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Guest Post: We Will Be Told Hyperinflation Is Necessary, Proper, Patriotic, And Ethical
Submitted by Patrick Barron via The Ludwig von Mises Institute,
Hyperinflation leads to the complete breakdown in the demand for a currency, which means simply that no one wishes to hold it. Everyone wants to get rid of that kind of money as fast as possible. Prices, denominated in the hyper-inflated currency, suddenly and dramatically go through the roof. The most famous examples, although there are many others, are Germany in the early 1920s and Zimbabwe just a few years ago. German Reichsmarks and Zim dollars were printed in million and even trillion unit denominations.
We may scoff at such insanity and assume that America could never suffer from such an event. We are modern. We know too much. Our monetary leaders are wise and have unprecedented power to prevent such an awful outcome.
Think again.
Our monetary leaders do not understand the true nature of money and banking; thus, they advocate monetary expansion as the cure for every economic ill. The multiple quantitative easing programs perfectly illustrate this mindset. Furthermore, our monetary leaders actually advocate a steady increase in the price level, what is popularly known as inflation. Any perceived reduction in the inflation rate is seen as a potentially dangerous deflationary trend, which must be countered by an increase in the money supply, a reduction in interest rates, and/or quantitative easing. So an increase in inflation will be viewed as success, which must be built upon to ensure that it continues. This mindset will prevail even when inflation runs at extremely high rates.
Like previous hyperinflations throughout time, the actions that produce an American hyperinflation will be seen as necessary, proper, patriotic, and ethical; just as they were seen by the monetary authorities in Weimar Germany and modern Zimbabwe. Neither the German nor the Zimbabwean monetary authorities were willing to admit that there was any alternative to their inflationist policies. The same will happen in America.
The most likely trigger to hyperinflation is an increase in prices following a loss of confidence in the dollar overseas and its repatriation to our shores. Committed to a low interest rate policy, our monetary authorities will dismiss the only legitimate option to printing more money — allowing interest rates to rise. Only the noninflationary investment by the public in government bonds would prevent a rise in the price level, but such an action would trigger a recession. This necessary and inevitable event will be vehemently opposed by our government, just as it has been for several years to this date.
Instead, the government will demand and the Fed will acquiesce in even further expansions to the money supply via direct purchases of these government bonds, formerly held by our overseas trading partners. This will produce even higher levels of inflation, of course. Then, in order to prevent the loss of purchasing power by politically connected groups, the government will print even more money to fund special payouts to these groups. For example, government will demand that Social Security beneficiaries get their automatic increases; likewise for the quarter of the population getting disability benefits. Military and government employee pay will be increased. Funding for government cost-plus contracts will ratchet up. As the dollar drops in value overseas, local purchases by our overextended military will cost more in dollar terms (as the dollar buys fewer units of the local currencies), necessitating an emergency increase in funding. Of course, such action is necessary, proper, patriotic, and ethical.
Other federal employee sectors like air traffic controllers and the TSA workers will likely threaten to go on strike and block access to air terminal gates unless they get a pay increase to restore the purchasing power of their now meager salaries.
State and local governments will also be under stress to increase the pay of their public safety workers or suffer strikes which would threaten social chaos. Not having the ability to increase taxes or print their own money, the federal government will be asked to step in and print more money to placate the police and firemen. Doing so will be seen as necessary, proper, patriotic, and ethical.
Each round of money printing eventually feeds back into the price system, creating demand for another round of money printing ... and another ... and another, with each successive increase larger than the previous one, as is the nature of foolishly trying to restore money’s purchasing power with even more money. The law of diminishing marginal utility applies to money as it does to all goods and services. The political and social pressure to print more money to prevent a loss of purchasing power by the politically connected and government workers will be seen as absolutely necessary, proper, patriotic, and ethical.
Many will not survive. Just as in Weimar Germany, the elderly who are retired on the fruits of a lifetime of savings will find themselves impoverished to the point of despair. Suicides among the elderly will be common. Prostitution will increase, as one’s body becomes the only saleable resource for many. Guns will disappear from gun shops, if not through panic buying then by outright theft by armed gangs, many of whom may be your previously law-abiding neighbors.
Businesses will be vilified for raising prices. Goods will disappear from the market as producer revenue lags behind the increase in the cost of replacement resources. Government’s knee-jerk solution is to impose wage and price controls, which simply drive the remaining goods and services from the white market to the gangster-controlled black market. Some will sit out the insanity. Better to build inventory than sell it at a loss. Better still to close up shop and wait out the insanity. So government does the necessary, proper, patriotic, and ethical thing: it prints even more money and prices increase still more.
The money you have become accustomed to using and saving eventually becomes worthless; it no longer serves as a medium of exchange. No one will accept it. Yet the government continues to print it in ever greater quantities and attempts to force the citizens to accept it. Our military forces overseas cannot purchase food or electrical power with their now worthless dollars. They become a real danger to the local inhabitants, most of whom are unarmed. The US takes emergency steps to evacuate dependents back to the States. It even considers abandoning our bases and equipment and evacuating our uniformed troops when previously friendly allies turn hostile.
And yet the central bank continues to print money. Politically-connected constituents demand that it do so, and it is seen as the absolutely necessary, proper, patriotic, and ethical thing to do.
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I disagree on what will spark the inflation price spiral. My best guess is politics - doubling the mininum wage. The political pressure to do this is increasing and will soon become irresistable. Once wages go up, prices must go up as well. Then wages and interest rates will have to go up. And up. And up. And yes, interest rates will go up too. Every instance of hyperinflation has always had runaway interest rates at the same time. The Event Horizon is usually crossed when the Central Bank issues bonds to soak up the excess money supply and is forced to pay ever higher rates of interest.
Just wait 10 years and see what happens. After the hyperinflation, some charismatic guy will claim Jews knew it was coming and they bought gold to protect against it. History tends to repeat itself.
Well that because jews didn't "know" it was coming they engineered it!(Fisher as FED Vice lol tell me about it) And it's not just Gold it's all productive assets, property and farmland.
I am not sure if other readers have noticed, but based on numerous comments on numerous web sites it certainly appears that anti-semitism is on the rise globally. Being Jewish is looking more and more like a liability to me. I sure am glad I am Annunaki.
The most important thing for the American people to understand is that Germany and Zimbabwe both still had control over their monetary situation. That is, their central banks could stop printing whenever they liked and the hyperinflation would cease. However in the US, the trillions in dollars (TPs) overseas will come flooding back, making any and all control impossible.
The Rubicon has been crossed. Time to march with wet feet.
"Should a bankster be hung or swung?"
'Should be' and 'Will be' are unfortunately two vastly different things as history has shown. Sadly, the odds are 'neither'. Ill-gotten gains can buy pretty big castles.
Stretched, as in drawn and quartered.
"Our monetary leaders do not understand the true nature of money and banking ..."
That's where I stopped reading. The author is a fool.
Of course they understand money and banking. The idiot author doesn't understand what's happening, a massive national looting spree, transferring the nation's wealth to Wall Street (and bankers outside America).
"Helping the economy" is merely the cover story, and the idiot author falls for it.
I'm surprised how many so-called "experts" still believe that "helping the economy" cover story.
This article assumes that hyperinflation is a natural part of the business cycle. This assumption is wrong and so the article unfortunately is useless. The evidence of history shows that hyperinflations and depressions are caused by banksters rather than underlying economic forces. For example the Weimar Republic hyperinflation was caused by the private banks that took control of the German central bank following WW1 (Milton Friedman). Europe enjoyed 500 years without hyperinflation or depression during the middle ages, a time when banksters did not own the right to create money and we did not have the fraudulent ponzi scheme of debt based money we have today. This means there is a solution to hyperinflation, the public needs to own the right to create currency.
For Christ's sake they are probably gonna make us all take another drug test!
Mono Atomic Gold, why hasn't anyone on Zero Hedge talked about Mono Atomic gold it explains everything, the Shortages, the Lies the Hoarding, why the governments want it everything including the golden calf.. You can't eat Gold.. Yes you can the Priests were feeding it to the Pharaohs no wonder it is so Valuable.. wake up People Warp Drive Anti gravity, Cancer Cures, Nano Engineering, it's all there and it explains why the price of gold is going to skyrocket
Yeah... amazing there's any left on the planet. After all weren't our alien overlords here - and weren't humans created - to mine gold for the Anunnaki?
Yes, and having 35% of your bank accounts "Corzined" and your I.R.A. and 401K turned into a government run annuity will be the financial "victory garden" of all good "Amerikans".
Only 35%?!? I figure anything 'in the system' will be a loss....... glad I'm near the end of my life instead of near the beginning - I really don't want to live through the shitstorm that's coming.
A .gov annuity would likely appear to be very similar to Social Security which is already 15% of the gross wage, so going another 35% for yet more "economic security" just rounds the scam off at an even 50%. One for you, one for Uncle Sam. Since I am a true progressive, I would like to see all government support checks and all forms of income taxed at a universal 15%. Everybody paying in is real democracy!
My article on France's hyperinflation (never published by zero hedge) makes a good complement to this great article!.
http://www.mises.org/daily/6584/Revolutionary-Frances-Road-to-Hyperinfla...
We will be told that inflation is the most humane way to claw back our lost wages, lost benefits our lost futures and avoid the ruin that awaits our children. And they will be right.
But personally, I hope that the bankers keep their grip and keep inflation low for long enough to allow bloody revolution to boil over.
I think the time to start up the violent intercession is near apon us. I think "humane" is no longer a just option.
I think anyone who is making money off Wall Street and Banking should be shit scared (if they have half a brain).
You should not be able to abuse a nation of hardworking folks, sell out their children's future by outsourcing and rampant imported labor and think you will walk away from it with your head attached.
I will be the first to pull the levers. And I would gladly get my head chopped if only to see all those sorry a-holes, my pitiful simian cousins of the banking class, dragged from their home and turned into dog food.
2014? 2015? 2016? We'll know only when it starts.
Thanks Mr. Feel Good. I'm feeling better already. More show tunes!
Nah, I think they will blame inflation on the mythical overpopulation and global-warming stories.
Guns will disappear from gun shops by theft?
Gimme a break. I've never walked into a gun shop where the owner and his employ were not armed to the teeth, each one packing heat on his hip, with one already in the pipe.
Trying to rob an American gun shop is the surest form of suicide in my opinion.
If you really want to check out, why not just throw yourself head first into a woodchipper? It'll be quick and save some honest merchant the guilt of having to drop you.
Riiiight. Several armed gun shop employees vs a mob of angry bat weilding nothing to lose types. Yep, no guns stolen in that scenario. How many off-planet readers does ZH have?
If we get hyperinflation it means we are administered by greedy fools. There are intelligent people in America but they mostly refuse to participate with steering the Titanic. It's much more practical to get in a lifeboat before even hitting the iceberg.
"If we get hyperinflation it means we are administered by greedy fools."
You're still on the fence about this? LOL...
"The most likely trigger to hyperinflation is an increase in prices following a loss of confidence in the dollar overseas and its repatriation to our shores."
With hyperinflation, prices go up like crazy. Foreign countries cannot afford to buy these very expensive (for them) products, which will force prices down again.
Don't forget, the last time this happened there was no globalized economy.
Lastly, if you can create dollars out of nothing you can destroy them too...
There won't be any hyperinflation, fiat is the future.
It's like...magic!
Not entirely. Only when foreign countries would decide not to buy US products/services at all or force the US to accept their currency as payment, then hyperinflation could be an issue. The real problem would then be that the dollar would basically disappear altogether, something that has happened in other countries... This is very unlikely though.
Probably fiat will be here for the foreseeable future, with a surge in alternative - and regulated - digital currencies (backed by big brand names, or independent organizations). Gold will become less and less important, simply because it won't fit as a medium of exchange (people can't be bothered), and when the immediate threat of a currency- or economic collapse has gone, it will reach its fair price, based on its value in industry and jewellery.
When it hits the fan, I have four decent gold mining claims, food for two years and all necessary "accessories". Let the games begin! Thanks to ZH, I've seen it coming and took actions to protect me and mine. Gold, Bitches! Though mine is still in the ground and in the creeks.
Hyperinflation will never happen..youre betting on dead gold horse dude. Id buy Bitcoins before physical gold.
I could be wrong, but I don't think the word "gold" was mentioned once in that article...
Until you see wages increase at the same time entitlement benefits increase in payouts across the board there will be no hyperinflation. We have doubled out nat debt since O took office and have little actual inflation outside of food and healthcare which are both known scams anyway.
So, until unemployment, section 8, TANF, SNAP, SSDI, SSI, etc etc start increasing their payouts and McDonalds starts paying 15 and hr there will not be any inflation at all.
Remember, half of the country is on some gov program, the gov is the largest subsidiser of private enterprise the world has ever seen.
All Central Banks are operated the same way and are baically engaged in the same money printing in order to reduce your standard of living.They want to inflate away their high budget deficits on the backs of ordinary working people.The only difference between China and the United States is that China has been able to be a "super-fed".So,in my books they're one step ahead and right now are gradually finishing off the prey by buying everything up gradually in the United States.First,take away most of all manufacturing base and technology and then move in and buy up what's left of it with inflationary wealth created in China.Communist Central planning is no different than what the Fed has turned into.Remember the Central planning of the Soviet Union?Ya,the Fed is self-righteous and knows what's best what's good for everybody and the markets and interest rates.It'll all go bust.
Help, ZH people!
I have a simple question that I have not been able to answer.
When I look at M1 or M2 money supply figures from the Fed (which means they are lies) do those figures include US dollars worldwide? Or only within the US?
I'm assuming that the Fed figures would only include money within the US. Is that right?
This hyperinflation argument is completely worn out. The proponents of such nonsense have been pitching it for five years now and the Fed continues to print, print, print.
Why?
The deflation which began in earnest in 2008 is still staring them in the face.
Look at it this way: When the Fed prints, it creates debt. That's their job and they're working overtime. On the other side of the equation are the countless numbers of homes (millions of them) that went into foreclosure or are on their way to forclosure and all the mortgages that are still being paid down. That last bunch constitutes the bulk, and that is destroying debt.
The Fed is promoting bubbles in stocks and college loans, car loans and any other loans they can find because many, many consumers and businesses are paying down debt and not incurring any more.
If the Fed keeps its foot to the pedal at $75B or $100B or more per month, it's because there's at least that much debt being eradicated at the same time, so they're trying to keep up.
Remember, in our fiat debt-based system, if there is no debt, there is no money and that's why the Fed keeps printing. And if interest rates rise too much, that's game over because then nobody could afford debt and most debtors would, facing higher rates they cannot pay, default.
The Fed has itself backed nicely into a corner. They need to keep the US dollar strong, but at the same time, they'd like inflation at 2-3%, and GDP growth at 3-4%, which they consider equilibrium.
They've managed to keep the dollar stable, even higher lately, but that plays against their inflation and growth desires.
They can't have it all and deflation is winning and will keep winning as long as people have choices and there's no wage increases. If a loaf of bread doubles in price, people will eat half a loaf. Yep, some will starve, which lowers consumption, and thus, lowers again, the price of a loaf of bread.
The Fed is totally fucked with ZIRP and QE, which, the evidence is beginning to prove out, cannot exist at he same time, lest you get a result of zero growth (which is probably what we've really had the past five years in sum when you take out all of the BS hedonics and other magnificent calculations).
They're completely fucked. If I could borrow at 0.25%, like the banks, I'd do it all day long and pay it back just as quickly. So, what does the Fed gain from that? They created cheap money, and just as fast as it was borrowed, it was repaid.
Businesses are also self-funding, with stock buybacks and their own debt issuance, which, if you've read the Creature from Jekyll Island, the bankers hate, because corporate stock and debt is like having your own currency, and the banks make nothing off that.
The deflation will continue as long as interest rates remain low, like a 10-year under 3.5%, which is likely to remain that way for at least another year or two or three.
So, enjoy the deflation. Buy land, ammo, guns, vehicles, any reliable alternative energy source (wind, solar, deep cycle batteries, etc.), non-GMO seeds and opt out of the debt system. As long as the deflationary regime remains intact, you'll be fine. When it ends, you'll be prepared to survive without money.
Doctinaire commenters don't have
to like this. It's simply a statement
of disownership of the ongoing
crisis from the Keynesian view.
Keynesians would say falling
GNP led to a drop in money supply,
vs. the monetarists' drop in money
supply led to a fall in GNP.
Bernanke's Fed forced Americans
not to shore up the banks but to
buy their artificially created self-
serving bubble, the adversity from
which they had also intended to
profit, and from which they are
profiting, including with new
privatizations, as well as by
buying the controlled real
estate inventory upon its
release, with the Fed having
purchased their mortgage
securities.
The Fed failed to protect
depositors in the Great Depression
by failing to rescue the banks, and
bail-in's actually look tame in
comparison. Obviously more aggressive,
Resolution Trust type measures, with interest
rate policy dedicated to the full
population's interest, and with those
who SOLD the bubble allowed to
clear the market rather than be chained
to its artificial reflation, along with
those who put down 5/10% who'd've
been better off with non-recourse than
with sharecropper'hood, could have
brought us to a better place by this time.
If it fails this time it will be
because of the opposite:
it embraced the cause of the
crisis, and in doing so, created
not only a new artificial bubble
but an illusory one for the very
same reason, non-support of the
GNP, that it's also an illusory one.
I'm with James Rickards on this. When USDs held abroad come back home, the US will be forced (not that it wants) to roll out a new gold backed dollar. The US Fed has the biggest gold reserve in the world. Then Europe, then Russia and Chia. You might see more of them SDRs as well, gold backed too.
See what happens with your "old" USDs when this happens...
And no, I don't believe in the "no gold at Forth Worth" conspiracies.
pogadac
o ulamkach
Fractional reserve banking
means
that commercial banks
can print money
and lend it to the state
for profit
that is passed
to the folks
that have lots
of cash anyway
Federal reserve banking
means
that the central bank
can print money
and hand it to the state
to quench
the seniors
that count on the SS
FOR FREE <3
(no bail-out for overprinting commie banks needed:)