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The Bright Side of Hyperinflation

Economics / HyperInflation Apr 08, 2010 - 04:47 AM GMT

By: LewRockwell

Economics

Despite encouraging words from politicians and the establishment media’s talking heads, it is clear to me, and I believe most Americans who do not live in a regime ivory tower, that we are not coming out of the recession. In fact, things appear to be getting worse as unemployment continues to rise and businesses cut salaries or shut down. The fears that this recession could turn into another Great Depression are very real, as we have lost so much of our capacity to create wealth and the federal government seems determined to use up any remaining capital fighting endless wars, funding endless entitlement programs, and spending trillions of dollars on non-wealth-creating "stimulus" programs while handing out even more trillions to their bankster buddies and corporate cronies. However, another 1930s-style depression is not what keeps me up at night with worry.


America could survive another Great Depression if it was like the last one. Sure, it would be extremely painful, but it would be manageable, as it was before, and eventually we would come out of it, despite the fact that the government would most certainly make all the wrong moves along the way. However, what really terrifies me is a hyperinflationary depression.

According to John Williams at ShadowStats.com, in an article titled Hyperinflation Special Report, hyperinflation is not only possible, but inevitable due to the overspending of the federal government, and the printing press of the Federal Reserve, which as Congressman Ron Paul continuously reminds us, prints money out of thin air. Williams’ report is a truly terrifying read that insists that the coming hyperinflation could get so bad that we will have to resort to the barter system as the dollar will become nothing more than very rough toilet paper. He cautions that electronic banking will cease to work and for a time no one will have any money at all, not even inflated currency. You can certainly imagine the type of Hell on earth this will create for the American people.

There is one bright side, however. Since Williams foresees the beginnings of this hyperinflationary nightmare starting this year, the pain from it might be felt in time for the 2012 elections. Since the crash of 2008 and the recession of 2009–10, I cannot leave the house wearing a "Ron Paul ’08" shirt without someone coming up to me and saying that "we sure would have been better off if everyone had listened to him," or "I sure wish I had voted for him," etc. The current recession has validated Dr. Paul’s warnings, and thus given him credibility in the eyes of the American people that he lacked when he campaigned for the 2008 election. This sent his book End the Fed to top of the bestseller list. If hyperinflation does occur, the pain that the American people feel will hopefully be enough to awaken them fully to the follies of the establishment politicians and their "spend, spend, spend!" mentality.

Williams predicts this, though he does not mention any candidate by name. What he does say is that "[a] wide variety of possibilities would follow or coincide politically with a hyperinflationary great depression, but the political status quo likely would not continue.  Times would be financially painful enough to encourage the development of a third party that could move the Republicans or Democrats to third-party status in the 2012 presidential and congressional elections."

If Williams is correct, then a hyperinflationary depression could cause the people to elect candidates that would make the necessary corrections, instead of the same old establishment candidates that got us into this mess to begin with. Of course those corrections would be slow in coming, as the previous administrations going back to at least Woodrow Wilson, have done so much damage that undoing it all will be slow and painful. There is also the risk that a third party could move in the other direction, to an even more authoritarian system so that the United States government became openly Socialist or Fascist.

A hyperinflationary depression will be very painful to Americans, but may present those of us who love sound money, free markets, and liberty with an opportunity to get sensible politicians into office. However, we must use the time we have now to continue reminding the people that it is government spending and interference along with central banking and economic planning that led us to the crisis to begin with. Otherwise the crisis may be used by authoritarians to seek even more power and control over the economy and our lives. After all, great crises often bring revolutionary change, but that change is not always for the better.

Tom Franklin [send him mail] lives in Pennsylvania with his wife and children. He blogs at TheEconomicSurvivor.com.

    http://www.lewrockwell.com

    Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

JR
11 Apr 10, 00:04
Hyperinflation IS coming

The current administration has already added over 1 trillion in new money into circulation. This is roughly equal to the total amount of money in circulation. History tells us that new money added to circulation takes about 2 years to work its way into the system and manifest its inflationary effects (the banks are still sitting on piles of the bailout money), so we have some time. Be aware, a TRILLION is a lot of money. How can we not have hyperinflation??

Once high rates of inflation are apparent, foreign governments will see the value of their US bonds falling and will probably begin dumping their holdings of dollars, thus accelerating hyperinflation. Once the cost of everything is skyrocketing, the government will not be able to collect taxes fast enough, and it will have to resort to printing even more money (as happened in Germany about 100 years ago when 99% of their government spending was with printed money and only 1% from tax receipts) further speeding up the hyperinflationary death spiral.

What seems to matter as far as initiating hyperinflation appears to be when government deficit spending via printing money increases to about 1/3rd of revenue. When a country crosses this line, hyperinflation starts sometime in the future, but nobody really knows how long in the future. The USA just crossed this line for the 1st time.

Inflation, or in a severe case, hyperinflation, is a local event; it does not affect currencies in foreign countries, and may even help their stock markets via shifting purchasing power to unaffected countries. It will be very bad for anyone who is not prepared.

http://swisssolution.webs.com/

If you have access to your foreign money in a foreign country, you are safe from hyperinflation, as well as bank failures that may result. In today's world, Swiss banks can issue debit or credit cards that are good just about everywhere, so yo can still spend as you need to. The money you spend via debit or credit card would not be converted into the depreciating currency until the instant that the sale takes place.


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