So says Shaun Connell (www.livegoldprices.com) in edited excerpts from his original article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Connell goes on to say, in part:
What is Hyperinflation?
Historically speaking, hyperinflation is essentially always a political event. Someone loses a war, the government collapses, socialists take over — some huge dramatic political event happens that triggers the hyperinflation. After this huge event, the politicians in charge generally begin printing money and dishing it [out] many times more than existed the year before… as inflation begins to pick up, the leaders then also generally speed up the printing.
First, high inflation and hyperinflation are different. I think we’re going to see high inflation over the next five to ten years — unless something goes very, very wrong with the economy, that is, but that’s not hyperinflation.
Hyperinflation is when people spend money as fast as they can because it’s losing value on a daily or weekly basis. In other words, it’s when savings of any sort become ]the] stupid [thing to do]. That’s absolutely, absolutely not the case right now. People who understand the value of cash have made a killing, because we’re not yet in a hyperinflationary economy.
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Why Hasn’t Hyperinflation Hit Yet?
Hyperinflation isn’t going on right now. Some prices are going through the roof, but nothing close to what it would be like in hyperinflation, especially not since some other prices are staying steady or dropping. Sure, inflation is occurring– but not hyperinflation.
Hyperinflation hasn’t hit yet for several reasons:
- Credit dried up: Credit [hasn’t been] what it used to be since 2008. We went from credit being something anyone could get to it being almost impossible for…[much] of society to get loans. That might be bad economics, but that’s deflationary and the Fed and even Congress’ printing hasn’t put enough money into the economy at a rate fast enough to counteract much of the loss in the supply.[…]
In our economic system, debt is currency…[and while] it’s a horrible system that creates huge bubbles that have to burst…[causing] recessions/depressions and, during recessions/depressions, credit dries up. Banks are afraid to lend money. That means deflation kicks in. So if $500b in loans are not lent out, then we’re going to have deflation — even if the Fed lowers interest rates. That’s just the world we live in, for better or worse.
- Printing is “too” slow: For hyperinflation to hit, [the Fed and other central banks] will need to issue much, much more currency…[than what is being loaned out] — and that is just not going to happen anytime soon. If hyperinflation happens, it won’t be because of anything currently in the news. If anything, we’re about to [encounter] more deflation — especially because of what’s going on in Europe.
…During QE2, when the Fed essentially bought government debt with newly “printed” currency, the impact was minimal because the purchased debt was just put on the Fed’s books… it’s essentially the government paying the government money. In other words, that money isn’t in circulation yet, and probably won’t be in circulation to the extent [necessary] to trigger anything like hyperinflation…
In a world where debt is money, a drop in the availability of new credit is essentially a drop in the money supply and that’s why hyperinflation hasn’t hit, and won’t hit, unless something drastic happens.
Can the Fed Cause Hyperinflation?
The Fed doesn’t print money and most likely can’t “create” inflation. They can only allow inflation to be created — but that requires the banks to do a bunch of lending. That’s not going on and during a recession, it won’t happen…[With] Quantitative Easing…the Fed [has been] trying to play duct-tape with the economy, and that’s not working. Basically, the Fed is running out of bullets.
Why didn’t this QE create massive velocity and explode consumer prices more than the jump that it did cause? The reason is pretty simple… the Fed just bought US debt, but it’s still on the balance sheets. When they did that, the reserve requirements suddenly changed. That’s why even Ben admitted that the QE really didn’t achieve anything except a psychological impact.
Just because there’s more money on the Fed’s balance sheets doesn’t mean that that same money will hit the market. Here’s a simple explanation:
If the government printed $1 Trillion dollars and sent that cash to the moon, would that create massive inflation? Of course not. That money is on the moon [and] that’s one of the reasons QE2 hasn’t had the huge impact many thought it would… the overall amount of money in circulation barely changed.
The most important thing you can learn from this article is this:
The Fed can’t print money at will. It can only lend money out when there’s a demand for credit [to] buy certain assets already in existence – and during a recession, it’s very, very hard to lend that money out.
The above being the sase, hyperinflation is very unlikely to happen in the United States [or elsewhere in the developed world, for that matter,] in the very near future. We’re absolutely going to suffer from inflation, and we have plenty of malinvestment bubbles created by the Fed [and other central banks], but the end result is going to be stagflation rather than hyperinflation.
*http://livegoldprices.com/hyperinflation-in-america/ (To access the article please copy the URL and paste it into your browser.)
Editor’s Note: The above article has been has edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) 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.
Whether our current economic crisis will end with massive inflation or in a deflationary spiral (ultimately, either one results in a Depression) is more than an academic one. It is the single most important variable for near and intermediate term investing success. It is also important in regard to taking actions which can prepare and protect you and your family. [Here is my assessment of what the future outcome will likely be and why.] Words: 1441
Daniel Thornton, an economist at the Federal Reserve Bank of St. Louis, argues that the Fed’s policy of providing liquidity has “enormous potential to increase the money supply,” resulting in what The Wall Street Journal’s Real Time Economics blog calls “an inflation inferno.” [Personally,] I think it’s too soon to make significant changes to a portfolio based on inflation fears. Here’s why. Words: 550
The developed economies of the world have opened the money spigots…[and this] massive money and credit creation is sitting in the banking system like dry tinder just waiting for a spark to set it ablaze. How quickly it happens is anyone’s guess, but once it does we are likely to be enveloped in a worldwide inflation unlike anything before ever witnessed. [Let me explain further.] Words: 625
Evidence shows that the U.S. money supply trend is in the early stages of hyperbolic growth coupled with a similar move in the price of gold. All sign point to a further escalation of money-printing in 2012…followed by unexpected and accelerating price inflation, followed by a rise in nominal interest rates that will bring a sovereign debt crisis for the U. S. dollar with it as the cost of borrowing for the government escalates…[Let me show you the evidence.] Words: 660
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.] Words: 550
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
It is my view that the world has entered a new boom-bust cycle driven by oil prices. Oscillating oil prices – as opposed to credit cycles – will repeatedly stimulate and crash the highly levered global economy. Governments have not recognized this new cycle, and as part of a fruitless effort to retain control over deteriorating real growth and rising unemployment central banks will print more and more money, risking a hyperinflationary depression (stagflation at best). [As such,] the only respite for many investors is gold. [Let me explain.] Words: 925