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The Unavoidable Face Of Hyperinflation!

Dear Comrades In Golden Arms,

CIGA Eric shows in chart form the face of unavoidable hyperinflation - a currency event.

It is horrifying what the Fed and Treasury injected in percentage terms. A true measure of comparison can be seen in the 3 months of 2008 when the Fed accomplished more than in the 7 years from 1929 to 1937.

This is beyond all reason, having its own new and terrible consequences well in excess of the consequences of the 1929 and 1932 breaks.

Markets have been run now for years by algorithms, manipulators and seeded interests that are like summer thunderstorms. They are loud and scary, but quite short term and in the end quite meaningless and non-productive.
The dollar cannot and will not remain strong, nor can a planetary Weimar experience now be avoided.
see the graph here!
http://jsmineset.com/

Click here to view the chart in PDF format

Click here to view CIGA Eric's commentary website

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Never before...

have I seen so many ads for "companies" that want you to trade in gold jewelry for cash. These individuals are in the newspapers, on the radio and on TV. It's going to get very bumpy, very soon! I hope you guys have your "seatbelts" on.

Makes you wonder what they

Makes you wonder what they know that the rest of us do not!

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain

Is the collapse of the dollar inevitable?

Note: This is not in HTML - I'll edit it later or you can read it at my website, http://www.axiomaticeconomics.com/inevitable_collapse.php

In my [url=http://www.axiomaticeconomics.com/montagne.php][i]Critique of Mathematically Perfected Economy[/i][/url], I write:

[i]“The basic flaw in the logic of modern socialists (Montagne, Cook, Zarlenga, etc.) is confusion between motivation and capability. ‘[/i]He’s privately controlled![i]’ the socialist sneers at the Federal Reserve chairman, the unspoken assumption being that, were the socialist put in charge, he would immediately open the floodgates of wealth and prosperity for us all. It would be a veritable socialistic paradise, if only the Benevolent One were given the authority to print money! But, the fact is, the Fed is in a box. If a socialist were put in charge, he would be in the same box.”[/i]

In my [url=http://www.axiomaticeconomics.com/critiques.php][i]Critique of Austrian Economics[/i][/url], I write:

[i]“Rothbard discusses an inevitable ‘distortion-reversion process’ but says little about how it actually plays out. Apparently forgetting his master’s regression theorem, he declares ‘the continuance of confidence in the banks is something of a psychological marvel’ (1970, p. 867).

“Garrison (2001, p. 44) redefines the Production Possibilities Frontier, PPF, to be [/i]sustainable[i] combinations of investment and consumption, but says nothing about what is so unsustainable about a credit expansion. Since he defines consumption on the PPF (which is real) to be the same as consumption on the Hayekian triangle (which is nominal), the unsustainability [/i]cannot[i] have anything to do with a devaluation of the currency.

“So we see that Mises, writing in 1949, was really the last Austrian to make much of an effort to explain or predict interest rate spikes. After that, their discussion of this issue, including Mises’ later writings, increasingly took on the tone of a morality play, with the greedy bankers getting their ‘inevitable’ comeuppance.”[/i]

Clearly, the socialists and the Austrians are at opposite ends of the spectrum of views on inevitability. Socialists believe that the Federal Reserve can turn on a dime, veering away from economic collapse towards a socialistic paradise simply by giving the right person the chairmanship. And how would the Benevolent One accomplish this feat? According to the Debt Virus Theory, it is as simple as printing money and spending it directly into the economy, rather than buying Treasury Bills. On the other hand, the Austrians believe that a “distortion-reversion process” is inevitable. Credit expansion is unsustainable and this, apparently, is true no matter how benevolent the chairman of the Fed may be.

Is hyperinflation the inevitable result of inflation? In America we have only had one bout with hyperinflation and, over 200 years later, the phrase “not worth a Continental” is still part of our language. “In conclusion,” I write in my [url=http://www.axiomaticeconomics.com/montagne.php][i]Critique of Mathematically Perfected Economy[/i][/url], “to Montagne, Cook, Zarlenga and anyone else who claims that they can open the floodgates of prosperity by spending paper money directly into the economy, I say: [i]‘The Debt Virus Theory is not worth a Continental!’[/i]” Debt Virus Theorists’ followers are mostly laymen (for obvious reasons) and, when I wrote this, I fully expected any American with a passing interest in economics to be familiar with the expression, “not worth a Continental.”

Indeed, the collapse of the Continental [i]was[/i] inevitable because, having spent Continentals directly into the economy (mostly for soldiers’ wages), the Continental Congress had nothing in their portfolio with which they could buy them back. They were, in fact, benevolent men who had no desire to see their newly-won nation racked with hyperinflation, but they could no more recall the paper money that they had printed than Frankenstein could recall his monster.

But surely the Federal Reserve is smarter than the Continental Congress! Until as recently as last year (2007), I would have responded to this question with a begrudging “yes.” As much as I dislike the United States having a central bank (I advocate free banking), I will admit that, by buying only Treasury Bills, the Federal Reserve has given themselves a portfolio with which they can buy back dollars in the event that inflation should threaten to turn into hyperinflation. Unless the Federal Government itself collapses – by losing a war, for instance – there will always be a market for T-Bills. Selling T-Bills for cash and destroying the cash is a painful, recession-inducing process, as evidenced by our experience during Reagan’s first term, but it can be done. Contra Rothbard, hyperinflation is [i]not[/i] inevitable under a central bank.

So what has Ben Bernanke done to make me question his intelligence, if not his benevolence? He polluted the Fed’s portfolio with AAA-rated securities, which I have mocked as being “about as marketable as the chocolate-covered cotton balls that Milo Minderbinder was trying to foist on people in [i]Catch 22[/i].” Everybody knows that, in spite of their impressive-sounding AAA rating, these securities are really just packages of sub-prime loans that nobody wants – what I defined in my [url=http://www.axiomaticeconomics.com/devils_dictionary.php][i]Devil’s Dictionary of Economics[/i][/url], as “worthless crap.” If people [i]wanted[/i] them, in the sense of being willing to pay cash for them, then we wouldn’t be having a credit crisis in the first place.

Bernanke’s actions have made the question of hyperinflation a murky one. The Austrian’s depiction of hyperinflation as being the inevitable fate of central banking has always been cartoonishly simplistic, and it remains so. However, economists of all schools must now admit that hyperinflation is at least a [i]possibility[/i]. If the dollar appears to be losing its status as the world’s reserve currency, what will the Fed do about it? Sell their AAA-rated securities for cash and destroy the cash? But what if nobody is impressed with the AAA rating and won’t buy their securities at any price? Then the Fed will be in the same position as the Continental Congress: Benevolent men who have no desire to see their beloved nation racked with hyperinflation, but who have no more ability to recall the paper money that they have printed than Frankenstein had to recall his monster.

Of course, not [i]all[/i] of the Fed’s portfolio is in AAA-rated securities and not [i]everything[/i] with an AAA rating is worthless crap. They still have lots of T-Bills and there is a market for at least [i]some[/i] of their AAA-rated securities. This is why the question of hyperinflation has become so murky. The bottom line is that nobody – not even Ben Bernanke – really knows what the Fed’s portfolio is worth these days. For this reason, I would be very leery of any economist, from any school, who speaks confidently about the future of the dollar. Is the collapse of the dollar inevitable, as the Austrians claim? Or are we at the dawn of a socialistic paradise, provided only that we install the Benevolent One in the Federal Reserve’s chair, as the Debt Virus Theorists claim? The answer is certainly somewhere between these extremes, but where [i]exactly[/i] I cannot tell you.

[b]REFERENCES[/b]

Garrison, Roger. 2001. [i]Time and Money: The Macroeconomics of Capital Structure[/i]. New York, NY: Routledge

Rothbard, Murray N. [1962] 1970. [i]Man, Economy and State[/i]. Los Angeles, CA: Nash Publishing

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Shaka, you so crazy! www.sniperflashcards.com

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Shaka, you so crazy! www.axiomaticeconomics.com

When is the COMEX going to

When is the COMEX going to default again???

Market manipulation makes it

Market manipulation makes it hard to many any accurate predictions and leaves no possibility off the table.

http://federalfallacy.com

watch and see what happens

watch and see what happens with the february delivery month.. maybe it will maybe it won't!

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain

But wait, this was a sure

But wait, this was a sure thing just a month ago.................

no one ever said it was a

no one ever said it was a sure thing.. hoping yes, but sure No.. once again an essay is presented and people skim over the essay and presume it says something.. nice try!

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain

SteveMT's picture

Agree, We are right there. The printing presses will go to ..

super-high gear in 6 days.

Buy gold and silver now while it is still obtainable.

Buy gold and silver now

Buy gold and silver now while it is still obtainable.

you are right.. I think the prices are going to be manipulated down to scare the masses out! then the banksters and worl elite will come in and scoop it up.. then watch out! the public has been set up for this with all this "deflation" BS. the network business shows etc are pumping deflation.. they will engineer a sell off of PAPER metals to panic people out. when the small guy goes back into buy there won't be any!

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain

"...beyond all reason"

Ain't that the truth? Holy cow. I can't even begin to imagine what this is going to look like worldwide. Man! Beyond all reason and beyond all imagination.

your only protection is

your only protection is prebuy everything, and get some silver and Gold!

"When governments fear the people there is liberty. When the people fear the government there is tyranny."
-Thomas Jefferson

I am more concerned about the return of my money than the return on my money. --Mark Twain