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View Full Version : Weimar Republic vs. U.S.A.: Hyperinflation Coming...




denison
08-19-2009, 02:07 PM
Note: I am not an economist. I've tried to make my point as well as possible, In order to impress upon the reader the near certainty of hyperinflation, already begun, but getting exponentially worse over the next 5 years.


Why did hyperinflation come to Germany in 1921?


1)Germany was saddled with HUGE debts associated with being required to pay for the costs of World War One.

2)In order to service this debt, the Germans resorted to printing money.

3)Because of various articles of the Treaty of Versailles, Germany had almost no industry of her own anymore and had to import a large part of its basic needs.

4)In spite of their complete inability to even service their debts, Germany embarked on a series of social programs, most notably paying workers in the Ruhr Valley full wages while they were on strike.

5)As high inflation took its toll, goods and services became more and more scarce. Very few countries would export goods to Germany in exchange for the German currency and the cost of these goods exploded.

6)As the supply of goods dried up, prices skyrocketed.


Does any of this look familiar?



For comparison, here is the current US situation...

1)The US is saddled with HUGE debts associated with decades of deficit spending, and capped with nearly 2 Trillion dollars worth of additional debt incurred in order to bail out the financial industry.

2)In order to service this massive debt, the US is resorting to printing more money.

3)Because of the exporting of jobs over the previous 25 years, the US has very little indigenous industry anymore and must import most of what it consumes.

4)In spite of this dire economic situation, the US government is pushing for Universal Health Care and other social programs, that are expected to cost a minimum of 3 Trillion dollars.

5)As inflation begins to surface, prices of imported goods, namely gasoline has already risen by 370% from 2001 to 2008.

6)As the value of the dollar plummets, and is gradually replaced by some other currency, other nations will refuse dollars as payment for their goods and price inflation will skyrocket.


Scared yet?


Here is a time-line of what happened in Germany from 1918 to 1924. In bold, is an example of the price of gasoline if such inflation were to happen today.

From January 1918 to January 1919 inflation was 57%. By comparison, imagine a gallon of gasoline that costs 3 dollars today, costing 4.71 in 12 months.

From January 1919 to January 1920 inflation is running 590% per year. By comparison, imagine that same gallon of gasoline costing 32.49 dollars after 24 months.

From January 1920 to January 1921, prices largely stabilized in German and there was very little inflation. That gallon of gasoline now costs 32.55 dollars.

From January 1921 to January 1922, inflation is running 196% per year. That same gallon of gasoline costs 63.64 dollars.

From January 1922 to January 1923, inflation is running 9160% per year. That same gallon of gasoline costs 5829 dollars.

From January 1923 to December 1923, not even a full year, inflation is running 23,369,685,978% per year. That same gallon of gasoline costs 136,221,899,568,675 dollars.



The biggest difference between now and then is today the US dollar is the world currency. It is integrated in the trade of all nations. As a result it is very difficult to trade something without the use of American dollars.

But as soon as the other nations of the world come up with a new currency, one that is either partially based on gold or silver, or one that simply replaces the dollar as the world currency, the game is up.

Alternatively, they could simply replace the dollar with the euro. Already several oil producing nations are negotiating oil contracts in Euro's. As the US economy gets worse, this is only going to increase.

Every time the dollar is replaced by a new currency, those dollars that were formally used for trade will find their way back in the US, where they will contribute to inflation. The US economy is already stripped of its ability to produce anything and as a result we will have to import vast quantities of goods and in order to pay for them, we will have to pay a higher and higher price in dollars for them.

It will take longer than 5 years for the other nations of the world to “unwind” all their dollar holdings, but as they do, the dollar is going to plummet in value.

This hyperinflation will only be stopped when the US replaces the dollar with a new currency. Whether it is the Amero, or simply a return to some sort of gold standard I do not know.




I submit that the US has already passed the point of no return. There is no magic bullet that will cure all our ills.

Hold on, because this is going to be a wild bumpy ride.

JadedRailman
08-19-2009, 02:19 PM
Two things:

1. The US economy does not 'not produce anything'. It actually has the second largest manufacturing sector outside China.

2. The Wiemar government was printing money at a much, much higher rate than even the Obama administration is. It would take an economic collapse to make the Great Depression look like a bait shop in Maine failing to trigger a hyper-inflation.

In the interests of spreading liberty, please do not spread rumors, speculation, and fear-mongering :)

youngbuck
08-19-2009, 04:07 PM
1. The US economy does not 'not produce anything'. It actually has the second largest manufacturing sector outside China.


I'm not saying you're wrong, but do you have a specific source at hand showing the US has the second largest manufacturing base?

Deborah K
08-19-2009, 04:40 PM
Why doesn't anyone ever mention Fort Knox anymore? When was the last audit? Couldn't we just as easily go back on the gold standard with the gold in Ft. Knox?

tremendoustie
08-19-2009, 04:56 PM
Why doesn't anyone ever mention Fort Knox anymore? When was the last audit? Couldn't we just as easily go back on the gold standard with the gold in Ft. Knox?

All they need to do is distribute all the gold the US federal government holds, with portions sized based on the content of each person's bank account in dollars, eliminate legal tender laws, and let people be free to choose how they want to trade goods and services.

stilltrying
08-19-2009, 05:00 PM
I like to compare the US more to the Roman Republic back 2000 years ago. We have our army everywhere. We try to run everyone elses country, etc....

denison
08-19-2009, 06:57 PM
I like to compare the US more to the Roman Republic back 2000 years ago. We have our army everywhere. We try to run everyone elses country, etc....

I remembering reading about near the collapse of rome they used foreign soldiers to fight their wars. I think they were german and barbarian tribes, something like that. That reminded be about an article saying the US is now recruiting illegal aliens to join the army.

Dunedain
08-19-2009, 07:05 PM
Two things:

1. The US economy does not 'not produce anything'. It actually has the second largest manufacturing sector outside China.

2. The Wiemar government was printing money at a much, much higher rate than even the Obama administration is. It would take an economic collapse to make the Great Depression look like a bait shop in Maine failing to trigger a hyper-inflation.

In the interests of spreading liberty, please do not spread rumors, speculation, and fear-mongering :)

I nominate this as the best first post on the Internet.

The U.S. financial position is much better then most other countries in the world. If you look at GNP to debt/deficit the federal government is not doing to badly.

denison
08-19-2009, 07:13 PM
I nominate this as the best first post on the Internet.

The U.S. financial position is much better then most other countries in the world. If you look at GNP to debt/deficit the federal government is not doing to badly.

can I ask your opinion about this video:

YouTube - The U.S. Economy is Unsustainable (http://www.youtube.com/watch?v=D6Q14HOBThM)

denison
08-19-2009, 07:16 PM
http://www.fourwinds10.com/siterun_data/business/economy/news.php?q=1248201377

Another good article:

The bankruptcy of the United States government has been talked about for years by independent observers. If you've read the book, "Empire of Debt," then you know where the U.S. is headed financially. But most people have no idea about the ultimate financial consequences of decades of borrowing and spending by Washington, and they remain irrationally convinced that the status quo will remain intact for eternity. No one in any position of authority, you see, has yet admitted that the U.S. government is indeed going bankrupt. Until now, that is.


In a remarkable paper posted by the Federal Reserve of St. Louis, and authored by a Boston University teacher named Prof Kotlikoff, it is revealed in blunt, powerful language that the era of borrowing and spending without consequence may soon come to a close. The paper, entitled, Is the United States Bankrupt?, may not remain posted for very long once the public gets word of what it actually says.
And what, exactly, does it say? For starters, Kotlikoff explains, "Unless the United States moves quickly to fundamentally change and restrain its fiscal behavior, its bankruptcy will become a foregone conclusion."

The country is bankrupt
He goes on to explain, "[that] the United States is going broke, [and] ...that radical reform of U.S. fiscal institutions is essential to secure the nation’s economic future." Failure to engage in these massive reforms will inevitably result in the financial demise of the United States, Kotlikoff says: "[W]e have a country at the end of its resources. It’s exhausted, stripped bear, destitute, bereft, wanting in property, and wrecked (at least in terms of its consumption and borrowing capacity) in consequence of failure to pay its creditors. In short, the country is bankrupt and is forced to reorganize its operations by paying its creditors (the oldsters) less than they were promised."


We might possibly be saved, he explains, if the nation engages in massive, radical reform in three areas: 1) Eliminating the current income tax system and moving to a national retail sales tax of 33 percent. 2) Privatizing social security so that workers own their savings accounts and the federal government can no longer swipe funds from Social Security. 3) Launching a national health insurance program that covers everyone and relies on a system of government-issued vouchers that citizens can spend with health insurance companies.

These radical reforms are necessary because the future gap between what the government owes and what it stands to receive in revenues is already monstrously large, and it's growing by the minute. This gap, called the Gokhale and Smetters measure, currently stands at an astonishing $65.9 trillion. (Yes, with a "T".) As Kotlikoff explains, "This figure is more than five times U.S. GDP and almost twice the size of national wealth. One way to wrap one’s head around $65.9 trillion is to ask what fiscal adjustments are needed to eliminate this red hole. The answers are terrifying. One solution is an immediate and permanent doubling of personal and corporate income taxes. Another is an immediate and permanent two-thirds cut in Social Security and Medicare benefits. A third alternative, were it feasible, would be to immediately and permanently cut all federal discretionary spending by 143 percent."

If you read that last paragraph with any presence of mind, you now begin to understand the magnitude of the fiscal problem facing the United States. It could be solved, as explained above, by doubling all personal and corporate income taxes. But then what's the point in working? It could also be solved by slashing promised benefits in Social Security and Medicare. But what about the inevitable street riots?
None of these solutions are likely to occur. And that leaves the Ace up the sleeve. It's the Ace that all government eventually play on their way to bankruptcy and collapse, and it's the Ace that the United States will ultimately be forced to play, too: hyperinflation. The U.S. will have to print more money to escape the financial consequences of its unbridled spending.

Hyperinflation is inevitable
As Kotlikoff explains: "Given the reluctance of our politicians to raise taxes, cut benefits, or even limit the growth in benefits, the most likely scenario is that the government will start printing money to pay its bills. This could arise in the context of the Federal Reserve “being forced” to buy Treasury bills and bonds to reduce interest rates. Specifically, once the financial markets begin to understand the depth and extent of the country’s financial insolvency, they will start worrying about inflation and about being paid back in watered-down dollars. This concern will lead them to start dumping their holdings of U.S. Treasuries. In so doing, they’ll drive up interest rates, which will lead the Fed to print money to buy up those bonds. The consequence will be more money creation—exactly what the bond traders will have come to fear. This could lead to spiraling expectations of higher inflation, with the process eventuating in hyperinflation."

It's not like it hasn't happened before. Hyperinflation is actually the norm, not the exception, and it's the escape route taken by virtually every country suffering under the burden of payment promises is cannot possibly keep. Whether we're talking about Germany after World War I, or the United States over the next few years, hyperinflation is the only option remaining for politicians who refuse to practice fiscal sanity.
No politician ever got elected by promising voters their entitlements would be halted, did they? Political popularity is derived from promising voters precisely what the nation cannot afford: Endless entitlements and runaway spending without apparent consequence.

The China factor
The only thing keeping the U.S. afloat right now is the temporary willingness of Asian countries to keep buying U.S. debt, thereby pumping up the U.S. economy with dollars earned on the backs of Chinese laborers. But even the Chinese -- known for their tolerance of hard times and manual labor -- may eventually tire of lending money to a posh, arrogant Western nation that has all but abandoned the concept of saving money. Says Kotlikoff, "China is saving so much that it’s running a current account surplus. Not only is China supplying capital to the rest of the world, it’s increasingly doing so via direct investment. The question for the United States is whether China will tire of investing only indirectly in our country and begin to sell its dollar-denominated reserves. Doing so could have spectacularly bad implications for the value of the dollar and the level of U.S. interest rates."

By "spectacularly bad implications," Kotlikoff means the value of the U.S. dollar would plummet, the level of U.S. interest rates would skyrocket, and hyperinflation would be well underway. U.S. citizens would find not only their dollars to be near-worthless on the global market, but their savings to be all but wiped out as well. Sure, you'll still have the same number of dollars in your bank account, but they won't be worth anything.
This is what eventually happens, by the way, when a government eliminates the gold standard and separates its currency from precious metals. The U.S. dollar, a green piece of paper, technically stands for nothing other than the U.S. government's promise to pay. But when push comes to shove, the government will have no choice but to hyperinflate its way out of financial obligations, thereby rendering all currently-held U.S. dollars to be virtually worthless. Those investors or citizens who hold savings in U.S. dollars will be wiped out by a government that will essentially steal their wealth without having to snatch a single physical dollar from their hands.




The inevitable collapse of the dollar:
YouTube - The inevitable collapse of the dollar (http://www.youtube.com/watch?v=4n3g5lUgkWk)

JadedRailman
08-19-2009, 07:19 PM
I'm not saying you're wrong, but do you have a specific source at hand showing the US has the second largest manufacturing base?

I actually don't have a good one. This is one of those things I, "just know", from years and years of reading about the stuff. I'm pretty sure my understanding comes from an article a year or two back talking about how Chinese manufacturing output surpassed American manufacturing output for the first time. However, I may be wrong, as this article seems to think the US is still far ahead of China (http://investing.curiouscatblog.net/2008/09/23/top-manufacturing-countries-in-2007/).

I'll keep looking.


I nominate this as the best first post on the Internet.

The U.S. financial position is much better then most other countries in the world. If you look at GNP to debt/deficit the federal government is not doing to badly.

Thanks.

Well, I wouldn't say everything is fine and dandy. The actions of the Obama administration are acting as a severe threat to the current global standing of the US Dollar. If it weren't for the fact that everybody else's currency is in a much worse position, people would be looking for a new source of reserves already. Plus, while we won't be experiencing hyper-inflation, a higher-than-normal level of inflation ala the 1960's and 70's, isn't out of the question.

Chase
08-19-2009, 07:27 PM
All they need to do is distribute all the gold the US federal government holds, with portions sized based on the content of each person's bank account in dollars, eliminate legal tender laws, and let people be free to choose how they want to trade goods and services.

There is a major roadblock: the shadow gold price. An interesting discussion can be found on mises.org (http://mises.org/story/3302):


This gold-price expansion, set off by the massive short squeeze, will continue until gold prices reflect gold supply and Federal Reserve liabilities in circulation. The "intrinsic" value of gold today (called the Shadow Gold Price), calculated dividing total Fed liabilities by official gold holdings, is about $9,600/oz, compared to the actual spot price of around $850/oz today. This gold-price calculation essentially assumes dollar-gold convertibility, as is mandated by the US Constitution and was utilized at various periods of American history.

TCE
08-19-2009, 07:36 PM
I actually researched this for quite a while and came to hyperinflation. Unfortunately, a few months later, I found Peter Schiff and he had come to many of the same conclusions that I had, so much of my time was wasted doing what someone had already done. Listen to Peter Schiff and he gives a great overview of what is to come. In an uncensored audio that I'm sure someone can dig up, he states that hyperinflation is inevitable.

Here is an argument I like to use on someone that doesn't believe a word of what I have to say:

Let us say the current U.S. National Debt is $11 trillion. It isn't, but that is a nice number. We paid $450 billion in interest last year when the debt was only around $9 trillion. Already we have paid $340 billion this year. It is looking like it will go up to around $500 billion in interest this year alone. Treasury's Website with Interest data (http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm)

If we pay $500 billion a year on interest alone, even if we did have a balanced budget, in 2011 the debt would be $12 trillion. In 2013 $13 trillion, etc. And that is if our expenses and revenues were perfectly balanced. As we all know, they are not even close to balanced. We are running a $1.8 trillion deficit this year. As of right now, the debt is close to $12 trillion Treasury's Website depicting debt (http://www.treasurydirect.gov/NP/BPDLogin?application=np)

We are also planning on being in the red for the foreseeable future. Additionally, this excludes unfunded liabilities that are coming down the pipeline like Medicare, Social Security, etc.

Eventually the world will switch out of dollars as we reach $20 trillion+ of debt. The U.S. can only inflate the currency in order to pay off its debts.

max
08-19-2009, 07:42 PM
Two things:

1. The US economy does not 'not produce anything'. It actually has the second largest manufacturing sector outside China.

2. The Wiemar government was printing money at a much, much higher rate than even the Obama administration is. It would take an economic collapse to make the Great Depression look like a bait shop in Maine failing to trigger a hyper-inflation.

In the interests of spreading liberty, please do not spread rumors, speculation, and fear-mongering :)

If you're gonna be a troll....at least post a few more times to make it look good.

Same for the guy who praised your post (another rookie)

The threat of hyperinflation is not "fear mongering".......Money supply has already doubled and debt monetization will cause further future expansion....To say that hyper-inflation is not a real threat is either troll talk or ignorance...

if its the latter...try visiting this site

http:www.TomatoBubble.com

denison
08-19-2009, 07:59 PM
Part 1
YouTube - Hyperinflation Nation Part 1/3 (http://www.youtube.com/watch?v=SzmYI_4XCbM)

Part 2
YouTube - Hyperinflation Nation Part 2/3 (http://www.youtube.com/watch?v=vQCCDttLhA4)

Part 3
YouTube - Hyperinflation Nation Part 3/3 (http://www.youtube.com/watch?v=rVcyM2Z4Ego)

TCE
08-19-2009, 08:04 PM
While I liked the series, it pissed me off that they stole my phrase from my article in the paper I used to write for. Ah well.

TCE
08-20-2009, 12:10 AM
While I liked the series, it pissed me off that they stole my phrase from my article in the paper I used to write for. Ah well.

I meant to say movie. Win for quoting myself.

revolutionisnow
08-20-2009, 01:55 AM
What about deflation? I've read elsewhere that since the money is just sitting in banks and not in circulation it means there is less money in the system. Also housing prices are still falling, and that is the biggest portion of most peoples expenses.

Elwar
08-20-2009, 11:23 AM
That same gallon of gasoline costs 136,221,899,568,675 dollars.


Sweet...so in 5 years, the can of gasoline in my garage is going to make me RICH!!!

Forget this sorry ass 6 figure job, I'll be living large in 5 years making 15 figures in 1 day! Woo Hoo!

Anyone want to buy that gas right now at half price?

ctiger2
08-20-2009, 11:36 AM
Hyperinflation is a worst case scenario. No guarantees it will happen. It's a possibility but not probable. Marc Faber insists there will be a war to divert our attn from the collapsing economy.

Deborah K
08-20-2009, 11:50 AM
Hyperinflation is a worst case scenario. No guarantees it will happen. It's a possibility but not probable. Marc Faber insists there will be a war to divert our attn from the collapsing economy.

And most likely it will be a civil war. :(

Brian4Liberty
08-20-2009, 12:06 PM
most notably paying workers in the Ruhr Valley full wages while they were on strike.

I wonder what the (true) unemployment rate was in Weimar Germany compared to the (true) unemployment rate in the US today?

Unemployment and under-employment have been the single biggest tools against (price) inflation in the US (since the Greenspan days). Keep enough people under-paid or unemployed, and you will never have to worry about price inflation. Even when you print money (monetary inflation), if it doesn't trickle down to the common people (which it never does), you still don't get much price inflation.

The end will be very near when they use the printing presses to create full employment. Print money and pay people to do nothing. Or drop it out of helicopters to the masses... ;)

Zippyjuan
08-20-2009, 08:10 PM
US, Japan, and German Debt to GDP ratios:
http://upload.wikimedia.org/wikipedia/commons/thumb/b/b8/PublicDebtTriade.PNG/800px-PublicDebtTriade.PNG
During WWII the US ratio was over 100% and nearer 120%. Britain's was around 200% from the 1920''s to the end of WWII.

Zippyjuan
08-20-2009, 08:22 PM
I'm not saying you're wrong, but do you have a specific source at hand showing the US has the second largest manufacturing base?

Here is a list from 2007-
http://investing.curiouscatblog.net/2008/09/23/top-manufacturing-countries-in-2007/
To manually copy some numbers from their chart:
Top manufacturer is the United States at $1.8 trillion worth of goods produced.
Second, China at $1.1 trillion. Next Japan $926 billion, Germany $620 billion, Russian Federation $362 billion, Italy $345 billion, the UK at $234 billion, France $296 billion, Korea $241 billion, Canada $218 billion.


The USA’s share of the manufacturing output of the countries that manufactured over $200 billion in 2007 (the 12 countries on the top of the chart above) in 1990 was 28%, 1995 28%, 2000 33%, 2005 30%, 2006 28%, 2007 27%. China’s share has grown from 4% in 1990, 1995 7%, 2000 11%, 2005 13%, 2006 15%, 2007 16%.

Total manufacturing output in the USA was up 76% in 2007 from the 1990 level. Japan, the second largest manufacturer in 1990, and third today, has increased output 15% (the lowest of the top 12, France is next lowest at 32%) while China is up an amazing 673% (Korea is next at an increase of 271%).

Since 2000 the USA has the second lowest increase in manufacturing output – up just 19% (Japan is worst with a decrease of 10%), the group of 12 is up 47% over that period. China is up 129%.

Total manufacturing output for some additional countries in 2007: Netherlands $94 billion, Thailand 85, South Africa 46, Singapore 38, Vietnam 15.

This data cannot be seen as perfectly accurate, but it is very interesting. Economic data (especially global data) has plenty of margin for error. And you will notice some of the figures for the same periods changes compared to posts from previous years – since it is based on current dollar value. Still it provides a useful view of global manufacturing activity, especially since there is so many misconceptions about the decline in USA manufacturing.

BCR_9er
08-30-2009, 01:16 PM
Part 1
YouTube - Hyperinflation Nation Part 1/3 (http://www.youtube.com/watch?v=SzmYI_4XCbM)

Part 2
YouTube - Hyperinflation Nation Part 2/3 (http://www.youtube.com/watch?v=vQCCDttLhA4)

Part 3
YouTube - Hyperinflation Nation Part 3/3 (http://www.youtube.com/watch?v=rVcyM2Z4Ego)

Hey does anyone have a download link for this video series? I tried using the flv downloader on Firefox and experienced a dramatic loss of quality. How can I get these videos in HQ? Thanks.

Bossobass
08-30-2009, 03:00 PM
Here is a list from 2007-
http://investing.curiouscatblog.net/2008/09/23/top-manufacturing-countries-in-2007/
To manually copy some numbers from their chart:
Top manufacturer is the United States at $1.8 trillion worth of goods produced.
Second, China at $1.1 trillion. Next Japan $926 billion, Germany $620 billion, Russian Federation $362 billion, Italy $345 billion, the UK at $234 billion, France $296 billion, Korea $241 billion, Canada $218 billion.

These numbers are 2 years old.

In those 2 years, nonmilitary durable goods manufacturing is down 25%.

At the same time, military durable goods manufacturing has skyrocketed.

Problem is that the largest customer for US military durable goods is our own government, which is buying the goods with borrowed money.

You also have to factor in trade deficits, which the US has with virtually every country in the world, and the largest total in the world.

All of the other countries you mention have trade surpluses.

Looking at the manufacturing totals as a % of GDP, the US drops on the list, which is why we have huge trade imbalances and which points to manufacturing as a problem for the US despite the gross $ numbers.

I also consider it a skew to categorize Exxon as a manufacturer, as they are the largest in the world, and 8 of the top 11 manufacturers (by revenue) are also oil companies, which boost the US and China numbers, but none are in Germany, S. Korea or Japan, but that's just my own opinion.

Finally, although I've read it and haven't confirmed it, there is the thought that the feds have recently moved fast food burger flippers into the manufacturing jobs category to help hide the fact that real manufacturing jobs in the US are evaporating at an alarming rate.

Bosso

FreedomFighter8008
08-30-2009, 06:36 PM
If you're gonna be a troll....at least post a few more times to make it look good.

Same for the guy who praised your post (another rookie)

The threat of hyperinflation is not "fear mongering".......Money supply has already doubled and debt monetization will cause further future expansion....To say that hyper-inflation is not a real threat is either troll talk or ignorance...

if its the latter...try visiting this site

http:www.TomatoBubble.com

+1

The troll talk seems to be picking up of late. Must mean we're doing all the right things if they feel the need to do a little trolling. Where's my flyswatter . . .? :D