Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
The Next Systemic Lehman Event - New Scheiss Dollar & Gold Trade Standard - 27th May 16
Energy and Debt Crisis Point to Much Higher Silver, Metals Prices - 27th May 16
Gold Junior Stocks Q1 2016 Fundamentals - 27th May 16
These Crisis Markets Are Primed to Deliver Big Gains, Platinum Never Cheaper! - 27th May 16
Operation Black Vote BrExit Warning for the Wrong EU Referendum - 27th May 16
UK Immigration Crisis Hits New Extreme, Catastrophic ONS Migration Stats Ahead of EU Referendum - 27th May 16
Many of the World’s Best Investors Made Their Fortunes This Way…And You Can Too - 27th May 16
The Ugly Truth About Stock Market Manipulation and Gold Prices - 27th May 16
Gold Price Looking Vulnerable While Gold Stocks Correct - 27th May 16
The 5 Fatal Flaws of Trading - 27th May 16
The Next Big Crash Of The U.S. Economy Is Coming, Here’s Why - 27th May 16
A New Golden Bull or Has the Market Gone Too Far Too Fast? - 27th May 16
It Feels Like Inflation - 26th May 16
Negative Interest Rates Set to Propel the Dow Jones to the Stratosphere? - 26th May 16
S&P Significant Low has Occurred – Not Likely! - 26th May 16
Statistics for Funeral Planning in UK Grave - 26th May 16
Think Beyond Oil And Gold: Interview With Mike 'Mish' Shedlock - 26th May 16
Hard Times and False Mainstream Media Narratives - 26th May 16
Will The Swiss Guarantee 75,000 CHF For Every Family? - 26th May 16
Is There A Stocks Bear Market in Progress? - 26th May 16
Billionaires Are Wrong on Gold - 26th May 16
How NOT to Invest in the Gold Market - 26th May 16
The Black Swan Spotter...Which Saw the Oil-Crash coming; now says the “Invisible Hand” will push Brent to $85 by Christmas - 26th May 16
U.S. Household Debt Still Below 2008 Peak - 25th May 16
Brexit: Wrong Discussion, Wrong People, Wrong Arguments - 25th May 16
SPX is at Strong Resistance - 25th May 16
US Dollar, Back From the Grave? - 25th May 16
Gold : Just the Facts Ma’am - 25th May 16
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16
Will Venezuela Be Forced to Embrace the US Dollar? - 21st May 16
Danish Central Bank Stumbles with Its Currency Peg to the Euro - 21st May 16
SPX Downtrend Underway - 21st May 16
George Osborne Warns of More Affordable UK Housing Market if BrExit Happens - 21st May 16
Gold And Silver 11th Hour: Globalists 10 v People 0 - 21st May 16
David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - 21st May 16
Gold Stocks Following Bull Analogs - 20th May 16
The Gold Chart That Has Central Banks Extremely Worried - 20th May 16
Silver Miners’ Q1’ 2016 Fundamentals - 20th May 16
Stock Market Rally At the End of the Road? - 20th May 16
British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - 20th May 16
NASDAQ 100, FTSE, and British Pound - When Rare Market Data Screams, Listen  - 20th May 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

U.S. Counting Down to Hyperinflation

Economics / HyperInflation Sep 30, 2012 - 12:41 PM GMT

By: GoldSilverWorlds

Economics

Best Financial Markets Analysis ArticleJohn Williams, who is the founder of ShadowStats.com, stated during a recent interview that the US is on track to become victim of hyperinflation the latest in 2014. He believes that “open ended QE” (which is nothing more than monetizing debt) is the key problem. He explains there is an annual deficit of 5 trillion dollar per year in the US, which includes the unfunded liabilities.  He declares the situation “beyond containment”. Central planners are responding to the current economic problems by simply increasing the amount of printed money. John Williams his expectations are that  we’ll soon see a heavy sell off in the dollar, quickly followed by a significant first spike in inflation. That will ultimately lead to  hyperinflation the latest somewhere in 2014. We are just before the kick off of inflation.


We recently mentioned in our article “Money printing and inflation” that in fact inflation IS the expansion of the money supply. Inflation results in price inflation (the phenomenon of rising prices). Usually there is a time period between those two events, which makes it hard for most people to relate them to each other. Inflation and price inflation are often confused in spoken language  but it’s mandatory to understand this fundamental difference.

Hyperinflation is a situation that most people can’t imagine they could go through in their lives. Among economic and financial experts and commentators, it’s a subject that triggers a lot of debate. The least you can say is that there is a consensus on when and how hyperinflation hits. If you think about it, it’s very strange as the world has experienced so many periods of (hyper)inflation. Even in the 20th century, the number of countries that were hit by severe hyperinflations  exceeds what most of us expect (see table below; courtesy of Miles Franklin). Honestly, it’s beyond us that even in the scientific world there is no consensus. The funny result is that most people belong to one of the two camps: either they think that inflation and possibly hyperinflation will hit, either they expect a deflationary situation.

hyperinflations in the world 1900 2012 gold silver insights

Hyperinflation vs inflation

First off, what exactly is hyperinflation? We think that the blog post from FOFOA “Just Another Hyperinflation” is excellent and that it provides an in-depth answer to our question. We consider it a must read for anyone trying to understand the concept of hyperinflation. It also puts the notion of deflation into perspective.

I would like to clear up probably the most common misconception about hyperinflation. What most people believe is that massive printing of base money leads to hyperinflation. No, it’s the other way around. Hyperinflation leads to the massive printing of base money.

Hyperinflation, in most people minds, conjures images of trillion dollar Zimbabwe notes. But this image is simply the government’s reflexive response to the onset of hyperinflation, which is actually the loss of confidence in the currency. First comes the loss of confidence (hyperinflation), then, and only then, comes the massive printing to keep the government and its obligations afloat.

You see, hyperinflation is exactly like deflation. The only thing hyperinflation has in common with inflation is part of its name. It looks just like a deflationary depression. In fact, it IS a deflationary depression, with a different numéraire, being GOLD.

The key in this view is to understand that debt (owned by banks & Central Banks) and credit (in the form of paper money) are not balanced anymore, although they were in the past. A desperate move to rebalance that situation is what (Cental) Banks are aiming to do with their actions. That’s why you see today for example tightened conditions of commercial banks in providing credit or the massive buying of mortgage backed securities and bonds by Centrals Banks. These actions result in a widening gap between debt and credit. It’s against that background that you should interpret FOFOA’s fundamental statement: “Hyperinflation is the process of saving debt-backed assets (MBS’s etc.) at all costs, even buying them outright for cash.

The point here is that this tactic only works as long as all circumstances remain unchanged. As soon as the awareness on a larger scale kicks in and a tipping point is reached, it will be the market that pushes interest rates higher. Several other types of events could cause the situation to spiral out of control as well. It seems like it’s just a matter of time till one of those things happen! When we reach that point, (Central) Banks will not be able to justify money printing anymore … but the damage will be done, sadly enough.

Mind also the unit of measurement that can make a huge difference in understanding a situation, for example expressing an economic situation in terms of fiat currency or in terms of gold. Measuring a situation in gold for example could show a deflationary view, while in nominal US dollar terms it can look totally different.

The bottom line is what Andy Hoffman wrote: “EVERY fiat currency regime throughout history has COLLAPSED, and EVERY new attempt will do the same.”

Grant Williams about (hyper)inflation

We asked Grant Williams if he thinks hyperinflation will hit in 2014. He is the author of the respected newsletter Things That Make You Go Hmm and is very well positioned to have a clear and neutral view on the economy. He told us that the sharp sell-off in the dollar may not happen for a while as just about every other currency is being overtly weakened simultaneously. However, he believes there is a very real risk of extreme inflation and he doesn’t rule out hyperinflation can kick in.

Grant Williams closely monitors the velocity of money which has been falling since 2008 as well as the excess reserves parked at the Federal reserve which have been rising during the same period.

velocity money 20121 gold silver insights

excess reserves 2012 gold silver insights

Right now, the Fed is “confident” that once they get the velocity of money rising, they can simply and effectively stop those excess reserves from pouring into the economy in search of a productive home. Of course, they were also ‘confident’ that subprime was ‘contained’ and that there would never be a national decline in house prices.

If they fail to successfully extricate themselves from the corner they have backed themselves into, then there is a very real possibility of hyperinflation but for it to happen by 2014 is, perhaps, a bit of a stretch.

Financial astrology and (hyper)inflation

We went on for an alternative view by a financial astrologist. Karen Starich from Astrology Traders isspecialized inproviding specific dates and in-depth analysis of the financial markets.

Karen believes that what Bernanke has done on September 13th had nothing to do with the economy and everything to do with a grab for power and effort to take control of the financial outcome right now. “With Pluto moving direct on the 17th tells me there were already certain algorithms and government statistics that were showing recovery. Pluto moving direct is strong for the dollar. So, the economic numbers were likely to improve in Q4 and the chairman had to make a move to take credit for it or it would appear that with no QE in 2012 that the Fed policies did not work.”

Karen thinks that the dollar is having another pullback in October which will most likely be the bottom. The US will most likely start to see a strengthening dollar particularly at the end of December and into January.  Oil prices will most likely stabilize and new drilling begins with the direct motion of Pluto as well. We could see counter intuitive forces in 2013 with the dollar/gold moving higher together and oil going lower.  ”Inflation will most likely be gradual.”

She looks at the power elite as semi-gods who are trying to be God.  ”The air is very thin up there and I believe they are broke apart their own rigged game which became clear in the Libor scandal, because it does not work anymore.  The process will repeat over and over until the people realize that the emperor has no clothes. I personally believe that moment is not too far off.”

Protect yourself with gold & silver

So in the light of all of this to come, whether it is inflation or hyperinflation, the most logic way for you to protect yourself is by preserving purchasing power in the form of Gold & Silver. Since 1913, which is the year where the Central Bank was founded,  the US dollar has lost 98% of its value. By contrast, Gold has preserved its purchasing power since then. During a hyperinflationary period, Gold prices surge dramatically. It doesn’t mean though you are making profits when, say, the gold price doubles. You are simply preserving your purchasing power in an environment where the value of the currency has declined by 50%.

Source - http://goldsilverworlds.com/gold-silver-insights/less-than-900-days-for-hyperinflation-in-the-us/

© 2012 Copyright goldsilverworlds - 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.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife