Skip to comments.On Hyperinflation (Dire predictions. Be forewarned.)
Posted on 01/12/2009 10:10:30 AM PST by randita
Monday, January 12. 2009
Let's put this to rest right here and now.
"Hyperinflation", or even "Serious Inflation" (similar to what we had in the 1970s) is impossible without a means to transmit the rise in prices into wages.
In today's United States that simply cannot happen for two reasons:
As a consequence a hyper-inflationary or even seriously-inflationary spiral is impossible to sustain.
Think about your associates, people who you know in the middle class.
Now consider that a 10% inflation rate (moderately bad "serious inflation" ala 1970s) goes on for four years.
This raises the cost of living for everyone by 46%.
How many people who you know are saving 46% of their income? How many will survive a 46% increase in their cost of living?
Such an outcome will result in half or more of America becoming immediately homeless, hungry, and as a consequence out of work. It will as a consequence crash GDP by 50% or more immediately which in turn will crash income tax receipts by a like amount at both state and federal levels.
This will in turn crash prices, but at that point it's too late as now the price crash in turn destroys what remains of the business community and further crashes tax receipts, while at the same time foreign bond investors throw up their hands and say "screw you!", cutting off all foreign capital inflows to the government.
Down that road lies immediate insurrection - that is, the violent overthrow of the government. You are delusional if you think the military could stop such a thing - 150 million Americans, maybe even 200 million of the 300 million in our population? Not a prayer in hell, even if all the Americans had was pitchforks, torches and a gallon of gasoline, and they don't - they have firearms, and lots of them. Even the Chinese, who are (by demonstrated act) willing to roll tanks over their own people would have no chance against 100 million of their citizens if hunger ever trumps fear.
This didn't happen in the 1970s because we had vastly more union work representation and they were able to force wages to keep pace for the average working man. While the pinch was bad (I grew up in it and remember it vividly) society never degenerated because the self-reinforcing crash of production, jobs and tax income never happened, and as a consequence the sort of mass-unemployment, disenfranchisement and loss of essential human needs did not come about.
Today the average working man works for WalMart or some other non-union shop and has no wage pricing power; ergo, there is absolutely no way to prevent the implosion from initiating.
The government must not engage in any sort of policy that could lead to this outcome. Absolute protection at the top levels of government must be put in place to prevent it, because if this occurs then everything - absolutely everything - that we know and love about America disappears.
This is where the Peter Schiffs and McHughs are wrong in their hyperinflation thesis and their "defensive" measures to try to do something about it (or worse, McHugh's belief that not only is this inevitable but that the government should intentionally cause it through something like a "money drop" to households.)
They are wrong because if this outcome occurs there will be no United States of America, your gold will be confiscated and/or rendered worthless by executive fiat, and at approximately the same time an angry marauding mob consisting of half the population of the country will literally loot and burn everything to the ground.
Vengence inevitably follows when justice is denied for a long enough or in an egregious enough fashion. We have seen this with Rodney King and now with the apparent BART assasination of a suspect in Oakland, and that was one man who was abused at the hands of government. Make the abuse half the population and there is a zero chance that civil and political order is maintained.
Pray that our nation's leaders aren't stupid enough to set in motion such a course of action either by accident or under the foolish belief that they can "keep the outcome under control".
Time is running out to demand and obtain justice folks. America's clock is literally ticking towards zero.
2008 Review, 2009 Forecast
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Why were people still buying real estate, even after the market started to turn south?
In the case of the bond market — it could be a case of “the greater fool” theory in action. IOW, it's just the latest Ponzi scheme. The test will come soon enough. Obama wants to borrow & spend $1 trillion for “economic stimulus” & he's been talking about trillion dollar deficits for years to come. If China (for one) ever stops buying U.S. Treasuries — what do you suppose will happen to the value of the U.S. dollar?
“there is little the federal government can do other than house and feed homeless and hungry Americans”
Where n the constitution does the government get the right to house and feed anyone.
Eliminate all welfare!
How do wages in Zimbabwe compare with the inflation rate?
It is a strange dichotomy where it is in the Chinese best interest to keep lending the USA money in order to sell their goods here. It is like a drug dealer extending credit to an addict in order that he be able to buy more drugs. The question is not one of IF we will overdose, but when.
The Chinese are quietly building their reserves of gold, as are oil rich arab countries. This massive Ponzi scheme will end badly and sooner, rather than later I fear. Global trade can only occur when their is trust in currency and in the counterparties ability to pay. The trust is rapidly disappearing in both areas, and the freezing of global trade may well be the catalyst that sets everything in motion.
We could be approaching a global depression, and with the advent of technology and computers, it may engulf us at a speed most can’t comprehend. Depression at the speed of the internet, rather than the slow motion 30’s style. That is what truly frightens me.
Who is this clown? Is this jist some dufus making a opersonal rant?
“bond purchasers tend to be saavy folks”
Yes they are, and I hope you are right. On the other hand, I am wondering if a lot of them actually do think there is a substantial risk of future inflation yet are buying bonds now anyway because they appear to be the least harmful alternative.
Not sure about wages, but they just started issuing their first 50 BILLION dollar notes. If you live in Zimbabwe, even the poor are billionaires now.
Inflation is not caused by a “spiral.” That metaphor was always just a dodge, so the government could blame others for inflation. I remember magazine ads in the mid-70s (under Ford) showing a worker, a housewife, and a storekeeper as PIGS, with copy saying, “We all need to be a little less piggy.”
“If China (for one) ever stops buying U.S. Treasuries what do you suppose will happen to the value of the U.S. dollar?”
It will collapse, and Chinese products will suddenly be far more expensive for US consumers, and the Chinese economy will tank. China knows that, so they won’t stop buying our bonds unless they are forced to. In fact, right now they are pushing in the opposite direction, doubling down on their weak yuan policies. I expect that, instead of cutting bond purchases outright, China will likely try to prod us constructively into more responsible fiscal policies by making threats to do so.
I remember back in the late 1970's, whoever it was that did the Jimmy Carter impersonations on SNL had him saying "Inflation is your friend. Eventually, with inflation, everyone will be a millionaire".
bond purchasers tend to be saavy folks
Would they be the same folks who were smart enough to create CDO’s, MBS’s and other financial instruments which created this crisis? Would the ybe the same Wall ST, Wharton School grads who decided it was kosher to invent no doc, no money down ARM’s and give them out like candy to illegal immigrants and the unemployed? If they are the same folks, I would say they are making the same mistakes all over again.
“What happens when the Chinese/Japanese, etc stop buying US bonds? That is the crux of the question. On the one hand they have incentive to prop up the USD as they already hold so much US debt. On the other hand, the maxim throwing good money after bad comes to mind.”
on the topic of debt, Donald Trump said something like: If I owe you a millions dollars I have a problem, if I owe you 100 million dollars, YOU have a problem. If the US goes bankrupt the Chinese will lose TRILLIONS. As much as they hate us they dont want that to happen.
Yep! What’s the first thing people stop paying when they are in a survival mode, credit cards.
and BTW China has already talked about pulling out of US debt.
Hmm, maybe more screaming would be dramatic enough...
Where in the Constitution does it say the government can yank money out of my earnings?
Like I said, “how long will they continue to subsidize our debt addiction?” Our economy is cratering and thus demand for their goods is drying up. The articles of factory closings and riots in China are much more common and growing. They will only continue to extend credit as long as it is in their best interest to do so. As our economy collapses, they may decide soon that is no longer the case. We will soon know as the US Gov’t is about to embark on a bond issuance orgy the likes of which the world has never seen. How their will be enough aggregate demand to purchase all those bonds is beyond me, but we will know within six months to one year the result.
They'll take their vengeance in other ways, such as military adventures in Africa and Asia that we can no longer afford to counter.
Take a sip of brandy before this one ..............