Steven Douglas
11-12-2011, 06:26 AM
This is a tangent from another thread, something I think about all the time, and wanted to get people's thoughts on this.
...my view is hyperinflation isn't even going to happen in the US...
I do not question whether the effects of hyperinflation of any fiat currency is possible, including the dollar. The question remains as to whether that will play out, Weimar Republic/Zimbabwe style in the US, and what events, if any, could prevent this from being inevitable as an end game for the currency.
Just to get terms straight, inflation (hyper or otherwise) occurs at the very moment the currency supply is increased. If I counterfeit a single dollar, inflation of that currency occurs the very moment that dollar is placed it into circulation.
Many people conflate rising prices and inflation, as if they were the same, when rising prices (falling dollar) is really only the chief long term effect of inflation. The Fed does not have to increase the money supply by a single dollar for hyperinflation to take place. The US dollar has already been hyperinflated for decades, but exponentially over the past decade. However, only a very small fraction of the delayed effects have been felt in the form of rising prices because of how many trillions of dollars (6-7? nobody knows) of US dollars that are held, but not circulated, by foreigners and foreign governments as both investments and as store of wealth.
The Fed and US government sent out an OCEAN of dollars into the world in exchange for real wealth. That same ocean of dollars is the potential mega-tsunami that can drown the American dollar if it is ever sent back in any substantial numbers. With orders of magnitude more claims to the assets backing physical dollars than there are dollars currently in circulation, all it takes for hyperinflation to be felt (in the form of a rapid spiral of hyper-rising-prices), is for global confidence in the dollar (along with any other currency) as a store of wealth to suddenly drop, and a dumping of massive amounts of the dollars already stored in the world.
A fire sale of US dollars by foreigners could trigger into a massive spiral of dollar devaluation, both around the world and in America. Americans would be hit the hardest, because we, unlike foreigners, are locked into The Dollar Jail (the "we're all in it together" mentality), given that the Fed dollar is our only currency in circulation, and we have no choice but to accept it as payment of debts - from anyone.
One twist on this:
Roosevelt (to the citizens) and Nixon (to foreign governments) are but two hard proofs that the US has ALWAYS PROVED both able and willing, once its government sanctioned Ponzi schemes are uncovered, to default on its debts and confiscate wealth - from its own citizens and from foreigners and foreign governments alike. The US is not going to hand over title to all "Fed assets" (land, your mortgaged house, and everything else the Fed holds title to in its own asset columns) en masse, should the foreign dollar pipers come calling in droves.
Of course, that also means that imports are seriously affected, given that we don't have any more dollars to sell to those who were once willing to trade things for them. It could also mean the confiscation of all the "outsourced" wealth owned by Americans overseas - in addition to the very real possibility, and certainly incentive, for war with all those foreigners who really have been cheated; namely, the world at large. The only thing buffering that somewhat is the fact that practically every nation on Earth has the same dirty hands in principle. But no hands are dirtier than those of the US banking system and its government accomplice.
It could be that the effects of hyperinflation in the US will happen, but only as a short-lived precursor to a resetting of the money-inflation clock by the Fed, in collusion with the US Government, in collusion with the IMF (regardless what it's called) as the new "lender of last resort" for the entire world is established. But only when the whole world realizes that the whole world needs to be bailed out - not just Iceland, Italy, Greece and others whose heads went all Lehman Brothers on us early in the game.
The only question in my mind is which government is stubborn enough, wise enough, not to adopt a "we're all in this Ponzi scheme together" position, and will protect its citizens by not forbidding or taxing - at the individual level - the usage of a competing currency (which would defeat the purpose of a final, ever-inflating world currency to that extent). I don't think it will happen - certainly not for Americans. Our government has already also proved a willingness to centralize everything, and limit all choices, by either forbidding them altogether, or taxing them out of existence. For our witless leaders, the question was never one of centralization, but only a question of whether it was publicly or privately controlled. So that brings me to the belief that we in the USSA may well be on threshold of a long, dark winter - a period of cold storage that could last for generations, before the final Ponzi scheme collapses, and individual states are all left to fend for themselves.
...my view is hyperinflation isn't even going to happen in the US...
I do not question whether the effects of hyperinflation of any fiat currency is possible, including the dollar. The question remains as to whether that will play out, Weimar Republic/Zimbabwe style in the US, and what events, if any, could prevent this from being inevitable as an end game for the currency.
Just to get terms straight, inflation (hyper or otherwise) occurs at the very moment the currency supply is increased. If I counterfeit a single dollar, inflation of that currency occurs the very moment that dollar is placed it into circulation.
Many people conflate rising prices and inflation, as if they were the same, when rising prices (falling dollar) is really only the chief long term effect of inflation. The Fed does not have to increase the money supply by a single dollar for hyperinflation to take place. The US dollar has already been hyperinflated for decades, but exponentially over the past decade. However, only a very small fraction of the delayed effects have been felt in the form of rising prices because of how many trillions of dollars (6-7? nobody knows) of US dollars that are held, but not circulated, by foreigners and foreign governments as both investments and as store of wealth.
The Fed and US government sent out an OCEAN of dollars into the world in exchange for real wealth. That same ocean of dollars is the potential mega-tsunami that can drown the American dollar if it is ever sent back in any substantial numbers. With orders of magnitude more claims to the assets backing physical dollars than there are dollars currently in circulation, all it takes for hyperinflation to be felt (in the form of a rapid spiral of hyper-rising-prices), is for global confidence in the dollar (along with any other currency) as a store of wealth to suddenly drop, and a dumping of massive amounts of the dollars already stored in the world.
A fire sale of US dollars by foreigners could trigger into a massive spiral of dollar devaluation, both around the world and in America. Americans would be hit the hardest, because we, unlike foreigners, are locked into The Dollar Jail (the "we're all in it together" mentality), given that the Fed dollar is our only currency in circulation, and we have no choice but to accept it as payment of debts - from anyone.
One twist on this:
Roosevelt (to the citizens) and Nixon (to foreign governments) are but two hard proofs that the US has ALWAYS PROVED both able and willing, once its government sanctioned Ponzi schemes are uncovered, to default on its debts and confiscate wealth - from its own citizens and from foreigners and foreign governments alike. The US is not going to hand over title to all "Fed assets" (land, your mortgaged house, and everything else the Fed holds title to in its own asset columns) en masse, should the foreign dollar pipers come calling in droves.
Of course, that also means that imports are seriously affected, given that we don't have any more dollars to sell to those who were once willing to trade things for them. It could also mean the confiscation of all the "outsourced" wealth owned by Americans overseas - in addition to the very real possibility, and certainly incentive, for war with all those foreigners who really have been cheated; namely, the world at large. The only thing buffering that somewhat is the fact that practically every nation on Earth has the same dirty hands in principle. But no hands are dirtier than those of the US banking system and its government accomplice.
It could be that the effects of hyperinflation in the US will happen, but only as a short-lived precursor to a resetting of the money-inflation clock by the Fed, in collusion with the US Government, in collusion with the IMF (regardless what it's called) as the new "lender of last resort" for the entire world is established. But only when the whole world realizes that the whole world needs to be bailed out - not just Iceland, Italy, Greece and others whose heads went all Lehman Brothers on us early in the game.
The only question in my mind is which government is stubborn enough, wise enough, not to adopt a "we're all in this Ponzi scheme together" position, and will protect its citizens by not forbidding or taxing - at the individual level - the usage of a competing currency (which would defeat the purpose of a final, ever-inflating world currency to that extent). I don't think it will happen - certainly not for Americans. Our government has already also proved a willingness to centralize everything, and limit all choices, by either forbidding them altogether, or taxing them out of existence. For our witless leaders, the question was never one of centralization, but only a question of whether it was publicly or privately controlled. So that brings me to the belief that we in the USSA may well be on threshold of a long, dark winter - a period of cold storage that could last for generations, before the final Ponzi scheme collapses, and individual states are all left to fend for themselves.