HYPERINFLATION

We live in frightening times.   I grew up during the Cold War.  We then had good reason to fear the possibility of nuclear warfare.  Nonetheless, few thought we would self-destruct.  Yet that seems to be what I think we are seeing, and I am not the only one.

I got the following from a relative.  He is a business major, and he is not wont to distrust our country or its institutions.  Nonetheless, he asked me what I thought about it.

If u r recieving this email it is cause u r important to me. I wanted to share with u something that caught my attention. As a student of finance, I have recently learned of the possibility of the US heading into hyperinflation. In economics, hyperinflation is inflation that is very high or “out of control”, a condition in which prices increase rapidly as a currency loses its value. This is what happended in post World War I Germany. $ had such little value, people used it as wallpaper. It took carts of $ just to buy a loaf of bread in Weimar Germany.

A woman using $ as fuel.

Hyperinflation is also currently taking place in Zimbabwe…

A vendor sells sweets and snacks with an average price of 15 million Zimbabwean dollars each, on the streets of Highfileds in Harare, Tuesday, May, 20, 2008. As Zimbabwe’s inflation soared to more than a million percent according to independent analysts the country faces a bleak future ahead of a run off election set for June 27. (AP Photo/Tsvangirayi Mukwazhi) Read more at:

http://www.huffingtonpost.com/2008/05/21/zimbabwe-inflation-now-ov_n_102899.html

The effect of increasing the monetary supply leads to inflation. Our Fed has produced trillions of dollars, that are currently being stored up in our banks. Remember the bank bailouts? When the banks start lending money again, our markets will become flooded with an excess of currency. The value of our currency drops when this happens. Which causes inflation.The prices of our goods n services will increase, which will cause the govt to print more money so it’s consumers can afford to buy the products being produced, which will cause another increase in the price of consumer gds n service and so on and so on. Argentina is a recent example of this increase in the money supply as well. Here is an excerpt from an article taken from

http://academic.reed.edu/economics/course_pages/201_f06/Cases/money_and_inflation_in_arg.htm

For most of the last fifty years, Argentina has vied with other South American countries and a few countries in other parts of the world for the dubious honor of having the highest inflation rate in the world. As is always the case with rapid inflation, the price increase in Argentina was fueled by rapid expansion of the money supply. The seigniorage earned from monetary expansion served the needs of the government as a method of taxation that was difficult to avoid and politically easy to enact.

…sound familiar?

While I try to be objective when hearing sensationalistic news, I think this is worthy information to take into consideration. My philosophy is prepare for the worst, hope for the best. Plus as Christians, I think it is a great witness to be informed, prepared and able to help in such unwelcome times.

Here is a link to a 3 part video on hyperinflation in our nation. It showcases some prominent economists and investors. One man, Peter Schiff, actually forecasted our current recession. He was publically ridiculed by his peers, including Ben Stein, on national television. He is now trying to raise awareness of the “real” state of our economy, the reality we don’t hear from most of our governing officials and economic pundits. This is all speculation, but if it is true, it is too important to ignore.

youtube=http://www.youtube.com/watch?v=SzmYI_4XCbM

Here are some good ideas on how to get prepared in the case of hyperinflation

http://www.ehow.com/how_4545539_survive-hyperinflation.html

We may see hyperinflation.  I don’t honestly know, but I know the problem is serious (see the US National Debt Clock).  I am certain we will see significant inflation.  However, if a bunch of people lose their jobs, that inflation may be preceded by a period of deflation.  Even if the currency drops in value (inflation), if there no buyers, prices will drop (net deflation).  High employment, unfortunately, will not improve the situation.

What I find somewhat confusing is why we are doing this?  Why is the current administration behaving so insanely?  Why did we elect these people?

I don’t know if our leaders are deliberately wrecking the economy or just insane ideologues.  I don’t know whether the Democrats are insanely power hungry or just stupid.  My guess is both, but why wreck the country just so you can be in charge of the ruins?  Do people hate their own country that much?  I fear they do.

When I consider our current crop of leaders, they make me think of something I read in high school.

Here we may reign secure, and in my choyce

To reign is worth ambition though in Hell:

Better to reign in Hell, then serve in Heav’n.

– So Satan spoke in Paradise Lost by John Milton.

What should we do?  What can we do?  Note how that one article said the citizens of Argentina fixed their inflation problem.

In 1990, the government began to completely overhaul the organization of the Argentine economy. It included (a) comprehensive liberalization of foreign trade and capital movements, (b) the privatization of public enterprises and the deregulation of the economy, (c) reduction of the bureaucratic apparatus of the public sector and the reconstruction of the tax system, and (d) the creation of a new monetary system.

Government expenditure fell drastically from 35.6 percent of GDP in 1989 to 29.8 percent in 1990, and continued to fall to 27 percent of GDP by 1995. The fiscal deficit also decreased sharply from 7.6 percent of GDP in 1989 to 2.3 percent in 1990, and from 1991 onward, it fluctuated around 0 percent, accompanying the economic cycle.  (from here)

The citizens of Argentina reduced the government’s role in their economy.  We, on the other hand, have leaders who want to do the exact opposite.  Unfortunately, the citizens of Argentina did not stick to their guns either.  During the period of 2001-2002, Argentina found itself heavily in debt and unable to pay the bill (see here and here).

About these ads

About Citizen Tom

I am just an average citizen interested in promoting informed participation in the political process.
This entry was posted in economy, unraveling. Bookmark the permalink.