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Philip Haslam: When Money Destroys Nations
Submitted by Adam Taggart via Peak Prosperity,
The global debt glut, plus the related money printing efforts by the world's central banks to try to stimulate further credit growth at all costs, leads us to conclude that a major currency crisis -- actually, multiple major currency crises -- are practically inevitable at this point.
To understand better the anatomy of a currency collapse, we talk this week with Philip Haslam, author of the book When Money Destroys Nations. Haslam is an authority on monetary history, and more recently, has spent much time in Zimbabwe collecting dozens of accounts of the experiences real people had as the currency there failed.
This week, he and Chris discuss the process by which a hyperinflationary currency collapse occurs:
In South Africa, there's a river called Suicide Gorge where you can jump off from the top of a series of waterfalls. You jump off each waterfall, and you can then go down to the next. But the problem is, once you jump off each waterfall, you can’t get back up again. So we used this analogy to describe the process of hyperinflation.
Typically, as a government prints money, you get levels of inflation. But that’s inflation based on historic money printing. Every year, when you get your salary increase, you base it on historic processes. You take the latest consumer price index and then build it into your wage increases. If you're a business, you'll build it into rent increases and price increases of your products. But it's all based on historic inflation.
But then the time comes when a cultural shift occurs and people begin to say "Hang on a second, my salary increase was based on historic inflation, but I'm beginning to lose purchasing power -- I'm getting poorer and poorer. Stop giving me increases based on last year, and give me increases based on next year." So the inflation becomes based on a future money printing, rather than historic money printing. That's what we call our first 'gorge moment'.
That leads very quickly then into our second gorge moment, which is where the rate of price increases actually outstrips the amount of money in the economy and you get money shortages. In 2003, the economy in Zimbabwe experiences fierce money shortages. You had massive queues at the banks, real shortages, everyone trying to take their money out of the banking system. It became a real problem as people began to distrust the banks more and more. They actually wanted to hold their money directly, concerned that the banks actually did not have it.
Gorge moment three is when that pressure begins to work its way into the real economy and margins begin to decrease to the point where stores begin to close. That is a real cultural shift. Before, stores were open; goods were expensive but you could still get food and you could still get goods and services. But at gorge moment three, the formal supply sector shuts down.
Gorge moment four is when the banking system begin to stop lending. If you are lending money to someone and, a day later, that money you lent has lost value, you no longer want to make loans. You're going to use that money to go speculating and buy things that will hold value. So gorge moment four is very close to gorge moment three. Stores close and credit dries up. People stop lending.
Following this stage is gorge moment five: a curious consumption hysteria develops that we call 'scorched money'. It's when people try to take their money and get rid of it as fast as they can because if you hold it instead, it's going to lose value by the next day and you can buy less and less with it as time goes on. People will do anything to get rid of their money and find anything that will hold some value of some sort. It’s a crazy, consumption hysteria where everyone’s buying everything. There is huge amount of demand, but in reality, production has stopped. So you have this entire consumption of the economy where all goods and services get consumed.
Finally comes the sixth gorge moment which is the death of the currency and the final collapse of the money-based system.
Click the play button below to listen to Chris' interview with Philip Haslam (52m:19s)
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Global debt has soared 57 T since 2008. If it ceases to rise, we're going to get "hyperinflation?"
Money doesn't destroy nations. Its owners do.
Because they are part of a private money cartel (of ancient, organized criminals).
It's not so simple Kirk. It's not always the owners who destroy the money. I have seen up close a catastrophic currency devaluation in my early days - bus ticket went from 1.50 to 20,000 in just few years in a large central European country. This was not entirely administered by the gov't (basically Kremlin controlled puppets). It was in equal part carefully engineered by the USA-led economic bloc by hooking up the national economy on cheap credit so that it effectively collapses under the debt burden. Funny how it's similar to what's Greece gotten into these days.
you mean socialism didn't work? Crony Capitalism doesn't work either
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com
Hey scam man, that's $44.87 an hour based on 39 hours a week. Great pay! Why don't you hire people at $25.00 an hour to do this work, and pocket the rest? That's what scammers do.
In my household the currency has already collapsed - thanks outsourcing!!
I'll be sure to sign up for your next half-dozen wars of choice.
Best,
Average White Man
Offshoring, labor arbitrage via H1B visas and HR hiring policies did the trick in wiping out high tech jobs for people of European ancestry.
OTOH, if you're female, Asian (Vietnamese, Filipino or Indian, but not Chinese), then you're a shoe-in to get hired.
E.g. A few years ago, HP had a big layoff at one of their facilities in the NW, and at that plant Chinese guys were affected but not Indian guys. If you walk into their campus in Palo Altogether or in Cupertino, you'd think you were in Asia.
I'm vacationing in South Beach atm, there are more Chinese here than I observed when I was in Singapore.
Porsches are as common and remarkable as Hondas are back home; only a Bently or Maserati draws the eye. Cannot believe the hostility of the area; no one speaks English, and the attitude is default angry.
Been to two restaurants so far where we had trouble ordering as the waitress spoke little English (one a Cuban Bistro - ok, another a 100% Natural, which appears to be a chain.)
Can't believe the cars, cash, damn. Beautiful change from the 25 degree weather back home, but I won't be back unless I add some zeros to our net worth, or I'm leading a platoon of infantry.
Lived in Miami for Last 25 years. Am the Landscaper for the rich and famous. Tapped into an income stream that grows more each year. I loathe the stratified class system here. Have been offered a mind blowing amount to sell my operation. 6 months from now I'll be a dental floss tycoon in Montana. Counting the days till I can ditch this 3rd world shithole and start a new life in big sky country. I pray each day the Fed can keep can keep the fantasy going till I'm gone to a friendlier environment.
This does not sound dissimilar to what is happening in Australia; particularly Sydney and Melbourne.
Over the last 10-15 years, Australia has been undertaking an unprecedented population ponzi that has been feeding the Australian housing/propety boom. Melbourne and particularly Sydney are in the World's top 10 least affordable property markets. Other than the now gradually waning mining boom, it has been population boom that has been the main driver of Australia's growth.
There has been widespread rorting of foreign "457 visa" workers by employers wanting cheap, obedient employees.
http://www.macrobusiness.com.au/2014/06/employment-department-questions-...
The cashed up Chinese have been coming in and snapping up as much property as they can, in contravention of law, yet the FIRB (Foreign Review Investment Board) has been underfunded and little more of a paper tiger.
http://www.macrobusiness.com.au/2015/03/firb-unable-police-foreign-prope...
Furthermore, we have among the most idiotic and shortsighted political class in the Western World.
"I'll be sure to sign up for your next half-dozen wars of choice."
That, or sign yourself up for the only war that truly matters to you and yours: Revolution.
See you on the battlefield, or the basement, as I'm not going "camping."
The banksters need to repay us.
maybe you geet a job cleaning houses for illegals since they don't pay taxes and Obama draws them here by the millions and they deal in cash many times lots of drug money as well. Because liberals never want to stop the drug trade
What stage is the U.S. at and Russia,Spain, Italy,France, Argentina,Ven. and Portugal do you suppose?
I get the impression that what is described in Gorge 4 is actually what causes Gorge 3. Businesses start losing their credit lines and so they cut wherever they can, and when they can't anymore they go out. If there's nobody to lend to anymore, and you didn't really want to anyways - then you stop.
Put that cart BEHIND the horse, sir!
Considering that credit has largely replaced cash as 'money' these days, in North America's case if hyperinflation were to occur, the likely sequence would be:
Gorge 4 --> Gorge 3 --> Gorge 2 --> Gorge 1 --> Gorge 5
Banks have quit lending: Gorge 4, check.
Margins are increasing rapidly, stores are closing: Gorge 3, check.
Price increases outstripping the amount of money in the economy: Gorge 2, now in progress, with all retail markets stalled (e.g., housing) or nearly dead (e.g., consumer retail).
Salary increases based on future loss of purchasing power: Gorge 1, still to come, but should commence soon. The recent minimum wage debates in some 'western' countries may show the beginning of this.
Scorched money: Gorge 5, remains to be seen.
Hyperinflation is not so certain or predictable, when credit is more widely used in the 'west' than cash is. So I guess we'll see. I could see hyperinflation. I could also see our markets just stop functioning at the citizen level, and 'money' pretty much dry up. I guess either way, one doesn't have enough 'money' to pay prices, so the result is pretty much the same.
As long as the FED survives, more of the last 5 years. Higher US gov. debt to replace other debt. Debt slavery for all US workers and dollar holders. If the FED were ended, then barter like Argentina would kick in. After too much FED QE, the world will dump dollars and a tidal wave of hyperinflation will wash ashore. That's why TPTB want to start a war so badly. Worldwide instability feeds the 'safe haven' dollar beast.
My thoughts exactly, The first problem (and still is) that banks received QE for bad mortgages, and then again received Treasury notes for bad loans, effectively monetizing the debt that was created. the banks cut waaaaay back on the lending process through tightening of lending requirements. the banks have the money and are not lending it out. the regular businesses cannot get loans to see them through, so they close up.
The hike in the minimum wage is evidence of prices going up to accomodate the future increase in wages. Doubtless if minimum wages go up 30% to $10.10 an hour, the guy making $10.10 an hour is going to feel slighted if he doesn't get his increase too. This is the same as when the Feds announce a COLA increase of 2% and before the workers ever see it in their paychecks, prices in the area have already gone up 3% or more.
I had thought that prior to a currency collapse that physical paper dollars would be a good idea, since ATMs and banks wouldn't be handing out money. If you have physical paper money you can spend it just as easily as electronic, assuming bank cards still work.
Still waiting on Gorge 5. People have to realize that future increases in their income are tied to prices and if they spend their credit now they can have goods now at relatively lower prices, with the debt to be paid off in the future with maybe a little left over.
Scorched money happens at the same time or after a currency is rejected as a reserve currency.
Chris Martenson asks an interesting question for which no answer is offered: what happens when multiple countries hyperinflate simultaneously? Maybe that would not happen, because the first country to do so will be cut off from international trade.
The modern way to hyperinflate is to have an app that lets store prices increase continuously as you fill your shopping cart. Meanwhile your ewallet inflates. There! No wheel barrels of cash.
we're not going to follow the same path, and it certainly wont happen linearly like the author believes. im guessing that there will either be another major crisis where the stock, bond, RE, student loan markets get demolished, quickly followed by massive QE, or the fed will front run the crisis with QE. either way it's credit contraction then huge inflation or stagnation then huge inflation when the velocity of money picks up. it'll be totally chaotic and the brunt of it will probably happen overnight.
Aging US demographics and the FED paying interest on excess reserves means no velocity increase. I could see the FED cutting that interest payment and causing a possible money flood into sub prime lending again. Especially, if another Dem gets elected.
Politicians have value as organ donors. Otherwise they are the expensive toys of crooks with little intrensic value.
Bankster == Organ Donor.
Kudos! What a brilliant idea.
Money does NOT destroy nations, and countries.
Printed theft, fiat, destroys nations, and countries.
It is not debt, as debt is how the fiat is injected into a nation, country, and society.
Debt is the plow, fiat is the yoke.
The banksters need to repay us.
The banksters are grifters. Guillotines are the answer.
Google; George Carlin and the Death Penalty and you will get some fine ideas on how to handle Bankers.
While I agree with the author's sentiments and opinion, he must surely be aware that the FedRes is not an agency of "government." They are the private and controlling entity of the DC US government.
The dollar will die, as it is in the process of being replaced as we speak--unless one thinks the dollar is up on "strength." However, the banksters will not allow their debt slaves to just walk away, but will switch out the dollar based debts with SDR fiat based debts.
It will all end in violence, as that is all psychopaths can truly comprehend. If you disagree, go watch the videos of the gun and badge thugs killing Kelly Thomas while he called for his father, shooting Oscar Grant in the back, shooting deaf John T. Williams in the back as he walked down the street, and James Boyd executed by a group of thugs acting as an Einsatzgruppen execution squad. And never forget, Eric Garner was murdered because of his supposed threat to NYC's revenue and service to the banksters.
The banksters need to repay us.
What does one say about a bankster run over by a bus? Was the bus damaged?
'' You use credit as money, credit will not be hyperinflating''
Mako
Go time bitches! Let’s just pull the ripper and drop a $10 trillion QE next month. That’ll up the ante on the global community. It’s a race to the bottom, and we own the printing presses; so, let’s just end this issue with overwhelming force (Powell doctrine). Go big or go home! :)
QE4 is assured. So is QE5 and so on. Until Japan and the US go the Zimbabwe route.
By definition, money cannot cause this series of events. Currency that has no intrinsic value, like FRNs, on the other hand, can and will cause a firestorm of destruction.
Both Draghi and the Fed said they will fight deflation at all costs:
The central banksters won't allow debt defaults to clense the system.
They have decided to inflate out of debt.
It's the Zimbabwe economic plan all the way.
you don't understand the system,.....they love bankrupcty and debt default....just when they use it.
Gee, I don't see Money destroying CHE or Monaco.
They need to rephrase that a bit more...
In 5000 years mankind has never produced a civilaistaion that has been stable in the long term.
They rise and they fall.
When NINA sub-prime mortages defaulting is seen as a black swan event, we haven't got long to go.
With credit ascurrency and credit intetwined globally, this time will be different. Worldwide chaos engineered to bring about global new world order.
This interview was hardly worthy of ZH readership. If this bloke managed to sell a book on his understanding of economics he's hiding his light under s bushel in this interview. Total bollocks!
There are smaller steps too, like the price of milk rising every week for 3 weeks in a row, or prices changing daily. That experience would certainly focus the mind that something is up.