[IoninnyHaro]

Credible analysts say we've already taken the on-ramp to hyperinflation, that there's no real chance of escape, and all talk otherwise is but noise and fog. They point to facts which appear to be a good fit to past catastrophes. In a commonly cited example, the German mark of 1914 traded at 4.2 to the US dollar, but after the war there was an induced inflation, intended to be strictly back-office and therapeutic, which it was for a while.

Prices in Germany temporarily stabilized and remained rock-steady during fifteen months in 1920 and 1921, and there was therefore no surface inflation at all, but at the same time the government began again to pump out deficit expenditure, business credit, and money at a renewed rate. Germany's money supply doubled again during this period of stable prices. It was this time, when Germany was sublimely unconscious of the fiscal monsters in its closet, which was undoubtedly the turning of the tide toward the inflationary smash.
Jens Parsson, Dying of Money, 1974, von Mises Institute

Eerily similar, aye? With huge deficits and uncollateralized credit, misallocation followed and inflation was set in motion, which then went off the rails and barreled sideways through the neighborhood. By November 1923, one US dollar would buy 4.2 trillion German marks. Prices doubled every two days. That's how it works when the money supply is increased irresponsibly. Inflation seems almost normal at first, although confidence in the currency takes a little hit. Then events cause confidence to slip noticeably, then alarmingly, then exponentially. The day comes when confidence drops to zero, when everybody wants what the currency may buy, but not the currency itself. When inflation takes a right-angle turn it earns a new name: hyperinflation. Said another way, hyperinflation is a matter of blundering into a critical mass, i.e., it's a non-obvious explosive with a nearly instantaneous ramp-up. In 1923 Germany it happened in mere weeks.

With our electronic banking and money exchanges, what took weeks in 1923 may now take days, perhaps hours, perhaps the second 64-bit computer architecture can't handle the numbers. When the currency becomes worthless and obviously so, when truckers and firemen and power plant operators understand they're working for nothing, the real economy collapses. Only then is the fullness of the debacle in plain sight, when there's nothing for sale at any amount of fiat, when only silver or gold or food is likely to be acceptable. It's just here deflation and inflation achieve identity, currency ceases to function, or as techno-economists would put it, the velocity of money approaches zero.* Thievery and barter take over. The benighted are understandably outraged and there's blood in the streets. Only future historians can say what follows.

It's never quite so simple of course, there are always stop-gaps and gimmicks. Revaluation is a classic weave-and-dodge, simply lop off a few zeros and issue new currency, which fails as fast as the old, but it's a stutter-step, an exploitable pause created by bedazzling the hopelessly hopeful. The Zimbabwe dollar was revalued four times, the last time at 10,000,000,000,000 to 1—ten trillion to 1—before it vaporized altogether in 2009, not to be seen again. And Zimbabwe wasn't even the record, the Hungarian pengo of 1946 holds the record with daily inflation at 207%, meaning prices doubled every 15 hours, inflation so colossal it's commonly expressed in scientific notation.

Hyperinflation can't be understood as extreme inflation, hyperinflation is the outright repudiation of the currency. When nobody wants or even accepts fiat, then we have true hyperinflation. Once it starts nothing can stop it, people's perception takes over, meaning everybody from CEOs to families around the kitchen table, all making tens of millions of self-preservation decisions every day. The soundest of economic countermeasures can't act fast enough to offset such a loss of confidence, nor does government have the credibility to merely make announcements and expect them to stick. Worse, the more draconian the action, the more fear and instability is put into the system.

Be assured hyperinflation can happen here, in fact it has happened, well, almost but not quite. Fiat printed during the Revolutionary War era, known as the Continental, reached 47% inflation monthly in 1779. Civil War-era US fiat known as "greenbacks" came close at 40% per month in 1864. The Federal Reserve Note, the only US currency in circulation today, is also fiat money. They promise the bearer it's legal tender and nothing more. Technically they're a gussied up debt entry, what Wimpy uses to buy 'a hamburger today' except engrossed. DC prefers to think of them as pre-defaulted IOUs, therefore available without limit or consequence. "If the government does it, it's not counterfeiting," says government, but yes, yes it is, although we're obliged perforce to use their shabby product as if they were the real thing. Hence the term fiat, from the Latin: "or else, and your little dog too."

It's not reassuring to know the CPI is up by about a third in the last seven years, and that's if we believe statistics from the same people who under-report unemployment by goal-seeking the data. A little arithmetic says their numbers work out to about 4% annual inflation, and sure enough, it's the number quoted by those who are paid to quote it. Independent analysts put the real number somewhere around 9%. Dispatches from other fronts are worse. For the last quarter the growth in the money supply has been running north of 40%, annualized. And where have we seen that number before? Some sunny souls postulate an underlying deflation which offsets M2-minus-CPI, an idea which waddles suspiciously like happy talk. Nope, sorry, the numbers describe a spring compressed to solid, or near enough.

Such value as economics may have lies in its predictive power but cautionary tales from the "I told you so" school can keep us entertained on our way to penury. One notion says all debt must be repaid and will be repaid, if not by the borrower then by the lender, and if not by the lender then by some otherwise uninvolved bystander who can be convinced to do so, or forced to do so or tricked into doing so. That would be us. Check. Another notion says virtual wealth gained by leverage alone is certain to be misallocated, to get more virtual wealth natch, because those who deploy leverage have nothing of value at risk. There comes a time when 'risk' becomes 'gamble', the string runs out and equilibrium reasserts itself. Deleveraging is economic's black hole, it devours virtual gains and everything else within line of sight. Check. Just look around. And it's barely begun. Then there are the Too Big To Fail banks.

The biggest U.S. banks continue to grow and they continue to get even more power. Back in 2002, the top 10 U.S. banks controlled 55 percent of all U.S. banking assets. Today, the top 10 U.S. banks control 77 percent of all U.S. banking assets. These banks have gotten so big and so powerful that if they collapsed our entire financial system would implode.
Michael Snyder, Economic Collapse

Some say the centralization of financial decision-making, with its global interconnectedness and its use of super-leverage, meaning leverage of leverage, has gotten us to into this fix. What used to be containable by compartmentalizing risk, at least in theory, is now tightly integrated throughout every time zone. In effect it's a monolith, intended or not. What fails in one place pulls down counterparties everywhere else. Bank of America alone is said to hold $75 trillion in derivatives for instance, recently transferred to the FDIC side of their operation—meaning the taxpayer guaranteed side, another casual outrage. When they speak of contagion they're talking about the imperilment of treasuries and central banks which have conspired with each other and TBTF banks to protect and serve their own ends rather than attending to their legitimate mandates and charters. Their putative clients get patsy duty. Check again.

It's said to be surprised is to reveal ignorance. Other than that faint praise, these things are forensic and add little of value to situational awareness, besides, no matter how fascinating the autopsy it stinks up the place eventually. The exercise does suggest a strategy however. Panic. It's still true, the first ones out the exit do quite well, recompense falls off precipitously thereafter. Market crashes were called Panics in more forthright times for just that reason. Everybody knew he who panics first panics best. Panic is a wise and sound alternative to the roadkill option currently on offer, not panic as seen in '50s sci-fi movies but the kind which prompts one to abandon the souvenirs and dinner jacket and get thee to a lifeboat, betimes. It's a mistake to look down on tactics which can't be accessorized with half-glasses and elbow patches, rather think of panic as a martial art. It focuses the mind. Panic effectively, if ruthlessly, reorders priorities with the necessary urgency to handle rapidly emerging and maximally unpleasant realities.

Preppers know all this. As the saying goes, panic now to avoid the last minute rush. When all a Benjamin gets you is "do you want fries with that?", when fiat finally staggers off into the sunset, dragging its incestuous spawn behind, it's too late for panic to be really useful. We're obliged to participate in the economy as-is until the Greatte Reset of course, but we can do so with our coat in one hand and our car keys in the other, trending toward the exit all the while, quietly and inconspicuously, so as not to spook the herd.

* It's sort of like cosmology. If you have nothing, you have nothing. But if you have half of nothing, now you've got something. If those two halves meet, you've got nothing again. There's your proof. Which is all you need to know to understand high energy physics, politics and economics.

http://www.woodpilereport.com/html/index-239.htm

[22CreessGah]

Great article! It highlights the cause of hyperinflation, the lack of confidence in the currency. A currency can for a long time be abused, before people lose confidence in it, but when they do it will go fast. I suspect a world reserve currency like the US dollar can be abused far more before confidence is lost, but it will go downhill faster once it happens.

The abuser of the dollar is the Federal Reserve, and the US government, as the previous abuse has left it relatively unharmed, they will feel the right to abuse it further in comparison to letting their criminal buddies in the banks take the just punishment for their irresponsible gambling to further their bonuses and carreers, or their buddies in congress who has to offer irresponsible spending to get re-elected...

It is unavoidable, you can't expect psychopaths to say from now on we will be responsible people who will look out for the common long term good of the population. It simply isn't in their nature!

[Unergerah]

If the goal is to have a one world currency, then the current world currency must be destroyed. What easier way than hyperinflation?

[Valdoyes]

anyone been to wmt lately? their 99 cent candies are now 1.24!

[NanoGordeno]

"Hyperinflation can't be understood as extreme inflation, hyperinflation is the outright repudiation of the currency. When nobody wants or even accepts fiat, then we have true hyperinflation."

There are dozens of fiat currencies in worse shape than the U.S. Dollar. Wouldn't those have to be repudiated first? Wouldn't the Dollar get stronger with each such repudiation? Currency strength is defined in relative terms, in a carefully monitored market. Even as the dollar continues to lose purchasing power, it will gain more and more relative strength. Its demise could only happen if some other country were to back their currency with a greater military, more natural resources, and more intellectual capital.

Seriously, is there a realistic scenario that addresses this argument?

[Matajic]

Schiff suggests that the dollar will fail the worst because our debt is so huge.

[deandrecooke]

The post WW1 looting of Germany carry trade.

"ARTICLE 235 The Versailles Treaty June 28, 1919

In order to enable the Allied and Associated Powers to proceed at once to the restoration of their industrial and conomic life, pending the full determination of their claims, Germany shall pay in such installments and in such manner (whether in gold, commodities, ships, securities or otherwise) as the Reparation Commission may fix, during 1919, 1920 and the first four months Of 1921 , the equivalent of 20,000,000,000 gold marks."

2790 Gold marks equalled 2.2 Lb of pure gold.

15,770,609 Lb of Gold or 7885 short tons of gold or 229,935,483 oz of Gold...

The US Treasury has 261,000,000 oz of Gold currently...and Germany owed almost 3 times that in the space of 3 years.

Quite a bit of GOLD...Especially when the total above ground stock around that time was 50,000 tons with around 25,000 tons monetary Gold worldwide...

And Germany certainly did not have 7885 short tons of gold in 1919 1920 or 1921...

What to do then?

The British (Bank of England) vicroy basically told Germany to print marks to buy GOLD...From?

The winning powers...

The Looting of Germany carry trade...Germany printed marks and then bought Gold then the amount of GOLD they owed dropped and the winning Powers still had GOLD and loads of marks...what to do with all those marks? send them home to roost buying raw materials and finished goods...

The marks flooded into the German commercial banking system allowing it to inflate the debt supply in Germany...The more GOLD Germany bought the more marks they had to print...Which caused the purchasing power to drop...It was quickly losing it's value...

But outside of Germany all the currencies were quickly gaining value...Basically German exports were getting constantly cheaper and cheaper...A free give away of German raw material and finished products basically...

To the winning powers...England France, the U.S.A...The Whole British/city of London Empire.

This fueled the Roaring 20's until the mark was losing value so fast that it basically caused prices inside Germay to hyperinflate until it was impossible to account...The looting of Germany carry trade collpased in 1924 after about 14 months of Hyperinflation of prices or a hyperdeflation of the value of the mark...

The collapse of the carry trade caused a hyperdeflationary implosion of the banking/monetary system in Germany and the shockwave spred out into the Global system and began collapsing the USA...The real estate market peaked and sold off and the yield from there flooded into the stock markets which then hyperinflated and collaped 1929.

The debt to GDP ratio began hyperinflating in 1927 due to the collpase in GDP.

It peaked around 1934-1935.

It was around 100% in 1919-1920 and took until around 1951-52 to reach 100% debt to GDP again.

A boom bust of roughly 30 years.

The post WW2 looting of the world carry trade boom following the 1933-1945 bankruptcy reorganization of teh previous global trade system that hyperinflated and collapsed 1929-1933 has basically been the roaring 6 decades.

Basically the positive aspect is...if it takes as long to collapse as expand roughly...Most of you will die long before the bottom is hit...Is that positive?

But if the top can't maintain control and there is a break out...a science fiction nightmare will rapidly unfold.

[NanoGordeno]

The thing is, I don't see post WWI Germany as anything near an analogy for the U.S. We're much more like 19th Century Great Britain, for whom super power status got away in the 20th Century due to an overextended military. And the British Pound is still around today. Loss of buying power, yes, but no repudiation.

[boffincash]

Seriously, is there a realistic scenario that addresses this argument?

BRIC

http://www.dnaindia.com/india/report...y-2020_1605518

A brief nightmarish scenario brought under control might gain traction, or a series of them.

[sbrscnds]

nice to see H.T. posting, had all but given up on him

[22CreessGah]

$16 Trillion/$1700/ounce= 9.4 Billion ounces of gold (twice as much as all gold ever mined)... If one only counts money US government owes foreigners I would estimate that would be aproximately 25% of total, so the US government owes the rest of the world aproximately half the gold in existence, at the current price of gold... Not that different from Weimar Germany. Biggest difference was that Weimar Germany debt was owed in gold... The US government just needs to devalue the dollar by 90% vs gold, and it can pay back its foreign creditors in the +8000 tons of gold it claims it has...

[22CreessGah]

The thing is, I don't see post WWI Germany as anything near an analogy for the U.S. We're much more like 19th Century Great Britain, for whom super power status got away in the 20th Century due to an overextended military. And the British Pound is still around today. Loss of buying power, yes, but no repudiation.

British pound is around today beceause the emerging world leader at the time, the US, supported the British.

The emerging world leader today is China. I am not convinced they would do for the US, what the US did for UK...

[NanoGordeno]

$16 Trillion/$1700/ounce= 9.4 Billion ounces of gold (twice as much as all gold ever mined)... If one only counts money US government owes foreigners I would estimate that would be aproximately 25% of total, so the US government owes the rest of the world aproximately half the gold in existence, at the current price of gold... Not that different from Weimar Germany. Biggest difference was that Weimar Germany debt was owed in gold... The US government just needs to devalue the dollar by 90% vs gold, and it can pay back its foreign creditors in the +8000 tons of gold it claims it has...

You're looking at this all wrong by even involving gold in the equation. The U.S. owes the rest of the world $10T, and it owes "itself" $5T. So the total amount owed is $15T, which is about the current total money supply. So they could double the money supply (devaluing the dollar by 50%) and pay off the entire debt overnight, including all the money owed for social security and Medicare. We'd be left with dollars that have half the domestic buying power, but a debt reduced to zero and a suddenly much more solvent entitlement system, which would make it an even stronger international currency than it is right now. A far cry from repudiation!

[NanoGordeno]

British pound is around today beceause the emerging world leader at the time, the US, supported the British.

The emerging world leader today is China. I am not convinced they would do for the US, what the US did for UK...

That's the thing; China is the emerging leader, and yet we can still kick their ass militarily a hundred times over. Talk to me when that changes. I'm not saying it can't happen eventually, but we're at least a generation or two away from that being a plausible scenario.

[boffincash]

That's the thing; China is the emerging leader, and yet we can still kick their ass militarily a hundred times over. Talk to me when that changes. I'm not saying it can't happen eventually, but we're at least a generation or two away from that being a plausible scenario.

When the 1/2 of the world that is financially sound is allied against you, nothing else really matters.

A slight tip is all that's needed to send it into civil war.

[22CreessGah]

That's the thing; China is the emerging leader, and yet we can still kick their ass militarily a hundred times over. Talk to me when that changes. I'm not saying it can't happen eventually, but we're at least a generation or two away from that being a plausible scenario.

Are you sure about kicking Chinas ass militarily? Seems like the US still has a problem in Afghanistan 10 years later... And that one has been on Chinese payroll. Sure you could send nukes to China, but then China would send nukes to the US. I'll go out on a limb and claim that the US can not win a war with China, only mutual destruction.

[NanoGordeno]

Are you sure about kicking Chinas ass militarily? Seems like the US still has a problem in Afghanistan 10 years later... And that one has been on Chinese payroll. Sure you could send nukes to China, but then China would send nukes to the US. I'll go out on a limb and claim that the US can not win a war with China, only mutual destruction.

You're saying the US wanted to win a war in Afghanistan?

[22CreessGah]

You're saying the US wanted to win a war in Afghanistan?

I think the intention was to win the war in Afghanistan, certainly not 100% sure of it... Afghanistan is a graveyard of empires though...

[boffincash]

[NanoGordeno]

Horn, how are we supposed to interpret that chart in terms of this conversation? What point are you trying to make?