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The Case for Hyperinflation in the US

Economics / HyperInflation Sep 21, 2011 - 01:52 AM GMT

By: Jeff_Berwick


Best Financial Markets Analysis ArticleEarlier this month, Gary North penned an article on entitled, "Mass Inflation, Yes; Hyperinflation, No".

In it he stated the following:

"The United States is not going to get hyperinflation unless Congress nationalizes the Federal Reserve System.

It will get mass inflation at some point: anywhere from 15% per annum to 30%. But it is not going to get 50% or 100% or more.

Why not?

1. The temporary nature of the payoff 2. The fear of getting blamed 3. The boom-bust cycle

While he makes good points for each, we take exception based on historical precedent, common sense and factual data.

1. The Temporary Nature of the Payoff

Gary North states:

"Hyperinflation lasts only a few years. People in the hard-money camp ought to know this, but they tend to forget.

Those economic forecasters who keep telling us the dollar will fall to zero forget the obvious: big banks are creditors. Bankers lose when a currency falls to zero."

And, yes, that is correct.  The bankers (who are all artificial, non-free market entities in this non-free market financial system) would lose everything if the currency goes to zero.

However, that has never stopped them before.  In fact, during many of the hyperinflations of our time, including Weimar and the ongoing hyperinflation in Argentina, the last people to see the causes of the hyperinflation (money printing) are the central bankers and the economists of the banks.

Remember, they've all been brainwashed with modern day Keynesian economics, which is witchcraft and delusionary.  They actually believe that inflation is caused by prosperity... and not money printing.  That's why the following quotes were made during the Weimar Republic hyperinflation after they had already had thousands of percent gains in prices:

And, even when the US dollar goes to zero, it does not mean the banks are out of luck.  Not if they were like the French banks in the beginning of the 20th century.  In a book published in 1912, called "Fiat Money Inflation in France", Andrew White recounts how the government changed the rules and stated that all debts increased along with the issuance of further currency, so that for every so many additional assignats printed, one's debts increased by 25%. 

The US Government owns all the guns.  It would not be beyond them to state that all debts held in dollars are now held in the New Dollar.  Or, what they will likely name, the "Patriot dollar".

As Congressman Pete Stark stated, "The Federal Government can do most anything in this country."

2. The Fear of Getting Blamed

Here, Gary North states that thanks to the internet and Ron Paul, too many people understand what the Federal Reserve does and they won't allow them to go into hyperinflation.

He makes a good point here that the public is more aware than ever about the Federal Reserve criminal enterprise.

However, in order for Ben Bernanke to stop he would have to admit that everything he has focused on for his entire life and achieved has all been a lie.  Not many people have this kind of ability to admit complete error in their ways after having their entire persona based on the false information.

Plus, the entire US media propaganda organization stands as ready and willing as ever to back the Federal Reserve until its dying days.  Paul Krugman at the New York Times has been wrong for years and years about absolutely everything yet he is still thought of by many people as being a "smart" economist - despite his calling for a housing bubble after the tech bubble and now having resorted to stating that the best way to get the American economy on track is through a massive, fake alien invasion.

Remember, that almost every US economics PhD, every major economist at most banks and people like Bernanke and Krugman will all have to admit they were all fools in order for them to stop with their Keynesian witchcraft.  Most white, older men who look in the mirror and see they are monsters rarely admit their flaws... they tend to take us all down into hell with them rather than, as the Japanese say, "lose face".

In Japan, at least, when a finance minister realizes his policies haven't worked he usually kills himself.  We can only hope for the same from Krugman and Bernanke.

3. The Boom-Bust Cycle

Here, Gary North states that because of the boom-bust cycle, the US will be forced to stop printing money before entering hyperinflation.  As example, he states how Volcker was forced by rapidly rising prices to slow money printing and allow T-Bill rates to rise to 22% to stop the inflation.

There is only one problem with this.  The US Government debt in 1979 was hardly anything as it had only been 8 years since Nixon delinked the dollar from gold.  Today, however, the US Government (and most western governments, ask Greece) have had plenty of time to build up mountains of debt.

Today, as we showed here, an interest rate of only 11.1% will effectively take all real income of the US Government just to pay for the interest alone.

In other words, raising the interest rates to even 11% this time around will destroy the US Government.

That's why Paul Volcker, who was on a "panel of experts" advising Barack Obama already quit and left town on January 5th of this year.  He took out his calculator, punched in a few numbers, looked around and decided it was time to retire.

Greenspan left on similar premises right before his housing bubble burst.


Gary North makes some good arguments.  And he very well could be right.  But historical evidence, common sense and the amount of current US debt makes stopping this train towards hyperinflation a lot tougher job than it looks.

We aren't counting on it.  Even if all we have is "mass inflation" our portfolios, heavily laden with gold and gold stocks will do very well.  If we do get US hyperinflation, many dollar vigilantes are also prepared for that as well, having left or in the process of moving assets outside of the US, getting a second passport (like here in the Dominican Republic) or expatriating outside of the western world.

Hyperinflation isn't fun.  And we aren't as convinced as Gary North that it is so impossible.

This evening we are releasing the September issue of TDV where we talk much more in depth about the coming collapse and strategies and info for how best to survive the coming storm.  Subscribe today to become a part of our community of dollar crash survivors.

The Dollar Vigilante is a free-market financial newsletter focused on covering all aspects of the ongoing financial collapse. The newsletter has news, information and analysis on investments for safety and for profit during the collapse including investments in gold, silver, energy and agriculture commodities and publicly traded stocks. As well, the newsletter covers other aspects including expatriation, both financially and physically and news and info on health, safety and other ways to survive the coming collapse of the US Dollar safely and comfortably. The Dollar Vigilante offers a free newsletter at

© 2011 Copyright Jeff Berwick - All Rights Reserved
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 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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