Hyperinflation Depression Imminent

Consider the current state of U.S. economic affairs.

1. Incredibly low interest rates
2. Low inflation
3. High Stock Market
4. Two wars funded by credit in the forms of bonds issued by Treasury
5. Massive increase of the money supply...printing of dollars
6. Confidence in the strength and buying power of the Dollar waining
7. Government actions to increase demand using selective and artificial means
8. Increasing credit capacity of banks through guarantees
9. Gold prices soaring
10. Rising unemployment
11. Systemic financial risks
12. World currencies linked to Dollar
13. U.S. is the largest consumer in the world (some 40% of world economy)

We're going to get back to the bold issues identified above soon. But for now, one doesn't have to look back too far to see the results of depression of a different type called a "Deflationary Depression". "The Great Depression was a "deflationary depression" wherein huge amounts of inflationary credit was wiped out resulting in lower real estate values, bank failures and wholesale stock devaluations. In a deflationary depression the adjustment is acute, short and permanent. But what made the Great Depression last so long?

All depressions (pre-1930) prior to The Great Depression were deep but short lived as wealth was redistributed to its rightful owners. People went about their way to work and not starve. Welfare was not in existence.
Deficit spending allowed for the finance of FDR's "New Deal" and not far thereafter, World War II. Hover's and FDR's actions extended the length of the depression through interventionist policies which included injection of substantial money into the then depressed economy. Programs such as Work Projects Administration (WPA), National Recover Administration (NRA), Tennessee Valley Authority (TVA) and Federal Deposit Insurance Corporation (FDIC) are examples of these programs.


The spending that occurred in that time frame say from 1934-1938 was later offset through War Bonds and by reserve payments and pledges by Foreign Governments, each looking for U.S. support their respective war efforts towards liberation. We provided goods and services to their efforts which produced jobs and new technologies....including advanced machining, aeronautical engineering, creation of plastics and ultimately...nuclear fission.

In comes "John Maynard Keynes"
(photo courtesy of Wikipedia)


"Keynesian's Theory" describes the roles and economic influences of three primary sectors of an economy: Government, Consumer, and Industrial. He taught that a "decrease" in demand of Industrial and Consumer sectors, (a destabilizing effect), can be offset by increases in Government spending, (a proposed stabilizing effect)....which is exactly what has occurred during this economic crisis under the Obama Administration.

The Keynesian theory goes that by offsetting with equal weight the declines in one or both sectors...an economy will re-stabilize through a makeup in the lack of money flow.

Fine in theory, but it makes several presumptions.

• The Government should be "flush with cash" allowing it is resources to inject such capital, (a condition that almost never exists) and,
• The country should not be at war, (where significant outflow of money is required to support wartime needs) and,
• National individual savings is high, (meaning that money is on the sidelines waiting to come into the economy once it stabilizes).

Our case here as we approach 2010 is quite different as as outlined in the opening list of conditions in this crisis event. Here we have no cash, personal or Government, and we are fighting not one...but two wars...and maybe a third if Iran or Somalia kick up. We have low inflation, low interest rates and high stock market - even following a brief correction. (You got to read this analysis of the stock market.) http://informationinstitute.blogspot.com/2009/11/stock-market-is-setting-up-to-repeat.html

Are you following these conditions?

Incredibly low interest rates: Our current money rate is less than 1/2 percent. The Fed Chairman says in advance of the typical report to congress that they will not be raising rates anytime soon.

Low inflation: Inflation has been extremely low and in fact deflationary in some commodities.

High Stock Market: As I wrote in the piece called "Stock Market Setting Up to Repeat Fall". http://informationinstitute.blogspot.com/2009/11/stock-market-is-setting-up-to-repeat.html We are in for the same collapse in the market as short sellers take another bite out of Americans retirement accounts.

So this depression is going to be different...far different...its called "hyperinflation depression" and the effects will reach almost every person on the planet.

You will be relying on yourself...Face it...There will be no Government Program to bail you out of this mess. What are the symptoms of "Hyperinflation Depression" you might be asking?

Well here are a few of the more notable symptoms:

• Government increases credit supply
• Government prints lots of money
• Government creates artificial demand with massive spending programs
• Government spending goes to only a few companies - companies which usually produce nothing...(Billions to "ACORN ring a bell")
• Prices increase rapidly (initially 20%) as inflation kicks in (then compounds)
• Competition between foreign dollars and dollars held in the U.S.
• Alternate currencies under discussion or in affect....gold

All of this would be academic if the Dollar was backed by Gold, instead of being a "legal tender" of trust by our Government.

If you want more information, check out Gun, Garden and Gold.

http://informationinstitute.blogspot.com/2009/11/gun-garden-and-gold.html