The primary obstacle to economic recovery is widespread insolvency among households and banks (meaning liabilities exceed assets). A consumer who is broke cannot spend, and a bank that is broke cannot lend. Devaluing the dollar would reduce the real value of the debt (increase the nominal value of the assets), rendering millions of households and most banks instantly solvent. [Let me explain.] Words: 590
So said W.C. Varones (www.wcvarones.com) in edited excerpts from his original article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Varones went on to say, in part:
Two Benefits of Devaluation
- If a family has a $200,000 mortgage on a house now worth just $150,000, and they also carry some credit card debt and are underwater on an auto loan a 50% devaluation of the dollar would mean a doubling of general price levels, making the house worth $300,000 and [enable] the family to sell or refinance the house and/or car, pay off the credit card debts, and go from a negative net worth to a substantial positive net worth.
- If the U.S. devalues the dollar faster than other countries devalue their currencies, American manufacturing and exporting will become more viable. Currently labor costs are too high in the U.S. relative to the rest of the world, leading to both automation and overseas outsourcing.
The Best Way to Achieve Inflation
Bernanke’s current mechanisms are not working as zero interest rates and buying assets from the banks serves only to bail out Wall Street and create asset bubbles that benefit asset owners – but this doesn’t get money to the broad mass of consumers. The misguided theory seems to be that if the banks are made healthy, they’ll eventually start lending to the little people – but people don’t need more debt. Too much debt is what got them here in the first place, and more debt will only make things worse. What people need is cash to pay down the debt.
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If Ben Bernanke really wanted to solve the problem, he’d stop giving money to the banks and follow through on his “helicopter drop” threat to get the money where it’s needed, to the people [and below is just one way he could accomplish just that:].
- give a printing-financed tax refund…of all the federal income taxes they’ve paid for the last three years. Cap the amount for the rich and give some to the non-taxpaying poor to get the money where it will help.
- [Read 2012: Is This How U.S. Financial Crisis Will Unfold Later This Year? for another way to bring major inflation in the U.S. about].
It gives me no pleasure to call for debasing the currency. I hate what the Dirty Fed has done to our dollar and our country but by blowing bigger and bigger bubbles to try to prevent normal, healthy recessions from occurring, the Fed has painted itself into a corner.
Obviously there are great risks to devaluation/inflation, with Weimar Germany and Zimbabwe being cautionary examples. [Read: 21 Countries Have Experienced Hyperinflation In Last 25 Years – Is the U.S. Next!]
Is it possible to pull off a one-time devaluation followed by a sound money regime? I don’t know, but I don’t see any option but to try.
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As economic and political matters become more desperate in the U.S., so will what the government considers acceptable. If a debt default cannot be engineered via continuous inflation as the Fed’s current money-printing is attempting to do, it will occur via a direct repudiation of obligations or a quasi-surreptitious one such the hypothetical one I present in this article. Here is… a look (not a prediction) at a series of not improbable events that could develop [and which] would change our economic world overnight[ – and your financial well-being too]. Words: 1365
The Fed is completely convinced that without an inexorably rising rate of inflation there won’t be enough money made available to finance our rapidly increasing national debt. [As such, they have just] disclosed that they now have an inflation goal of at least two percent . As a result, we are stuck with a perpetually decreasing standard of living, a middle class that is on the endangered species list and provided the holders of U.S. dollars a target rate for its destruction…[Indeed,] Bernanke’s actions are so destructive to savers that I’m sure if he were a broker, he would be telling his clients to buy more gold.
Economists are telling central banks to accelerate monetary growth even faster…to avoid a bank balance sheet implosion with all the deflationary consequences that implies. [As such,] the prospects for 2012, and thereafter, are for Total Money Supply to continue its hyperbolic trend – and when such a trend becomes established it becomes almost impossible to stop because the whole debt-based economy and the banking system would collapse. [Let me explain further.]
There is a difference between inflation and hyperinflation…and there is no gradual path from one to the other. To wind up with true hyperinflation, some very bad things have to happen. The government has to completely lose control… the populace has to completely lose faith in the system… or both at the same time. [Are we there yet? Let’s take a look.] Words: 1188
The U.S. economic and systemic-solvency crises of the last four years only have been precursors to the coming Great Collapse: a hyperinflationary great depression. Outside timing on the hyperinflation remains 2014, but there is strong risk of a currency catastrophe beginning to unfold in the months ahead…moving into a full blown hyperinflation [in a few] months to a year… depending on the developing global view of the dollar and reactions of the U.S. government and the Federal Reserve. [Let me go into more detail.] Words: 2726
In our estimation, the most likely time frame for a full-fledged outbreak of hyperinflation in America is between the years 2013 and 2015 [based on 12 warning signs that are on the horizon.] Americans who wait until 2013 to prepare, will most likely see the majority of their purchasing power wiped out. It is essential that all Americans begin preparing for hyperinflation immediately. Words: 2065
This analyst sees the perfect storm of converging criteria almost perfectly timed and aligned with the 2012 election cycle. When the moment arrives, the financial earthquake will rapidly demolish the existing highly precarious financial system. Government will stand by helpless, unable to shield itself, much less its vulnerable citizens or private financial institutions from the tsunami of debt and currency destruction. 2012 is shaping up to be the blockbuster main event of the ongoing financial crisis. Massive amounts of new debt, vast quantities of additional digital dollars and the spark of higher interest rates will set off version 2.0 of the credit-driven financial implosion. Let me explain. Words: 1443