.  The velocity of money in the U Sis still low - with the excess currency in circulation tied up in bank reserves, the stock market and other securities.  All the TRILLIONS in TARP and such have NOT filtered down to the population at large.  The masses barely have enough to get by (if even that) so there's no 'excess' to be spent.  Those that have a bit extra have tired to pay down debt - or stay even with payments.  The uber-wealthy are spending profligately on artwork, penthouse co-ops in Manhattan and collector cars but their spending does not increase velocity like the aily spendiong of the masses.

Meanwhile the rest of the world pays the price.  Excess funds held by US banks go to buy commodities andother hard assets.  China is doing the same with the $US it holds - buying up mining companies, farmland in Africa and oil contracts in the Stans.  The flight of excess dollars to commodities drives up the cost of food and enegry for the rest of the world while the lower demand for goods from the US puts people out of work world wide.

The Arab Spring was about a lack of jobs, high foood prices and government corruption.  Expect to see more of the same.

We are seeing the beginnings of currency wars - in lieu of shooting wars.    This all cannot end well for the US because in trying to postpone the day of reckoning, the US is only strengthening China and Russia and others. And even if China's economy does implode in the short term, IMO they are far better positioned than the US for the long term.

It is remotely possible that Bix Weir is right and this is all a deliberate crach engineered by insiders in the US to collapse the existing financial system and restore the US to a state free of the yoke imposed by bankers, using 'hidden' natiural wealth to rebuild  - but I realy don't think such idealistic altrusim exists anymore and that the end result of a collapse is more likely a totalitarian statee facing a civil war

Thu, 02/06/2014 - 23:03 | 4410449 SgtShaftoe
SgtShaftoe's picture

Tom,

I understand that the US exports inflation to the margin. I've been trying to explain that to people for years. I'm with you on your entire thesis. I called price inflation, inflation because I was being lazy.

Martin Armstrong makes the same argument I outlined all the time however (reserve currencies don't hyperinflate), that's why I ask.

The international configuration is a little different now than during the debacle in France. Systems are so hyperconnected, the contagion effect would be absolutely insane.

I'm also wondering if the "taper" effect on the inflationary economies is more of a feature than a side effect. It's a currency war after all. I wonder if they're intentionally destroying those countries preemptively. That would be pretty fucked up if it were true. What do you think?

Fri, 02/07/2014 - 08:45 | 4411052 Tall Tom
Tall Tom's picture

Well I disagree with anyone who claims that Reserve Currencies do not hyperinflate. Perhaps Reserve Currencies have not Hyperinflated before.

We are the first.

What would you call this?

http://www.moneyandmarkets.com/uploads/2013/11/chart1s4.jpg

The "Taper Affect" is a feature. National Interests take precedence over that of International problems in times of stress.

I do not believe that the Federal Reserve is intentionally setting off a Nuke in the Currency War as it would be Suicide. I think that they are so DETACHED FROM REALTY that they cannot fathom just what they are doing.

The last time that we did this was to Japan in the 1970s and 1980s.. They threatened to sell their US Treasuries in the middle 1990s.

But they did not do as the Chinese and buy Gold. The US Dollar was relatively stronger, much stronger, and that would have been National Suicide for Japan had they sold their US Treasuries.

Currently the US Dollar is much weaker and the Chinese have purchased the Gold which they can use for trade in a post US Dollar collapse World.

The retaliatory Strike from China will be devastating. That is what I think.

Fri, 02/07/2014 - 01:02 | 4410720 Hmmmmm
Hmmmmm's picture

The destruction started when they printed not "tapered". We're all fucked.

Thu, 02/06/2014 - 18:23 | 4409390 cynicalskeptic
cynicalskeptic's picture

In past examples of hyperinflation there were 'safe havens' available to those with both savings and he means to access those 'safe havens'.   Usually another, neighboring currency ended up being the refuge.  In Yugoslavia, people used 100 Mark notes, in Zimbabwe, South African Rands and $US. But this option also requores access to foreign currency or accounts - something that hyperinflating governments do their best to prevent.  Currency controls are NOT put in place to help people safeguard their savings - quite the opposite, they are designed to allow governments to steal as much as possible from their citizens.

However - even ignoring currency controls - if any major currency (likt eht Euro or $US) enters a hyperinflationary scenario, ther is NO monetary 'safe haven' large enough to accommodate what the resulting demand will be.  A fraction of the funds held in Euros or $US would overwhelm any other perceived 'safe havens'.  We've already seen the demand for Swiss CHF's push their value so high that the Swiss government deliberately took steps to DEVALUE their currency by linking it to the Euro so as to maintain exports.  And of course what currencies are actually 'safe' - Singapore dollars?  

If hyperinflation hits the US what is left as a medium of exchange?  Most Americans have already sold any gold or silver they might have had ('WE BUY GOLD!' shops milked the masses pretty dry) - the populace having been convinced that there is no real value to either metal.   

Thu, 02/06/2014 - 18:48 | 4409517 MeelionDollerBogus
MeelionDollerBogus's picture

Tanigbles, bitchez.
Tide, morphine, hammers, saws, toasters, crowbars, bullets, extra magazines, and of course for those who do have them, gold & silver.

Also alcohol & tobacco.

Thu, 02/06/2014 - 19:46 | 4409735 Hacked Economy
Hacked Economy's picture

Ditch the toaster.  Use a solar oven.

Bullets and smokes are good for trade, though.  Don't believe me?...remember when a certain popular brand/style of tampon was unavailable from the manufacturer for a couple of months (was it 2012?), and women across the nation went berserk?  A few savvy people who had extra personal inventory of the stuff sold some on eBay for 3-4 times the normal retail, and they all sold out!

Imagine what an addicted smoker will trade for a carton of Marlboros if/when the SHTF for real.

Fri, 02/07/2014 - 01:15 | 4410745 MeelionDollerBogus
MeelionDollerBogus's picture

I understand but must be prepared to cook in the dark.

No woman in my life: I had no idea that event happened.

Fri, 02/07/2014 - 02:23 | 4410285 DoubleTap
DoubleTap's picture

They were selling for $80 a box. There were other brands available and they were still selling for $80! Because of this tampons and maxi pads have been my secret idea for barter. They're cheap and can store for a long time. Only problem is that you'd have to barter with crazy psycho bitches on the rag. Could be as bad to barter with meth.

Thu, 02/06/2014 - 18:16 | 4409361 AvoidingTaxation
AvoidingTaxation's picture

I will suggest:

This Time Is Different:
Eight Centuries of Financial Folly
Carmen M. Reinhart & Kenneth S. Rogoff

 

Use the Evil Google machine to find the Evil Adobe PDF

 

Thu, 02/06/2014 - 18:09 | 4409305 cynicalskeptic
cynicalskeptic's picture

Zimbabwe went through three different currencies - the last issue revaluing the old $Zim at 100 TRILLION to 1 $NewZim.  Truly sad when you consider that the old Rhodesian dollar was worth $US 1.48 - Rhodesia being one of the most resource rich countries on earth.  Besides using the SA Rand and $US, people would pan for gold dust to pay for food.  

The saga of currency printing ended when pressure was put on the German company that provided banknote paper to stop selling it to Zimbabwe (though some questions remain as to whether Zimbabwe could even afford to pay for more paper).  

Luckily the US doesn't have to worry about paper suppliers.  We can continually create new money with computer keystrokes.  Perhaps this is one of the reasons for a push to 'electronic money' - much easier to revalue.

Fri, 02/07/2014 - 12:40 | 4411959 Emergency Ward
Emergency Ward's picture

"I'd like a loaf of bread, got change for a 500-trillion $Zim note?"

Fri, 02/07/2014 - 02:59 | 4410844 boogerbently
boogerbently's picture

Hyperinflation is nonsense. Just say no.

If a govt can "lie" away corruption and unemployment, it can lie away hyperinflation.

Fri, 02/07/2014 - 04:38 | 4410904 Vincent Cate
Vincent Cate's picture

Argentina lies and says their inflation rate is 10%.   Everyone is really experiencing hyperinflation anyway.

Fri, 02/07/2014 - 02:58 | 4410841 PT
PT's picture

... just minor upgrades needed as we transition from 40 bit numbers to 80 bit numbers to 160 bit numbers ...

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