How Likely Is Hyperinflation In The U.S?

Tyler Durden's picture

Authored by Seaborn Hall, originally posted at Advisor Perspectives,

My previous article, “How likely is hyperinflation in the US? Part One,” covered hyperinflation's history, process, effects, definition, types and causes, as well as how to measure its emergence in nations using casual symptoms. Part Two answers the questions of how to gauge the likelihood of hyperinflation in the United States, what the emerging dangers are, how it might happen here and how to prepare if it does.

As stated in Part One, because there are so many conflicting or just different views among analysts relative to hyperinflation, it is difficult for the average advisor or person investing for retirement – or just self-preservation – to know what to believe and how to act. Many of the warnings related to hyperinflation sound like Chicken Little's cry that the sky is falling.

In the midst of the alarmism and confusion, these articles sift through the best resources available, including Bank for International Settlements (BIS), International Monetary Fund (IMF), Cato Institute and Fed papers to provide some clarity.

Measuring hyperinflation in the U.S.A.

The U.S. has come just short of hyperinflation twice before: once during the Revolutionary War and the second time, in March 1864, towards the end of the Civil War. The wars created high debt and supply disruptions within the continental states, congruent with fast acting hyperinflation, as explained in Part One.

The U.S. has geographic advantages. It has natural supply routes made up of rivers, natural ports and inter-coastal waterways connected by a sophisticated rail and interstate system. It is protected by the natural boundaries of oceans, mountains and friendly bordering states. It is also not dependent on one export, like oil. These geographical and man-enhanced attributes temper any economic trend towards hyperinflation in the modern U.S.

As previously noted, hyperinflation may be expected when there is persistent monetization and when the currency exchange premium – the premium the most-used foreign currency commands over the native currency – rises above 50%. This later sign typically occurs during a period of high inflation and up to three years before hyperinflation appears. This period may or may not include a currency crisis, which is distinct from, and can be an initial phase of, high inflation or hyperinflation. More broadly, the dangers of hyperinflation are measured by casual symptoms. These include fiscal, monetary and political causes and symptoms.

As to fiscal symptoms in the U.S., according to a recent JP Morgan (JPM) presentation, net U.S. debt is presently around 75% of GDP, high, but non-critical. Foreign officials hold 35% of this debt; the Fed holds 16 percent. Both are significant, but not excessive. And, as Prasad and Ye note, debt cements the U.S. dollar role as global reserve; that is, as long as it is not unsustainable, and interest is a manageable piece of the total budget (chart, below).

On this front, the U.S. does not have enough reserves to cover its short-term debt, but the Guidotti-Greenspan rule may not apply to Advanced Economies. And, as long as 10-year yields, currently about 2.35%, stay below 7% global bond investors tend not to panic, especially when the U.S. is the best of a bad lot.

Where Does All the Money Go

Deficits-to-expenditures is marginal at about 18%. According to the Wall Street Journal, the deficit has decreased to only 3% of GDP in 2014. The deficit was $1.4 trillion six years ago and the Congressional Budget Office (CBO) projects it to be just $486 billion this year. But, it is expected to increase in 2016 and according to The Heritage Foundation could be worrisome again by 2021.

Also on the down side, according to Heritage, net U.S. debt, above, will reach 100% of GDP, a dangerous level, around 2028. At $18.2 trillion, total federal debt is already 102.5% of GDP. But most analysts feel that net debt (total minus intra-governmental debt) is the more critical measure. By 2024, mandatory expenditures, or entitlements plus interest on the debt, will be 75% of revenues. By 2030 they will consume revenues (chart, below).

As to monetary symptoms, Federal Reserve liabilities are also high, about $4.4 trillion. According to Guggenheim, the Federal Reserve's debt/equity ratio was 51:1 in July 2012, more than double 2008, and almost double commercial institutions that failed. And Fed Assets as a percentage of GDP have more than doubled since 2007. But central banks are judged differently, as Japan's experience implies, thus far at least. John Cochrane, a professor of finance at the University of Chicago, points out more specifically that Fed reserves do not lead to hyperinflation. It is also important to understand that printing money or QE is not necessarily the same as monetizing the debt.

All Tax Revenue Will Go Toward Entitlements and Net Interest by 2030

In most cases, central banks control interest rates and reserves through government security and foreign currency purchases. To create money, a central bank purchases securities when it digitally credits the accounts of dealers with whom it does business. These dealer banks, like JP Morgan, are immediately richer. In some cases they park the money with the Fed, earning interest; in others, they invest it, some in riskier ways, like derivatives. For money velocity to increase they must actually loan it, which, according to Hanke, few currently do. This is partially due to increased federal regulations, like Dodd-Frank, instituted since the GFC, that place strict restrictions on lending activities.

Cabinet Appointments: Prior Private Sector Experience, 1900-2009

Monetizing is when the central bank buys government securities directly from the Treasury to fund existing or, unplanned debt, as in the case of Zimbabwe or Japan at present (see Part One). An independent central bank firmly resists such pressure from the political power. The danger, of course, is that this distinction becomes unclear.

And, as a 2008 IMF report on the Fed stated, "Compared with its posture during the Great Depression, the Fed today is taking considerably more risk and the scope for possible profit and loss outcomes is much greater." The report also points out that the Fed's ability to make a profit during every year of the Great Depression era was largely due to its accumulation of gold. This is a far cry from the make-up of the Fed's burgeoning balance sheet today.

Another emerging hyperinflation danger is in the area of political management relative to economic health. The Obama administration has less business experience than previous administrations (chart above). Surveys also show that the American people see themselves as more divided than at any time in history (below), and other studies show that the political center is shrinking. Political mismanagement that suddenly increases the debt and social tensions could lead to a crisis that results in high inflation.

Years ago, R. E. McMaster, author of No Time for Slaves, proposed a simple formula to facilitate understanding of the interplay between government and economics: government + religion = economics. According to Hanke, the problem with Venezuela and its hyperinflation is Hugo Chavez's successor, Maduro; the problem in Yugoslavia was Milosevic; the problem in Zimbabwe was and is Mugabe. They all adhered to the ten-point playbook of the Communist Manifesto, which wrecked their economies and the social order. According to McMaster government does not operate in a vacuum, but those who lead administer by their philosophy or religion.

Public Sees Deeper Political Divisions, Most Expect Them to Continue

This simple, but profound theorem plays out around the world today. It can lead to prosperity or economic crisis and hyperinflation. In America, this theorem has led to prosperity. The respect for individual rights and property rights are the pillars of the free market. The founders assured these rights through the founding documents, especially the U.S. Constitution.

Executive Orders over the years

According to Coltart (see Part One), the primary reason for Zimbabwe's hyperinflation was that the deficiencies of their constitution allowed a vast disparity of power between the executive office and the legislative and judicial branches. Most worrisome relative to the U.S. Constitution are a list of Supreme Court reversed Executive Orders that even liberal law scholars say blatantly violate the Constitution. It is the quality, not the quantity (above ) of these orders that is the issue. If Americans continue to allow this executive tendency to span administrations, as they have in the past, the dilution of their constitutional rights may eventually lead to hyperinflation in the U.S.A.

For the present, inflation and money velocity remain low. Though there are various reasons high inflation may appear, typically, there need to be two elements: economic capacity, including low unemployment, and high money velocity. With even core inflation (PCE) currently under 1.2% (as of June 15th headline PCE is 0.2%), economic capacity and lower unemployment just emerging, and money velocity still quite low, high inflation does not appear to be on the horizon.

This is not to say that other factors could not instigate high inflation or hyperinflation. Some of these "black swans" are dealt with below. But, while Reinhart and Rogoff are no doubt right about the rampant denial afflicting advanced nations relative to future sub-par growth, QE, debt restructuring and coming high inflation, a crisis appears years away. Greece is symbolic of that looming crisis; but it is not Bear Stearns or Lehman.

This time is not different; but global reserve status, the trust and confidence of investors and deep and wide financial markets make the U.S. unique. There are still enough questions not to be dogmatic, but until the U.S. experiences an increase in causal symptoms or a black swan that fractures global confidence in its economy, hyperinflation is not a worry.

Black swans that could lead to high inflation or hyperinflation

The above being noted, according to FT, the global system is in many ways more fragile today than before the GFC. And, considering its fragile nature, many incidents could come out of nowhere and lead to a crisis, or series of crises, that eventually results in a currency crisis and/or hyperinflation.

One of the prominent possibilities is a successful cyber-attack on a major institution or the U.S. itself, especially the nation's power grids, its nuclear plants, its water supply or its major financial institutions. JPM's, NASDAQ's, and Sony's recent experience serve as examples, and with increasing tensions with Russia and China this area will continue to be a challenge. The director of the NSA recently warned that a cyber-attack will cause a major systems collapse within a decade unless the U.S. develops counter strategy immediately. According to Greg Medcraft, chairman of the board of the International Organization of Securities Commissions, the next black swan will be a cyber-attack.

SG Swan chart: Political and financial risks now outnumber real economy risks

Though the U.S. has largely avoided catastrophe in the past, there is also the possibility that it might experience more natural disasters in the future. Remember Zimbabwe? About 19% of the U.S. is presently in severe or extreme drought, 29% in moderate to extreme conditions and approximately 40% in abnormal dryness or greater. 100% of California is in extreme, severe or exceptional drought. Also alarming is that according to the Wall Street Journal U.S. beekeepers have been losing 30% of their bees for the last decade, above the 19% sustainable rate. The above issues may place strains on agriculture, lead to supply disruptions and drive up food prices in future years.

As I covered more extensively in “Evaluating the Arguments for the Dollar's Demise,” in the last decade, globally, at least, there has been an, apparent, increase in natural disasters. According to a 2013 article in The New England Journal of Medicine, there were three times as many natural disasters from 2000 to 2009 as there were from 1980 to 1989. And, according to one account, it was the 1906 San Francisco earthquake and fire that led directly to the Financial Panic of 1907.

In another critical area, both George W. Bush and Barack Obama have identified nuclear terrorism as the greatest threat to national security. According to a 2008 FBI study, any terrorist nuclear weapon is likely to have a yield of about 1-kiloton (chart, below ), large enough to destroy a city center and with the potential to contaminate surrounding area for up to 4 miles, depending on wind direction (chart, 2nd below ). According to Nukemap, a 1-kiloton detonation in lower Manhattan would kill about 30,000 people and cause three times as many injuries, some fatal. A smaller possibility is a 10-kiloton event with fallout reaching 20 miles.

Miles from ground-zero

Even before 911, the U.S. recognized that terrorist groups were attempting to acquire nuclear material. According to one recent joint report by Belfer Center at Harvard endorsed by military leaders, constructing a crude nuclear device is easier today than constructing a safe, reliable weapon. Tests indicate that intelligent operatives could defeat security systems holding weapons or materials and in the last five years several sites have been penetrated. As of 2014, at least four key core Al Qaeda nuclear operatives were still at large. And the difficulty of smuggling nuclear material into the U.S. is largely overstated. But the primary concern is that with one detonation terrorists could claim they had more bombs hidden, creating mass panic.

General radioactive fallout pattern

The nuclear scenario would be a global catastrophe, claiming thousands of lives, shutting down trade and exporting dire consequences to other nations. The cost in response and retaliation would also add enormously to U.S. debt, potentially accelerating the nation towards economic crisis. According to the above Belfer report, the risk of a nuclear terrorist attack on U.S. soil is greater than 1 in 100 every single year.

In addition to all of the above possibilities there are ongoing currency wars, the reemergence of the Eurozone crisis, the Ukraine and the potential destabilization of Russia, the China slowdown and real estate bubble, Japanese debt, the Sino-Japanese conflict and the craziness of mad regimes like North Korea and Iran to worry about. And we haven't even addressed nuclear sabotage, dirty bombs, an EMP device, ISIS and the Middle East as a whole, other U.S. terrorist events, central bank errors or another financial meltdown due to the approximately $70 trillion in global derivatives. In many ways, the world we currently live in is like dry kindling waiting for an inerrant spark to set it ablaze.

Hyperinflation in the U.S.A.: How and when it might happen

The risk of the economy collapsing and instigating hyperinflation is much like the theory of the avalanche: many of the items are in place, and all that is needed is the right trigger to set them off. Whether it comes in the next few years or twenty years from now is impossible to predict and depends on too many unknowns.

Some, like Eswar S. Prasad, argue in The Dollar Trap that the intricate nature of global mechanisms will keep the dollar in play indefinitely – and the world largely in balance. Others, like James Rickards, in The Death of Money, insist that the complexity of global financial interactions and their tipping points will crash the U.S. economic system. Who is right?

Based on the above analysis, unless the U.S. experiences a crisis greater than 911 or the GFC, hyperinflation is not a likely scenario for the next five years and probably more like twenty years. But, the greater and the more numerous crises are, the more likely that hyperinflation will come quickly. What if a black swan or a series of crises led to a perfect storm?

A 1 kiloton nuclear terrorist attack strikes the U.S. in either New York City or Washington D.C. The stock markets crash, losing half their value. The EZ breaks apart and the resulting malaise spreads to the global economy. Instead of the confidence in crisis coming to the U.S., the U.S. bond market implodes and global money runs to gold, silver, foreign currencies and various ex-US bonds. In the U.S. prices rise and stocks rebound some with them – eventually. The U.S. military retaliates in foreign lands for the nuclear attack but walks into a trap.

Disunity disintegrates into political civil war and panic incites unrest, resulting in martial law. The current drought increases and food supply is cut in half. Fed printing presses finally result in high inflation. Destruction from an earthquake and/or a volcanic eruption lays waste to much of a major city. All of these events combined destroy infrastructure, disrupt distribution, exacerbate the drought and kill leaders. Foreign governments take advantage of America's weakness and institute a cyber-attack. Power failures occur nation-wide.

Hyperinflation ensues. The stock market falls as confidence wanes. Loss of control leads to a government coup, bank account freezes and despotism. The U.S. descends into an inflationary depression leading to fear of invasion, the dollar's fall and its replacement as the global reserve.

It would probably take more than one isolated event – even a major one – to create the conditions for hyperinflation in the U.S. And, it took a decade for a similar process to unfold in other nations. But, it can occur faster in the midst of critical events.

As I stated in “Evaluating the Arguments for the Dollar's Demise,” the U.S. has been protected by a hedge when it comes to disaster. But, events like Katrina, national drought, and the recent Supreme Court decisions relative to Constitutional interpretation hint at a new and more divisive era. Though for the present things seem fine, there is more than one route to an avalanche now than there may have been just a few years ago.

Replacement of the dollar as global reserve as an isolated event might instigate hyperinflation more quickly. However, only one reserve currency nation has ever experienced a hyperinflation – France, from 1795-96, during the years of the French Revolution. And no nation has ever experienced a hyperinflation as a result of losing global reserve status. Other causal symptoms would likely be apparent, leaving some time to prepare.

How to prepare for hyperinflation

Here is some broad investment advice that takes into account the dichotomy of the above conclusions relative to hyperinflation. Portfolio allocations can start small and increase as events on the ground change:

  1. Protect what you have: Diversify your portfolio globally. Hold some real estate. Borrow at fixed rates while interest rates are low.

  2. Consider an international account. Set up expeditious portfolio transitions into foreign currency accounts and international funds with a flexible strategy for transference of at least some assets in the event of escalating volatility, major U.S. weakness or black swans.

  3. Allocate part of your portfolio to alternative funds and hedge-fund-like strategies. If qualified, consider hedge funds, especially those with a global macro and/or event-driven focus.

    Silver and gold in marks

  4. Consider natural resources, agriculture and commodities based funds, especially now when commodities overall, including oil, have corrected and mining is near a historical low cost point versus gold. Remember that water is liquid gold and may be scarcer in the future.

  5. Accumulate tradable items: physical gold and silver (the chart above shows the rise of gold and silver during the Weimar Germany hyperinflation); jewelry; stored food and water; wine; and foreign currency.

Hyperinflation in the U.S. is coming sometime in the next 20 years or so, and this isn't a cry from a Chicken Little, but a conclusion that the analysis strongly suggests. It is possible hyperinflation could happen during the next few years, but that seems unlikely since it would require a series of major crises and political blunders – events unprecedented in the history of the United States. If this led to a corruption of Constitutional rights in the midst of an exaltation of the Executive Branch that resulted in loss of the rule of law, hyperinflation might result. This is why the understanding and interpretation of the U.S. Constitution, especially in the context of executive orders, may be the most important issue before Congress, the judicial branch and the American people over the next few years – regardless of which party rules.

It is much more probable that hyperinflation, when it comes to the U.S., will be preceded by a long slow decline that will include a protracted period of high inflation, and that the crash of the dollar and hyperinflation will be the final tumble off a looming, steep cliff. The indications from this analysis point to a convergence of events sometime in the mid-2020's to early 2030's – unless the American people can somehow unite and motivate their politicians to accomplish the hard, almost impossible task of cutting mountainous entitlements adding annually to U.S. debt. But, of course, if the perfect storm occurs, hyperinflation could arrive sooner.

For the chaos of change it brings, hyperinflation has been described as an economy without memory. It can also be viewed as a furtive civil war a nation's political leaders wage with its people over who will pay for the nation's sins. Its battlegrounds, victories and defeats answer the question of who will wave the white flag over the extravagance of the nation's mismanagement. Ultimately, the people – and the leaders – are both forced to surrender.

The good news is that, with time, every nation returns from the devastation of hyperinflation to the degree that it embraces corrective measures and free market principles. Regardless of what else might occur, in this sense the U.S. has a sure foundation, a rich history and a hopeful future.

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PrayingMantis's picture

 

 

... " ... and that the crash of the dollar and hyperinflation will be the final tumble off a looming, steep cliff. "

... it's not the fall off the steep cliff that kills the economy, it's the sudden stop at the end ...

OldPhart's picture

" The respect for individual rights and property rights are the pillars of the free market. The founders assured these rights through the founding documents, especially the U.S. Constitution."

Reading this and all I could hear was the sound of Obama's evil laugh.

greenskeeper carl's picture

This article was crap. Treating intergovernmental debt as something to be subtracted from total debt is just as dishonest as all this 'seasonal adjusted' bullshit. That's some straight up Paul krugman shit right there. It's either debt, as in its money that has to be paid back, or it isn't. We are already over 100% debt to GDP and getting worse. Using GAAP, we are adding 4-5 trillion a year to it, currently over 200 trillion, not the bullshit number we see paraded around on TV.

Also, 18 T GDP is a joke too. The only reason it's up there is because we keep finding bullshit to add a few hundred billion to it. It's all smoke and mirrors. We haven't added hookers and blow to it yet like some euro countries, but we will.

BeanusCountus's picture

Agree. All these charts, graphs, stats, etc., only confuse people. LOOK AROUND! Inflation in equivalent products and necessities is way higher than reported. Still waiting for the "deflation" that is the worry of the day for the economists. Perhaps if they start writing off the bad debts and recognizing losses it might show up. Until then, I say inflation is at least running at 6%.

JerseyJoe's picture

Thank you!   I also choked on the notion that the Fed is not monetizing the debt because they don't buy direct from the treasury...yeah, instead they wait five minutes and buy it from their friends/owners who make huge profits.

Trying to even suggest this is somehow different than directly buying is absolutely laughable.   

No mention of trillions off-balance sheet currency swaps, student loan defaults, persistent foreclosure inventories - both residential and commercial. Can you say: derivatives and this modern contrivance that when you stop making payments and can't pay - that is not a default?  

 

That seems to follow the same nonsensial logic that not buying direct from the Treasury with trillions "created out of thin air" is not monetizing the debt.   BULLSHIT!

 

JerseyJoe's picture

"Though there are various reasons high inflation may appear, typically, there need to be two elements: economic capacity, including low unemployment, and high money velocity."

Monetarist clap trap.  Oh yeah, and inflation only comes from high employment...not printing trillions.   I guess employment was high in VZ, Argentina and Zimbawe when inflation reared its head. 

What a potporri of nonsense. 

Vullsain's picture

Just in case my inflation hedge is stockpiling good whiskey, which will also be useful in a deflationary environment!

Row Well Number 41's picture

Thanks Tyler, my doom chubby was gett'n a little soft.

#41

daveO's picture

"U.S. has come just short of hyperinflation twice before: once during the Revolutionary War and the second time, in March 1864,...

No mention of 1980 when Volcker had to raise rates sky high to avert disaster. Gold doubled in less than 3 months time.

Then, the usual talk of a nuke taking down the system. I've heard this so much since 9/11, that I'm sure they already have it penciled in on the calendar, I'd say about 2 years from now. Anyway, closer to 2 than 20. 


ZH Snob's picture

who needs hyperinflation when you got a credit collapse?

it is the mathematical destiny of all fiat currency that multiplies itself with compounded interest.  seems great for a while, until you arrive at the end of the self-enriching illusion.  then, ironically enough, there is NO LIQIUIDITY TO BE FOUND--ANYWHERE!

the machine has no choice but to print more fiat with less value.  sound familiar?

tarsubil's picture

Hyperinflation is an assured outcome. It's baked in. Predicting when it will happen is probably something that will make you go crazy. From what I can see, a lot of smart people have thought about and made predictions and few can possibly be right.

Jumbotron's picture

The good news is that, with time, every nation returns from the devastation of hyperinflation to the degree that it embraces corrective measures and free market principles. Regardless of what else might occur, in this sense the U.S. has a sure foundation, a rich history and a hopeful future.

HAHAHAHAHA !!!

This guy is surely smoking some of that GOOD weed !!  Obviously wrote this before the influx of illegals and the formation of the Standing Army of Free Shitters.

Freddie's picture

+1 million. Anyone noticingweird stuff at the store including food.  The whole razor blade thing, some shampoo, deodorant, detergent and other similiar products.

Premium items are astronomical with some products but they have cheap stuff or the stores will sell nothing.

Persona has Made in the USA blue colored twin blade desposables for $1 for 8 at Dollar Tree and they beat the crap out of premium blades.   Wal Mart also sells them too.  Gillette and Schick stuff is like $30 for some blades.  I think Buffett owns Gillette so they can s*ck it.

Jumbotron's picture

Persona's aren't bad as long as you don't have a beard like mine that requires 3 strokes...down, up and sideways.  ( I know what you're thinking.....and that's true too )  ;)

But watch out for those Noxema brand blades.  WHOOO-BOY.  Like shaving with a mad weasel.  I love Noxema cream to settle down a little razor rash or to cool a sunburn.  Even their shave cream is cheap and cheerful as the Brits like to say.  But DAMN, them razors are cheap and BITCHY !

El Vaquero's picture

"Like shaving with a mad weasel."

 

LOL!

 

The other option is to go with a straight razor.  It's a big up front investment as far as shaving goes, but after that, you probably won't have to buy another razor for decades.  You need the razor, the strop, a stone for honing or a barber's hone, and if you want to be old fashioned, a brush for shave soap. 

TheEndIsNear's picture

It can also double as a convenient way to exit this mortal coil if your investments go wrong.

OldPhart's picture

Used a straight razor from 13 to 18.  Marines handed me a shaving gizmo and I had to ask someone to show me how to use it.  Thought about going back to it, but nothing cuts like those five bladed fusion shavers...to get that fine a cut with a straight razor meant some pressure that could easily lead to peeled skin.

El Vaquero's picture

I can get it close enough to cause ingrown hairs with a straight razor.  The other thing that i like is that I can go without shaving for a week or more and I don't have to choose between pulling out clippers or clogging the razor. 

greenskeeper carl's picture

Dollar shave club, been a member for almost two years now , I get the 6 dollar a month ones, couldn't be happier. I can't use those one and two blade disposables, my beard is just too thick. But those 4 blade razors from them work just as good as the Gillette fusions I used to use at less than half the cost, plus I never have to feel like in shaving with a rock cuz I forget to buy more.

OldPhart's picture

My wife bought me an electric shaver once for Christmas.  Kids were young at the time.  I had a three day growth of face hair.  Turned the electric shaver on and it died embedded on my face.

Hurt like shit to get it off.  Tossed it to my wife and suggested a bit of a 'trim'...I was >< close to having a shave jammed up my ass.

JerseyJoe's picture

Costco use to carry cheap double blades that were just fine.   No more - only more expensive triples and the ridiculous high end crap for suckers.  I guess the low end was eating their highend (both at Costco and for the scam "you need 5 blades" manufacturers.)  When I saw them go to two blades, I knew I should have patented five...   Hey why not 10!  LOL!   

loveyajimbo's picture

This author seems to have his head up his ass... no offense.

disabledvet's picture

Yeah, pretty much.

US economic history makes generating inflation really difficult. "Too much arable land." It is interesting to speculate about the responses to the two Great Inflations in the USA post World War II (1970's and 2001-2008) but the fact remains creating inflation that doesn't result in "Vast Speculations" is really hard in the USA.

I was hopeful that the truly massive energy boom coming out of Texss, Oklahoma, North Dakota and now Pennsylvania, Ohio and West Virginia would create "an inflation." Historically this was how the "West was Won" (high priced goods chasing absurdly low priced commodities including gold.)

Not this time.

The USA has had pretty much ZERO friggin growth out of the 2008 collapse.

Ironically we actually have had a SPAT of Municipal Bankruptcies...one that now includes Puerto Rico incredibly.

At some point however this much energy production at this low a price will cause an economic boom.

I ain't talkin Government jobs either...though those aren't bad of course.

I'm talking something like farming, logging, manufacturing, trucking, shipping, etc.

The ONLY reason for the U.S. dollar to be moving higher is because we ARE competing and winning at SOMETHING.

reTARD's picture

That bitch FDR has the biggest cock.

AUD's picture

US credit is junk

Dagny Taggart's picture

umm... where does he explain what happens to confidence when the global derivatives bubble explodes?

SMG's picture

The ONE QUADRILLION global derivatives bubble.

Now guaranteed by your deposits in the bank.

Dagny Taggart's picture

Gosh, I don't think I deposited enough to cover it. But that's sort of a given, huh?

OldPhart's picture

Do what the banks do.  Write yourself a check for a zillion dollars and deposit it to your account.  You're good for it.

Tall Tom's picture

another financial meltdown due to the approximately $70 trillion in global derivatives.

 

His underestimation of the magnitude of the Global Derivatives Market is the supposition which flaws his model.

El Vaquero's picture

Along with his understanding of the unemployment situation in the US, and also his insistence that net government debt should be used as opposed to total debt becuase some analyist somewhere said so.  Considering that the social security IOUs are sitting in a fund that owes other people FRNs who are outside of the government, calling it intragovernment debt is bullshit. 

 

And yes, LOL at the whole "$70 trillion in global derivatives."  IIRC Citi alone has about $70 trillion notional in derivatives, and that's just one fucking bank. 

JerseyJoe's picture

It can't explode - no one defaults anymore... don't cha know?  Orwell's friends own the financial lexicon now.   

Metalredneck's picture

Yep, we're all gonna die.
Nor like this idiot predicts, but it is inevitable.

buzzsaw99's picture

so disjointed it gave me a headache

JerseyJoe's picture

A potporri of nonsense.  

coast's picture

I am sorry, but we dont live in any type of scenario related to history...History is kansas and we are not in kansas anymore toto....and yes loveyajimbo, his head is way up his ass so far that its coming out this throat...These are the type of articles that ZH should not even print because it gives people the idea that it is many decades away.  Hyperinflation, in my opinion, is already here.  My wife used to buy everything because I was out working off grid scenario.  Well for a time I had to go buy stuff recently.  Since I did not buy stuff for a few years, I was shocked to see prices.  Not shocked, overwhelmed.  The thing I am trying to tell you, is that is has been so slow, that most people dont notice. But take a few years off, then go buy stuff...friggin unbelievable.  This is what is called, "social engineering"....I kid you not, if you had taken a few years off, then go buy stuff, you will shyte your pants.  We are already in inflation for basic needs.

The author said:  It is possible hyperinflation could happen during the next few years, but that seems unlikely since it would require a series of major crises and political blunders – events unprecedented in the history of the United States.

I say: exactly, and the series of major crises and political blunders are happening as I type this you friggin idiot.

 

Where I shut down an article is when the author speaks history instead of "THIS WAS ALL FUCKING PLANNED YOU IDIOT"   !!!!!!!

 

 

Freddie's picture

+1 I sort of did the same thing to a lesser extent. I stocked up on some things including clothing.  Oddly enough, Buffett owned companies are some of the biggest culprits.  Gillette razors, he owns Hanes and Fruit of the Loom so underwear is up a lot.  If you shop around you can find alternatives in a lot of cases.

Very third world stuff with bargain brands which will really hurt premium brands.

All sorts of things you buy that probably have imported parts or product inputs.  Hardware store stuff.  Anything with chemicals and cleaners.  There are lots of bargain brands but it is getting harder.  Food keeps going up.  

daveO's picture

Yep, plannned. In a few years out, we could see Republicans try to repeal O'Care and the penalty. The banksters won't like it. They'll say, 'you repeal it and your credit risk goes up'. By then, people will be desperate due to all the 'non-inflation' inflation. O'Care gets repealed and interest get jacked up at the same time. Bankster's margins go back up and DC raises taxes.

WrongNumber's picture

Worked retail a few years back before landing my current gig.  Every Sunday we would do price changes. Nothing ever went down in price. Coworkers had no concern with what I saw. 25 cents here...a buck here...every single Sunday.

Small changes are hard to notice over a longer timeline. 

OldPhart's picture

We bulk buy every couple of months.  Cycling through a pretty good food stash.  I'm staggered by the cost of meats at Costco.  Fucking $20 a pound!  Wasn't that long ago a steak could be bought for less than $2.00/lb.  Started looking at alternatives.  Albertson's occasionally will have a sale on bacon and chicken.  Chicken around $0.69/lb, bacon at $1.29/lb.  We'll buy forty or fifty pounds of each.  Campbell's soup is now in a 10.75 oz can for twice the price, around $1.82.  But at the Dollar General they have 15.25 oz (not the original 16 oz) at $1.00.  Dollar General has a lot of bargains in canned goods. (It's a lot easier to ask the Manager to order a couple cases for you so you don't have a shitload of loose cans to deal with.)

Bush's Beans were on sale at Stater Brothers at $0.89 per 21.5 oz can. I got a case of each kind.  Now down to about 1/2case.  Next trip is next Friday, and we upped the ante to $5k to stock up meats along with the rest.

Due to the cost of meats I've found a local market, mom and pop mexican meat market, and we've been sampling and encouraging them.  They've done a pretty good job of controlling cost and coming out with respectable cuts.  Going to call them Monday and place a $2k order.

who cares's picture

I think that in the late seventies the USA were goimg to hyeprinflation, had not Volker raised the intrest rates to the high teens. I also believe we already are in the same situation we were in around 1976. Today the way inflation is measured looks much lower, but if measured in the same way as then, it would be very close to what it was. The point is: we could already be in the early stages of hyperinflation, masked mainly by the relative value of the dollar, which soon could have very high level of fluctuation, since the value of a currency is often dependent on the confidence the rest of the world has in it. Confidence that would be severely shaken in case the USA economy slipped back into recession.

Wave-Tech's picture

All interested parties will pay dearly for this........   

g speed's picture

wishful thinking for the gloom and doomers---get a life--

Tall Tom's picture

The collapse is not doom or gloom for me.

 

It will be a day to rejoice and a day to celebrate. The corrupted will be humbled. Justice will be delivered.

 

The only people who look at the collapse of civilization with foreboding, doom and gloom are those dishonest and the fraudulent who are invested into that which is corrupt....like YOU.

 

Your words and your description of the oncoming collapse and destruction of the corruption onlyserves to demonstrate that YOU are invested into it and that YOU see this nightmare as doom and gloom.

 

I value a life that is good, moral, and just and I will have it. You will lose everything that you have as a result of your fraudulent activites.

 

I do understand that you perceive this as doom. I also understand that Satan sees the return of Jesus Christ as his doom as well.

 

Yet I will be celebrating, joyfully, both events.

 

I have a life, especially afterwards. Do you?

DanDaley's picture

...central bank errors or another financial meltdown due to the approximately $70 trillion in global derivatives.

 

Hey, bubba, try at least $700 (that's seven hundred) trillion according to the BIS (and probably as high as $1 quadrillion+ (and you don't even want to know how much that is).

delacroix's picture

a trillion seconds is 31,000 years

p00k1e's picture

The 'Swan Chart' alone is worth five stars!!!

Tough crowd.