guest post_ what causes hyperinflations and why we have not seen one yet _ zero hedge

7/27/2019 Guest Post_ What Causes Hyperinflations and Why We Have Not Seen One Yet _ Zero Hedge

1/18
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2/18

29/04/13 Guest Post: What Causes Hyperinflations And Why We Have Not Seen One Yet | Zero Hedge

www.zerohedge.com/news/2012-12-19/guest-post-what-causes-hyper inflations-and-why-we-have-not-seen-one-yet 2/18

Why would a central bank need to pay interest on itsliabilities?

This is a key point to understand inflation. According to mainstream

economists, inflation is a process that pops once the potential output

gap of a currency zone is eliminated. Inflation is the consequence of

reaching full employment of resources, they say, and place the

situation within the context of hydraulics. In the figure below, I

illustrate this context, showing two glasses: One is not full, and

therefore, there should not be inflationary pressures.

Please, do not laugh at the figure. It also contains a citation from a

speech given by Feds Governor Jeremy C. Stein a few months ago,

that uses this same metaphor to illustrate how the Fed thinks about

their policies. If it wasnt so sad, it would be comic. And it is sad

because there is absolutely no historical evidence of a nation

sustainably living under inflation that would have reached full

employment. In fact, it is quite the opposite: Inflation breeds

unemployment, which breeds shortages and further inflation. This is

why this whole situation is so sad. Millions of lives have been and will

continue to be ruined because of this error.

The truth is however that inflation and financial repression are

inseparable. They are different faces of the same coin, and as

inflation develops, financial repression morphs into plain

confiscation. As at December 2012, we have only had increasing

financial repression, mostly in the form of price manipulation. Some of

this manipulation is open, as with interest rates, and some of it is

covered, as with gold, the consumer price index or the unemploymentrate. But as the US fiscal deficits grows, the manipulation will be

increasingly open and the fear of confiscation will be very tangible.

Yes, the manipulation will be so open that even the GATA (Gold

Anti-Trust Action Committee) will completely lose its raison

dtre. It will be worthless to expose what will be public.

With regards to the fear of confiscation, there is a good example in the

drop in deposits from the banks in the periphery of the Euro zone. Any

rational investor could see that his bank was being coerced into

purchasing the worthless debt of its sovereign and that the likelihood

of being caught in a bank run was exponentially rising. Policy makers in

the Euro zone chose not to confiscate. It was too early to do so, in

the presence of other alternatives. But deposits dropped nevertheless,

and to restore them, the European Central Bank will have to pay higher

interest rates on its sterilized purchases, when it finally engages in

Open Monetary Transactions (i.e. purchase of sovereign debt with

maturity under three years). I explained this in September: Since thebackstop of the ECB removes jump-to-default risk from the front end

(i.e. 1 to 3 years, in sovereign debt), selling the sovereign debt to the

central bank for cash will be a losing proposition for banks. The Euro

zone banks will demand that the purchases be sterilized, to receive

central bank debt in exchange and at an acceptable interest rate. This

rate will have to be higher than it currently is. This is why, in my

opinion, we are seeing a st ronger Euro and weaker Treasuries.
http://sibileau.com/martin/2012/09/10/why-draghi-opened-the-door-to-hyperinflation-and-denied-the-fed-an-exit-strategy/http://www.gata.org/http://www.federalreserve.gov/newsevents/speech/stein20121011a.htmhttp://sibileau.com/martin/wp-content/uploads/2012/12/Dec-16-2012-2.jpghttp://sibileau.com/martin/wp-content/uploads/2012/12/Dec-16-2012-1.jpg


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Why would a government want to maintain a certain levelof deposits?

Governments need bank deposits to fund the bonds they force their

banks to buy. The regulations, the pressure on the bankers, the open

threats are all part of the same means to coerce bankers to fund their

debts with your savings. Is this what was behind the failed moves in

2012 to destroy the US money market funds?

Essentially, hyperinflation is the ultimate and most expensive

bailout of a broken banking system, which every holder of the

currency is forced to pay for in a losing proposition, for it

inevitably ends in its final destruction. Hyperinflation is the vomit of

economic systems: Just like any other vomit, its a very good thing,

because we can all finally feel better. We have puked the rotten stuff

out of the system.

Why would depositors not want to renew deposits?

Whenever the weight of deficits passes a certain milestone, people

begin to flee en masse from the system. They not only take their

savings from the system, but they generate income outside it too. This

has happened since times immemorial. Below is a picture of buried

coins, found in Hertfordshire. They are presumed to have been hoarded

in 4th century during the final years of Roman rule.

Then and now, the tax pressure ended breaking capital markets and

trade. In the early stages, everyone seeks to stop investing and

collect by any means whatever capital that can be recovered. Nobodyshould be surprised if, with these low interest rates, the wave of share

buybacks and dividend payments increases. The shrinkage of the

system exacerbates the fall in tax revenue and the intervention of

central banks, leading to the self fulfilling outcome of quasi-fiscal

deficits. Production falls and the shortage of goods, together with the

increase in the circulation of money, triggers high inflation. Price

controls follow.

If this is correct, Jim Rogers is wrong and you should not buy

farmland. Farming will not be profitable. The increase in food

prices would not be a signal to encourage farming, but the

reflection of the fact that farming is not profitable because it is

easy to tax. Hence, the food shortages. The same applies to real

estate in general, as the rule of the mob spreads and the rights

of debtors and tenants are favoured over those of creditors and

landlords. Hyperinflation therefore is not just a run from a

currency, but from the economic system entirely. Thousands of

years of Diaspora are screaming to us in the face that theadvantage of gold as an easy-to-transport and store asset is not

to be underestimated.

Why have we not seen a quasi-fiscal deficit yet and howclose are we too see one?

I think that at this point one can easily see how high nominal interest

rates (to attract deposits) and hyperinflation go together. The loss of

confidence in the system pushes nominal rates higher, which causes

even more pain to produce, unleashing shortages of goods and higher

prices. Von Mises, for instance, remembered that in the case of the

German hyperinflation, With a (my note: nominal) 900 per cent

interest rate in September 1923 the Reichsbank was practically giving

money away (Chapter 7, in Money, Method, and the Market

Process).

Frankly, I do not have a definitive answer to the question of why we

have not seen a quasi-fiscal deficit yet. But I can intuit that we are

still far from seeing one. There are many factors at play. The existence

of coercive pension plans (i.e. monies coercively taken from salaries to

fund collective distributions) could be playing an important role. These

funds are other peoples monies to their managers and they will not

risk their careers to protect them from governments that force them to

assign a zero risk weight to US Treasury holdings. It is conceivable

that as funds are burdened with losses, the contributors wake up to
http://library.mises.org/books/Ludwig%20von%20Mises/Money,%20Method,%20and%20the%20Market%20Process.pdfhttp://youtu.be/0ngA_TM4em0http://sibileau.com/martin/wp-content/uploads/2012/12/Dec-16-2012-3.jpghttp://sibileau.com/martin/2012/08/19


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Wed, 12/19/2012 -

20:03 |

Wed, 12/19/2012 -

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Wed, 12/19/2012

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Wed,

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22:36 |

Wed, 12/19/2012 -

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Wed, 12/19/2012 -

them and decide that at a certain point, one is better off working

outside the system than in it, to avoid this hidden tax. Just like

Romans left the city, millions of workers in the developed world may

decide to become self-employed and leave the system. This is a

typical characteristic of under-developed economies.

So far, the Federal Reserve does not even need to sterilize what it

prints. The European Central Bank did have to sterilize but the market

does not demand an interest rate on its liabilities, higher than that of

the sovereign debt it purchases. Not yetPerhaps because the market

somehow still believes that institutional structure of the European

Monetary Union is fixable. Further downgrades in the risk rating of core

Europe, the concurrent rise in the yields ofGermanys sovereign debt

and corporate defaults in USD denominated bonds will eventually wipe

this belief. For now, the European Central Bank has been successful in

not even having to pay interest on deposits.

If I have to think of a main and most likely trigger of quasi-fiscal

deficits, I have to name the future bailout of the next wave in

corporate defaults, particularly from the Euro zone.

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Racer

Banking system = fractal

destruct ion cycle

formadesika3

Long before we reach

hyperinflation, your savings have been wiped out.

formadesika3

Forgot sumpn.

... unless you save in gold & silver.

THX 1178

What about debts?

bigmikeO

I'm guessing that our "dear

leaders" are thinking that we can muddle our way through

for 20 more years like Japan.

The thing I'm concerned about is that everything moves a whole lot

faster than yester-year. Facebook, Groupon, Pinterest - the

Internet can accelerate at breakneck speed, so the 15 minutes

after "The View" does a story on "should you spend all of your

money asap?" hyperinflation kicks off and then ends within 6

months. (With lots of death and destruction).

BraveSirRobin
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5/18



21:01 |

Thu, 12/20/2012

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It seems the current

bubble is in guns and

ammunition. Of all the bubbles to worry about, perhaps

this is the one.

sessinpo

Or it might be a

bubble multi decade bubble in liberalism and

ignorance. In which the ones that need to worry are

the liberals - they just be about ready to pop in a bad way.

spinone

Interest rates will never

have to go up in the USA, as long as the dollar is WRC the

Fed can monetize as much as it wants.

Al Huxley

Yep, lucky no other

country out there is angling to take over the role of

WRC provider. Infinite prosperity for everybody. I'm

just looking forward to the day when all taxes are abolished and

everything is just outright monetized without consequence.

Assetman

... this assumes that

the Fed is the marginal price setter for pricing what is

considered "risk-free" Treasury assets across the

curve. Today, that is certainly the case.

Tomorrow? Who knows?

Flakmeister

We'll be fine along as the

House of Saud stays in power and there is more net exports

of oil on the market than there are net US imports...

Upper limit 20 years.... tops...

Edit: For perspective, check this out...

http://i289.photobucket.com/albums/ll225/Fmagyar/Oilreserves-

1_zps45f0ebc3.jpg

Body of Lies

You are right about Saudi

Arabia ... and if you are looking for trigger event it will be

th fall of Saud.

1) Saud falls

2) Crisis prevails worldwide in oil pricing (If Obama is in office

we're screwed, if a Bushie is there we have a chance by taking

over Saudi Arabia)

3) Islamists come to power rapidly IN SA

4) They refuse US dollars for oil payment (demand gold only)

since they are ideology driven, the money is not so important.

5) Energy rationing in US, colossal depression results

6) Dollar collapses as everyone t ries to 'redeem' them for

tangible assets

7) Reset ... whatever that means

ball-and-chain

I asked my mother what
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causes hyper-inflation.

She says its velocity.

Picture this.

Bernanke's man-tits are squirting milk to the hungry (his banker

friends.)

But there is so much hunger in banking land that his milk isn't

distributed t o the regular folk.

Hence, no big spikes in inflation. Why? No velocity.

But what does she know?

http://www.angrysinner.blogspot.kr/2012/12/yesterday-dragon-lady-served-beef-and.html

becky quick and...

jim rogers (and me)

advocate buying farmland so that you will not starve to

death while the 'smart people' with underground food

bunkers try to figure out how to 'save us.'

buying farmland is investing in 'staying alive, live, live, live,

livvvvvvvvvvvve.'

Flakmeister

Just make sure that you

have water....

Which eliminates a lot of places...

Bohm Squad

...and water rights.

kaiserhoff

Farm land is a great

place to keep your gold, guns, etc . I've never quite

understood what any of the prepping supplies are worth unless

you are part of several counties of folk who think and act like

you.

Getting more interested in specialty crops. I hate tobacco, but

I've noticed those who are so inclined will pay almost anything

to get it. Gray market, Bitches?

JohnG

Prepping "supplies" are a method to get going. Gardening is

a steep learning curve, as is animal husbandry, meat

preservation, etc . Water is essential of course.

One will need tools, and the skills to use them. I would like

to be warm when the lights go out, and I will be. Preserving

vegetables, while not hard, takes supplies and know how.

Moral: Get some seeds and learn how to grow them. It will

be at least two years before you have a meaningful

harvest. Prepare now or starve. Learn to hunt, clean and

preserve animals. Learn to raise them. Learn to find water.

There is much to learn, do it now, or die.

Diogenes

Everybody laughs

at the hillbillies

but they will go

under last, if at all.
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Thu,

12/20/2012

- 01:11 |

Wed, 12/19/2012 -

21:01 |

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Flakmeister

Sure, that was

never in

dispute...

The question is do you want to live like that now....

ultimate warrior

The way I look atfarmland is (1) you don't need or want a lot of it

(confiscation/theft could result if you have to much land) (2)

Store what you can but sell extra produce at inflated price to

pay off debt at fixed interest rates i.e. mortgage. (This was

done in Weimar Republic). Farmland could possibly be a

lifesaver.

vast-dom

you miss the point: it is

about t axes on farm product ion and just as importantly

and unmentioned in above article, the gov jacking up RE

taxes, which will occur 100% and thus extract from you wealth,whether saved in fiat or buried on said RE in form of PMs.

BraveSirRobin

Also, land can not be

moved or hidden. Time and again, governments have

taken land from their owners and given it to its

preferred constituencies.

vast-dom

hence the

leverage of

renters and non-

land owners as per above article.

ultimate warrior

The government can

only jack up taxes so far especially in a hyper-

inflationary environment. Eventually the public will say get

fucked while stroking their AR15. The black market will

be flourishing and the government will be limited in their

actions.

Body of Lies

There will no black

market ... with

everyone armed and

the level of morality in the American psyche we become

a Mad Max world with the strongest strong man in the

area trumping all others. Take a look at criminality in the

US ... Gangs can and will rule in the black market just as

they rule the black market in drugs. One season of

produce will mean a dead farmer. We become Somalia.

You worry about Gov taking your produce ... at least

they leave you alive

Rusty Diggins

The point that is missed

in the "buy farmland" meme is that you do not need very

much for you and yours.... 10 ac res will do quite well for
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Thu, 12/20/2012

- 01:01 |

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Wed, 12/19/2012 -

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Wed, 12/19/2012 -

a dozen paople.

Body of Lies

I had a plum tree ...

watched it every day until one day all the plums were

gone ... warefare over farmland will result if it gets

that bad

haskelslocal

Why is this story so full of

shit?

drbill

What an insightful

comment...

I am a Man I am...

It also helps if you are asmaller country that no one likes or that a bunch of other

countries are aligned against. Europe against Argentina,

world against Weimar Germany, Zimbabwe because it is easy.

garypaul

Good observation

notadouche

Well I don't know about notseeing hyper inflation. OK maybe not hyper in the technical

sense but when you compare the real cost of fuel, food,

college tuition, healthcare, prescription meds, insurance, housing

we are seeing plenty. It would perhaps be useful to measure

inflation by the same definition as they did in say 1950 and

compare. These govt stats are so watered down and manipulated

now who knows what to believe. The planners have a number they

want to publish and then work their way back to make the math

work. Also measure the amount of food, any packaged food today

vs what you were paying for 5 years ago and tell me there is no

inflation. Same bag, a little bit more in price and a lot less in

product . Smells like inflation to me.

balz

Food is easy to tax ?

Go and try to tax that carrot out there in my garden that i

will eat tonight.

Body of Lies

Food on tax, and I'll get

the carrot f rom your garden LAST Night

blunderdog

It's really just not likely we'llsee hyperinflation in the USA until a meaningful alternative

medium for exchange exists.

akak
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9/18



20:48 |

Thu, 12/20/2012

- 15:16 |

Wed, 12/19/2012 -

20:38 |

Wed, 12/19/2012 -

20:42 |

Wed, 12/19/2012 -

20:43 |

Wed, 12/19/2012 -

20:46 |

Wed, 12/19/2012 -

20:50 |

What has any alternative

currency got to do with

chronic governmental overspending, rising debt and its

concurrent monetization? Your argument, heard so often, is in

fact so lame and intellectually insulting it is laughable.

Just for one example, the Romans' lack of any "alternative

medium of exchange" did not prevent the utter debasement

(hyperinflation under the specie system) of the denarius in the

third century AD from happening nevertheless, leading to the

effective (and permanent) death of the money-oriented

economy in the (Western) Roman Empire.

blunderdog

What has any

alternative currency got to do with chronic

governmental overspending, rising debt and its

concurrent monetization?

Nothing at all, but those things are not hyperinflation.

Hyperinflation is loss of faith in the currency to the extent

that it can no longer be used as medium of exchange.

In the USA, in order for the "dollar" to go out of use,

something else will have to be available. Too much of our

entire SOCIETY is dependent on exchanging colored paper

for it to *end*--it has to be subsumed by something else.

Once we have other options, like easily located barter-

exchanges, or alternative means of transacting business, it'll

be easy to dump the dollar.

Payne

There is a run on the Banks

today it is called default. $178 Billion in defaults today on

mortgages. That is a hefty run on the bank.

AUD

Hyperinflation in $ terms is a

run on the bank that issues the $.

ramacers

fed can't eat that balance

sheet any more than bonds will move at any rate when

the jig is up. sh-- will hit the fan and blood will flow.

Bicycle Repairman

Money shot:

"...the tax pressure ended breaking capital markets and

trade. [...] If this is correct, Jim Rogers is wrong and you shouldnot buy farmland. Farming will not be profitable. The increase in

food prices would not be a signal to encourage farming, but the

reflection of the fact that farming is not profitable because it is

easy to tax. Hence, the food shortages. The same applies to real

estate in general, as the rule of the mob spreads and the rights of

debtors and tenants are favoured over those of creditors and

landlords. Hyperinflation therefore is not just a run from a currency,

but from the economic system entirely."

Head for the hills. Your guns get used only if they c orner you.

JR

The way to crush the

bourgeoisie is to grind them between the millstone oftaxation and inflation.

Thats Vladimir I.Lenin. And whats more thats the two-party tag

team of Washington, DC, Obama and the GOP arm-in-arm with Ben

Bernanke -- stealing, cheating, compromising and enjoying their

positions.

The American Thinker writes: We have seen this before. Lenin
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10/18



Wed, 12/19/2012 -

21:10 |

Wed, 12/19/2012

- 21:46 |

Thu,

12/20/2012 -

22:42 |

triggered inflation to eliminate the Tsarist monetary system,

which he planned to replace with centrally-managed

rationing. He increased the money supply twenty-five fold."

Obama cares no more about Americas children or her elderly than

did Clintons Jewish Secretary of State, Madeleine Albright, who

said the price of 500,000 dead Iraqi children for U.S. sanctions

on Iraq was worth it.

Case in point: The New York Times is reporting Obama will cut

social security, but spare the Pentagon, by drastically reducing the

spending power of Americas elderly using CPI gimmickry. It comes

as no surprise, in that Obama made a promise to international

banker Bob Rubin in 2006 that he would do just that.

And while the cost of seniors non-discretionary spending soars,

Security benefit payments will rise by only 1.7 percent in 2013.

Obamas spending cut proposal cuts $122 billion by "adopting

a new measure of inflation that slows the growth of

government benefits, especially Social Security," even

though, as Don Smith writes on OpED News, Social Sec urity hasn't

contributed a penny to the deficit.

In fact, according to Paul Craig Roberts in a recent article: For

the past quarter of a century the Social Security portion of the

payroll tax has built up a surplus of over $2 trillion.

Obamas stealth redistribution strategy is merely robbing the old

to finance SSD and Medicaid for his constituents, including the

bankers. A fellow I know (Ive ac tually had to help him out), has

been addicted to drugs for years, has no job and every month the

government puts a sizable cash deposit into his checking account.

And then he was angry because I dont care for the poor. Why? I

didnt vote for Obama.

BraveSirRobin

Social Security was

already looted long ago. Nothing in the lockbox except

IOU's to ourselves.

JR

Exactly. The

Congress has been busy looting Social Security andother untouchable monies to use as general

revenue for their favorite vote-getting programs. Then they

simply add what they steal to the Federal debt figure but

not to the yearly deficit and leave a worthless IOW in the

Trust.

As to why the sum of the yearly deficit and the

accumulated federal debt doesnt add up to a new total for

federal debt, the answer they give is that these disparities

dont show up because we owe it to ourselves.

In Human Action, Austrian economist, Ludwig von Mises,

wrote regarding this economic accounting abyss and "owing

it to ourselves":

The most popular of these doctrines is crystallized in the

phrase: A public debt is no burden because we owe it to

ourselves. If this were true, then the wholesale obliterationof the public debt would be an innocuous operation, a mere

act of bookkeeping and acc ountancy. The fact is that the

public debt embodies claims of people who have in the

past entrusted funds to the government against all

those who are daily producing new wealth. It burdens

the producing strata for the benefit of another part of

the people.

Congress is responsible for this grave injustice to the

American people. And now you know why the bankers such

as Rubin want to do away with SS: it ain't there.

Bicycle Repairman

The SS fund

hasn't been

looted. That's

bullshit. Cut the defense budget and all the money is

there.

Run the numbers. Take defense spending and pay SS.

The IOUs are still there. Do you know what IOU

means? The empire was fun for some folks. Show's
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11/18



Thu, 12/20/2012

- 00:54 |

Wed, 12/19/2012 -

20:47 |

Wed, 12/19/2012 -

20:48 |

Wed, 12/19/2012 -

20:57 |

Wed, 12/19/2012 -

21:09 |

Thu, 12/20/2012 -

00:48 |

Thu, 12/20/2012

- 02:47 |

over now.

Body of Lies

It works the same in my

house ... I sock away money in the Boodle Bag and

match it with an equal increase balance on my credit

card and say 'I'm saving', but in reality, I'm going farther

behind for each dollar I 'save' because I get no interest on

it, but have to pay interest on the money I borrow.

Unfortunately for us the Gov keeps a huge increasing credit

card balance and robs the Boodle Bag at the same time

DavosSherman

I'm not a huge rogers fan,

but he's right, barring a population adjustment.

AGuy

Hyperinflation happens when

Investors, consumers and business lose faith in it. Currently

our trading partners still accept US Dollars for transactions,

and have been holding on to surplus dollars caused by tradeimbalances. Some trading partners have smartened up, like China,

by converting their US Dollars into tangible assets (PMs, Land,

rights to natural resouces). The dollar will tank when other join into

China's diversification program, as there will be excessive number of

countries willing to chase a small pool of tangible assests, and

those with tangible assets are less than egar to trade assets for

dollars.

Consumer Credit, and Domestic Consumption are meanless for

causing hyper-inflation. Consider hyper-inflation in Argentina, and

the Former Soviet Union. During the period when currencies

collapse, domestic unemployment, consumption and credit was

deflationary. This is because the citizens had no money to spend

and no access to credit. Domestically, they were in a state of

deflation, but globally their currencies were distrusted. The lost of

external confidence crushed the Ruble and the Argentina dollar.

When Hyperinflation does arrive, It will be very devistat ing forAmericans, since few are Americans are self- reliant, and America is

very very depend on imports (energy, raw and manufacturered

goods). I sudden collapse of imports would bring the American

economy to a complete standstill.

Counterfiat

Fail sorry. Back to the

chalkboard you go.

Why post half baked articles like this?

DavosSherman

Another fucking ilene

sailer boy special. Sad days.

jomama

was it: "Frankly, I do not

have a definitive answer to the question of why we

have not seen a quasi-fiscal deficit yet."that c linched

it for you?

Counterfiat

Seriously, I t hink the

article was written by a kid taking over from a ZH

editor that is now gone on holidays. He must have

discovered a new word and just had to add it to his

vocabulary and let it flap in the wind. I hope ZH in the

future will send homework back from whence it came, after
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12/18



Wed, 12/19/2012 -

21:32 |

Wed, 12/19/2012 -

22:34 |

Wed, 12/19/2012 -

22:34 |

Wed, 12/19/2012 -

23:31 |

Thu, 12/20/2012

- 00:42 |

Thu, 12/20/2012 -

00:07 |

Wed, 12/19/2012 -

22:52 |

allowing the dog to chew on it, with a note attached saying

'we'll all pretend that this didn't happen, now lose it in the

bird cage'.

DollarDive

The fiscal cliff discussions

are just the beginning of the problems. Remember, we've

been kicking the proverbial can down the road for several

years now. We haven't experienced ANY of the hardships of fiscal

restraint. The sledding will be gett ing tougher. Fed is applying

more pressure to politicians to cut deficits. Fed is running low on

bullets. As more an more people fall out of soc iety, due to lack of

jobs, income, ability to survive - there will be repercussions. The

government will need to confiscate more from those that are still in

society to make up for the ever increasing deficits - as well as

those that have fallen off the map. The gig is up. It's coming

soon. I can't wait to hear those teachers and firefighters

complaining about their cuts in income and pension benefits - It will

be loud and will scare the markets. It will be like nothing the

current equity generation has ever experienced. There will be fear.

Fear will cause volat ility and this will create more fear. Prices will

drop. Rates will spike and we'll be in the same situat ion as Greece,

Ireland, Portugal etc. We'll be begging from the IMF and the new

socialist world government leaders. We're really just a sad excuse

for another third world country.

topspinslicer

You will know we are on the

verge of hyper-inflation when Benny at the Fed starts

laughing uncontrollably in front of CON-gress questioning

him -- what gives benny boy??

Louie the Dog

I got a headache just

reading this article. I don't understand any of this shit.

Someone just give me a heads-up before it happens.

Assetman

Well... for starters, it's

a poorly written article.

Body of Lies

You are right ... when

the average reader cannot understand the point, the

article is not well written. I read it carefully and can't

see that he made his case at all.

AUD

It's also complete

baloney.

Quasi-fiscal deficit? I don't think so.

dunce

I have no clue what the guy

meant on buying farmland, but the guy that said farming

would not be profitable had a point. What might be more to

the point though is what is known as subsistence farming where

you just produce enough food to feed your family until the financialdebacle runs its inevitable course. Our economy is based on a very

complex distribution system and i do not mean wealth redistribution.

Hyperinflation results in plenty of cash but goods are hard to get.

People can get by with the same clothes for a long time but people

must eat every day. The govt. has a problem with forcing the

farmer to deliver his goods to the market. Espec ially if t he farmer

has guns and ammo.
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13/18



Wed, 12/19/2012 -

23:13 |

Wed, 12/19/2012 -

23:13 |

Wed, 12/19/2012 -

23:18 |

Wed, 12/19/2012 -

23:40 |

Thu, 12/20/2012- 10:00 |

alentia

My wife went through

hyperinflation, this is what she told me how it had began

from regular cit izen point of view (T minus about 8-6

months):

1. Everyday local media broadcasted "everything is good with the

economy", people do not have to worry

2. Unempoyment was rising

3. Interest rates started rising in geometric progression

4. Banks advertising high interested rates trying to attract money

5. Smart few started to withdraw cash from bank accounts

6. Interest rates upto almost 100%

7. Run on banks

8. Prices rise in geometric progression

9. Absense to goods to purchase

10. Hyperinflation

11. Crash and Default

H E D G E H O G

you can try to t ax me into

oblivion, but to try and take my land and the air space

above it, that'll be where the shit hits the proverbial fan. as a

most famous person of late voiced, "bring it on!" assholes........

cbaba

Very interesting that the

Author c laims he knows what hyperinflation is but he misses

the biggest reason why it has not arrived yet. He frankly

admits that he doesn't understand..

In fact it is very simple, there is leverage in the system AKA

shadow banking, which is an inflation buffer and its slowly dying...

that's the reason why system is deflating.. in US there is 10 times

more credit than real cash savings, hence the leverage is 10. In

Europe they say its 30 times.. some say in France its 100 times..

Nobody knows exactly the real leverage is in each country but the

effects are same in each country, when the banks cannot lend

money/credit , deflation starts and credit dies, it shrinks ,

companies c annot make profit, start to lose money, lay off more

people, less people buy goods, more companies lose money etc.

this is the killing loop... Gradually Central banks print cash and add

to the system buy it slowly adds inflation and at some point

inflation will be visible and its not near yet.. buy all of us will see

how inflation will rise and exponentially increase and within couple

years will turn into hyperinflation, it can happen in any country and

it has nothing to do with reserve currency..

Confundido

Not true. The author

makes the point on leveraging at the source: deposits,

or money in the system. Leverage is money in the

system. He also mentions the dumb money of pension funds.

Another way to look at this is that even WITHOUT leverage,

you can still avoid hyperinflation if the central bank gets away

with not having net interest losses. It is a simple accounting

demonstration.

sessinpoAuthor: "Frankly, I do

not have a definitive answer to the question of why

we have not seen a quasi-fiscal deficit yet . But I

can intuit that we are still far from seeing one"

I think this is the statement cbaba is referring to. I actually

agree with both of you. But I also tend to keep things more
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14/18



Thu, 12/20/2012 - 00:00

|

Thu, 12/20/2012 -

10:03 |

Thu, 12/20/2012 - 00:00

|

Thu, 12/20/2012 -

01:11 |

Thu, 12/20/2012

- 02:56 |

Thu, 12/20/2012 - 01:26

|

simplistic.

I suggest we do not see such type of inflationary pressures

because, despite of the printing or monetary easing, we do

not see that money flowing freely through the system.

There is such an overhang of debt, that basically that

money dissappears. Of course there are various details that

change that simplistic statement, that equation. But that is

the most basic form I can state it. It doesn't change the

overall picture that this fiat system will likely fail.

neutrinoman

Hyperinflation is a political

phenomenon. It happens when a government decides to

utterly trash its currency and monetary system. I don't

mean a currency devaluation or bank reform. I mean utterly TRASH.

The larger public eventually gets the idea and flees the currency.

That's not happening in the US and is unlikely. What is likely is a

1970s or late 40s style inflation, sustained over 5-10 years, to

erase part of the debt. This is already happening in the UK --

although it's not hyperinflation -- as the BoE has abandoned trying

to claim with a straight face that the inflation is "temporary." No

one believes it any more, and everyone there knows what's

happening.

sessinpo

Gross misunderstanding of

economics.

Stuck on Zero

The reason we don't have

hyperinflation is that spending meoney hasn't reached the

average man. All the money printing by the Fed has gone

to the top 5% and they reinvest it with the Treasury, Fed, or stock

market. If but a tiny fract ion of that money gets to main street we

will have explosive inflation.

mkkby

Stuck on Zero IQ -- of

course it's gett ing out. What do you call trillion dollar

deficits every year. Dot gov spends that.

Alpha Monkey

And where do they

spend that? The nominally paid gov't employees, or

the overpaid corporates.

steve from virginia

More nonsense to gin up hyperinflation fears when there is too

much debt remaining to delever.

Angels dance on the head of a pin. How many? Who knows but the

central banks do not print, they lend, they do not create currency

they create debt, they replace one form of debt with another, from

one account @ the central bank to another account @ the same

bank ... they cannot create anything real only claims against real

things.

There are already too many claims ... way, way too many claims.

Real things are gone, burned up for nothing.

BTW: there are as many reasons for hyperinflation as there have
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Thu, 12/20/2012 - 04:23

|

Thu, 12/20/2012 -

04:26 |

Thu, 12/20/2012

- 05:40 |

Thu, 12/20/2012 -

05:27 |

Thu, 12/20/2012 -

been episodes of hyperinflation, including in countries with no

central banks. Asset price 'bubbles' are ipso-facto hyperinflationary

with central banks on the sidelines doing nothing. In a debt-money

system all banks and finance non-banks can create credit on

demand. Finance institutions do not need reserves to re-lend and

do not re-lend anything.

The only way (excess) reserves in central bank accounts can be

deployed is during bank runs (when banks themselves are subjected

to involuntary deleveraging). Sorry, FAIL.

>>>>>

AnAnonymous

Another jaw breaking

'american' theory.

Could be elected as the poster child for 'american' justification for

consumption:

there is no other justification to be found to consumption than the

capacity to consume.

Probably a highly educated 'american' (consumption) who puts that

previous consumption to good usage from an 'american'

perspective: that is it allows him to achieve even more

consumption.

Same drivel posted by a non 'american', non graduated, non

corporated employed person would be mocked for what it is and the

waste associated to it would be immediately shut down.

'America' is a big club and if you aint part of it, you wont get the

priviledges of it .

AnAnonymous

And as the 'american' he

is, that 'american' author thinks that he deserves every

single c ent he makes.

Dont try to cut him down on his lethal non sense, he will call in

his unalienable rights coming from the 'american' natural rights

theory.

Wonderful an 'american' world is. No digging.

TheFourthStooge-ing

And as the Chinese

citizenism citizen he is, that AnAnonymous author

thinks that he deserves success as shown through

examples like an hypothetical against reality based on

supposed distorted view of an hand out given to Chinese

citizenism citizens by grateful Tibetans.

Don't try to sit him down on flush toiletry for his fecal non

sense, he will call in his unalienable rights coming from the

Chinese citizenism citizen natural roadside squats theory.

Wonderful a Chinese c itizenism citizen roadside is. No latrine

digging.

TheFourthStooge-ing

Same drivel, posted by

AnAnonymous, non graduated, Chinese Citizenism

Communautist Ministry of Truth employed propagandist,

mocked for what it is and the waste associated to it is

immediately laughed down.

It is an observation based on collection of facts.

Are Chinese citizenism citizens in love with battling wind mills?

bunnyswanson
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06:30 |

Thu, 12/20/2012 - 04:39

|

Thu, 12/20/2012 - 06:10

|

Thu, 12/20/2012 - 06:39

|

Lid has been blown off.

Have you ever stayed at a

Holiday Inn Express?

Harrison

Two points regarding

farmland:

1) you can farm it, and eat what you grow, thereby

surviving a general economic disaster such as what the Fed seems

hellbent on creating;

2) when a new system replaces the destroyed one, the land willretain its value.

True, governments can tax and confiscate, but at some level this

becomes unworkable -- either because the government is pressured

to stop confiscations (see the "foreclosure crisis"), or because

individuals (e.g., Carl Drega) or the c itizenry as a whole will revolt.

Azannoth

"Jim Rogers is wrong and you

should not buy farmland" - it def initely makes sense to have

enough of farm land to feed your self and have something

left over but becoming a food supplier is mighty risky as the

government will disown you the moment the hungry masses start

stampeding through town, just look at White farmers in Africa oreven the recent Presidential Order(in the US) that gives him the

power to confiscate ANY property in the event of a natural disaster

snowlywhite

@Max

as someone living in hyperinflation - or ok, very high inflation, not

hyperinflation, but still double digit inflation with the 1st digit over 4

or 5(Eastern Europe, '90s), contrary to most that post here, I beg

to differ.

The mechanics of hyperinflation, despite the fact that many

attempt to reinvent the wheel, are always lost of trust in the

currency. YES, IT HAPPENS. The govt . can print till kingdom come,

their act ion is irrelevant. Population will just move to a different

currency and let them be. In my case(Romania), the economy was

USD based, than EUR based. After 20 years, and still many ppl.

don't hold reserves in the local currency.

You just use a different storage mechanism and convert in the local

currency for current needs, being immune(bar exchange costs -

which is usually high in this case) to the inflation promoted by the

govt. And still, a big part of the economy functions like crap in such

a system. Anyone selling something to the state(which in US case

is even bigger chunk than in my case - over 30-40% of the econ.?)

is penalized since it'll be paid back in the local currency, leaving him

exposed till he gets paid. That obviously leads to huge mispricing

since everyone tries to guess how much they'll lose till they get

paid, especially since, when econ. starts malfunctioning, the govt.

will pay you back when they want, not when they tell you.

Obviously that guessing produces prices having nothing to do with

reality and reinforcing the cycle, since everyone will expect

inflation to go up and putting additional margins to try and protect

themselves from such an outcome. Which obviously makes inflation

go up.

After 15 years of okish inflation, most contracts are still something

like "pay x EUR at the rate established by the central bank for the

day of payment". Ridiculous in a way, given how much the rest of

the world inflates, but hey... what's far from you always looks

better. Should the govt. try and manipulate the official exchange

rate will just move more of the economy outside the system.

the reason there's no hyperinflation is because everyone inflates.

So there's no refuge currency. USD + EUR more or less = the entire

world currency. Everyone else has more or less to come to the fold

sooner or later(see Switzerland for instance) and join the printing

press. But when that 'll happen(probably when mercant ilists get

tired of holding the bag), you'll have huge inflation in all importing
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Thu, 12/20/2012 - 07:34

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Thu, 12/20/2012 - 08:29

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Thu, 12/20/2012 - 08:48

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Thu, 12/20/2012 - 09:44

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Thu, 12/20/2012 - 10:02|

Thu, 12/20/2012 - 16:46

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nations. Sure, that'll affect fx rates and produce the waited

rebalance.

The only reason why that might not happen for a long t ime is

because the elite of the mercantilist countries have it good in such

a system(China for instance - suppresed rates affect them way

less than the average population since they get parts of their

capital out and buy even more stuff), while the slaves doing the

work have no power.

But really, it's totally naive to believe that having a printing press

has anything to do with the ability to pay your debt. Everyoneknows you have that press and you can use it. Heck, even 70

years old communist educated people figured out the action of our

govt. in... less than 5 years. I'm sorry, but population isn't as dumb

as ec onomists hope it is(ok, I hold some reserves regarding the

average Westerner since you had it good for so long, but trust

me... need makes you learn things fast ; bloody fast).

jmcadg

Diversified portfolio:

Physical gold, silver, copper, platinum, palladium, zinc,

nickel, farmland, food.

A fair start.

Pumpkin

Most of the money supply is

credit. Banks do not loan the money they have, it is

created with the signature and contract to repay. About

95% of the money supply comes into existance this way. And once

created, it is used as a reserve in another bank so it to can create

new money by loaning. The loan side is descreasing and the print

side is increasing. Since the loan side of money creates 95% of the

money supply, it takes A LOT of printing to off set any reductions

in loaning. This is why there has not been hyperinflation.

Fix It Again Timmy

If we haven't arrived at

hyper-inflation, it's only because the bus is running a little

late...

northerngirl

So being stuck in this

artificial market is a good thing?

midtowngSo he's predicting food

shortages, but not recommending buying farmland?

Something tells me he's missing something.

bart.naf

"There cannot be

hyperinflation without high nominal interest rates"

Horse puckey.

The actual interest rate in Weimar Germany was at 8% as late as

early 1923. Look it up... or don't.
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