Ushering in a New Era of Hyperinflation

This last week, “Helicopter Ben” and The Fed decided to “create” $1.2 Trillion in new money.

That is a lot of money.

Of course, I have no idea what the future holds. I can only make predictions. So let me venture a prediction here.

All the bail-out money that’s been dished out so far hasn’t really hit main street. It’s only hit Wall Street. So we really haven’t seen much inflation from bail-out money.

But this latest development — adding $1.2 Trillion to the money supply — could very well usher in a new era of hyperinflation in America.

If you study the Weimar Republic in pre-Hitler Germany… or modern-day Zimbabwe… or any other country where the government has decided to print money for any and every need…

…you’ll soon discover that hyperinflation is no walk in the park.

At first, people are able to pay off old debts with newly created money. Some are even able to pay off their mortgages within months instead of years.

Ultimately, though, people end up selling their homes to buy things like… bread.

Imagine getting a paycheck and promptly spending the entire thing on basic necessities just because waiting one day would mean losing half your purchasing power.

It sounds insane, but that’s what happens when hyperinflation is in full swing.

In the Weimar Republic, people eventually burned their money because it was cheaper to burn the paper than to buy wood.

Anyway, what you read here is speculation about the future based on The Fed’s latest move to create $1.2 Trillion out of thin air. A trillion here, a trillion there and it starts to add up to real money. Or, more accurately, fake money.

For all our sakes, I hope we don’t have to experience the ravaging effects of hyperinflation. But at this point it may be too late.

UPDATE: World Net Daily has picked up the story, today, March 22, 2009. They report that it has now been two years since The Fed stopped reporting M3 money supply figures.

Jerry Robinson, author of the new book Bankruptcy of Our Nation, says:

…the actions of the Fed can only serve at best as a temporary fix – placing a Band-Aid on a severe laceration.

“And it will only serve to delay and enlarge the scope of the impending day of reckoning for the United States,” he adds.

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6 thoughts on “Ushering in a New Era of Hyperinflation”

  1. I think you’re absolutely right.

    My concern, beyond the hyper-inflation and the suffering that goes with it, is the potential, politically, for craziness to be acceptable.

    Remember, the Weimar Republic’s hyper-inflation was a catalyst that made Nazi-ism acceptable to the German people. People are people. Americans won’t be immune to this if the hyper-inflation happens.

  2. I’ve considered that, too, John.

    When there’s economic and social upheaval, people are more willing to say “yes” to whatever the government wants to do, even if that means accepting dictators, torture, internment (concentration) camps, etc.

    Let’s hope it doesn’t come to that.

  3. Ryan, just found your blog and am a bit confused. I beleive that the scenario in some form as descibed in “Ushering in a New Era of Hyperinflation” will materialize. Whether it is nasty inflation or hyperinflation, we will see the value/purchasing power of our dollars decreased. It seems that you are focusing on debt reduction. A very noble and valuable exercise but probably not in this paradigm. May I suggest an alternative approach? Keep your debt. What is the benefit of debt reduction right now? What is your current debt load preventing you from accomplishing? What opporunities are you missing because you a focused on singular goal—debt reduction. What about investing to expand your business? What about investing some portion of your debt reduction funds on acquisition of physical assests such as silver or gold…as a hedge? What about taking on debt backed property? If inflation happens, savings become worth less and at worse worthless. If inflation is going to occur, then debt backed properties and physical assets are the way to go. I am not suggesting one extreme or the other. Simply that debt reduction should be balanced with other strategies. The most important issues is to make sure all variable rates are FIXED. Best of luck. Keep the faith brother

  4. Troy – You make some very excellent points, and these are things I’ve been thinking about as well.

    When I began this blog in Fall 2007, the current financial crisis was not in full bloom.

    And my debt was more than double what it is now.

    At the moment, my debt is not a problem for me at all. More of a nuisance than anything.

    I have considered buying silver… and may still do that. And I’m currently getting pre-qualified to buy a home. As you say, when hyperinflation kicks in, it’s much better to own debt-backed physical goods than to be the creditor.

    I really appreciate your insight, Troy. Thanks for the excellent comment.

    Ryan

  5. Actually, it was in 2006 that the Fed stopped publishing the M3 money supply figures.

    If you visit http://www.shadowstats.com, who provides continuation data for M3, you will get a _very_ clear impression of why they did that.

    Getting silver sounds like a good idea, BTW.

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