Joined: Sep 03, 2007 Posts: 614 Location: Sunny Virginia, USA
Posted: Thu May 01, 2008 8:25 am Post subject: Re: Get Rid of Yer Dollars While Ye Can: Hyperinflation Com
Pretorian wrote:
there is 1 point everyone is missing, when they talk about hyperinflation in US. Americans don't own anything; there are more mortgages than paid off houses, more car loans than a value of paid off cars, and a WAY more debt than savings. So what is a point of hyperinflation? To strip Americans of their personal debts?
What a great question, but while I'm not sure I have the full answer. I will however be happy to give it a stab.
First, if the Fed quits printing dollars and starts raising interest rates to stave off inflation, the money machine in the US will likely seize up and the economy will essentially crash. Sort of like a motorcycle going 60mpg suddenly having its engine seize up; it can throw the rider. However, AFAIK this is all theory as no country in our position has ever done it for the obvious reason - they don't want the masses marching on government.
The inflate-your-way-out has been accomplished several times, usually with long term success and sometimes punctuated by very short term suffering. There are lots of cases of similar countries who got into a mess like the US is facing now (different reasons, different circumstances, same inflate-our-way-out response). Often times, inflation hits, corrections are made, things work themselves out (Carter-Reagan period is a good modern example for US). However, sometimes it turns to hyperinflation and things get really tough for the common person. Not so much for government and the rich (with exceptions, I'm sure).
The Inflate-Your-Way-Out-Of-Trouble method works, and it usually works pretty well (to an economist's point of view). It can lead to problems, but the pulling back of money, as I understand it, will most likely cause pain and damage rather than lead you out of the problem.
So why are they doing it? Remember, we're talking about politicians. These people worry about one thing and that is getting reelected. You can't get reelected very easily when TSHTF in the financial markets. So they do not want to have to face the music on their watch. They will do everything possible to give the problem to the next guy or to put as long as possible.
Also, while the Fed controls the money system, they face similar problems as each fed member has to get renominated every few years in order to stay in the powerful position they are in. So there is some small pressure from the hill on what policy to set.
So why do we let our economy get into this mess every 50 or so years?
Because the people of this country do not understand money and the economy. They simply let government do whatever it wants, because "government knows better" and "it's really complicated".
If you or I need money, we either get a second job (providing services at the market price in exchange for money) or we cut our expenses (cut waste and non-necessities from our budget). If government wants money, it typically taxes its citizens (providing no extra service for the money it takes) or prints more money (refuses to cut waste or non-necessities). This is the first disconnect - Economic reality vs Economic coercion.
The idea that more is better and that we must continue to grow our economy at all costs is another problem. While it is very arguable that "that which does not grow, dies" the rampant colossal waste born by a system that prizes growth above all else is what has gotten us our disposable economy and ever inflated monetary system. People prefer stable, sustainable growth (as the typical person is planning for their life) while growth at all costs for government (planning for the next election) and business (planning for the next fiscal period) is the rule. This is the second disconnect - life planning vs economic planning.
Finally, in order to propagate the ability to allow government to grow and business to "do its thing" the people have, over the decades, been blinded to their duties as citizens. The duty of the citizen is to guard against government excess and firing those that fail in the job. Guarding against government excess will, in turn, lead to guarding against the excess of business. Thus, since the founding of this country, instead of teaching each successive generation the duties it must perform in order to enjoy the fruits of freedom, it has been trained to accept the needs of the very institutions that the people should control. The third disconnect - citizen responsibility vs control of the masses.
In the final analysis all I can conclude is that the chickens have accepted the farmer's decision to hire a fox to watch the hen house. _________________ When somebody makes a statement you don't understand, don't tell him he's crazy. Ask him what he means. -- Otto Harkaman, Space Viking
Posted: Fri May 02, 2008 12:23 am Post subject: Re: Get Rid of Yer Dollars While Ye Can: Hyperinflation Com
jlw61 wrote:
...
The inflate-your-way-out has been accomplished several times, usually with long term success and sometimes punctuated by very short term suffering.
...
I guess it depends on your definition of "long term". History shows that in the "long term" every government must collapse. Hyper inflation is inflation gone out of control. Governments don't mind inflation but they certainly do NOT want hyperinflation, because it's usually a harbinger to political revolution. French Revolution, German Weimar Republic of 1920's etc...
Every government whether democracy or dictatorship must convince it's citizens that they have a vested interest in keeping the current system or else...... If your money becomes worthless (basically you lose everything you have) then where's the incentive to keeping the current system? See what I mean. This is why government fears hyperinflation, but they also need to buy votes so they try inflate a little and hope they don't push it too far. It's a game that always ends up the same. --> it's where the little guys lose.
Posted: Fri May 02, 2008 12:47 am Post subject: Re: Get Rid of Yer Dollars While Ye Can: Hyperinflation Com
cube wrote:
jlw61 wrote:
...
The inflate-your-way-out has been accomplished several times, usually with long term success and sometimes punctuated by very short term suffering.
...
I guess it depends on your definition of "long term". History shows that in the "long term" every government has collapse.
Posted: Fri May 02, 2008 6:43 am Post subject: Re: Get Rid of Yer Dollars While Ye Can: Hyperinflation Com
RE: Social Security.
As a baby boomer, I have long believed that when the process goes negative, the govt won't renege on payments, which is political suicide, nor trash the economy for the same reason. Instead, I expect them to inflate away the value of the SS payments into oblivion, since so few of the public can accurately point to the cause of their problem. Obfuscation and confusion, the stock in trade of liars and thieves! _________________ Local fix-it guy..
Joined: Sep 03, 2007 Posts: 614 Location: Sunny Virginia, USA
Posted: Fri May 02, 2008 8:19 am Post subject: Re: Get Rid of Yer Dollars While Ye Can: Hyperinflation Com
cube wrote:
jlw61 wrote:
...
The inflate-your-way-out has been accomplished several times, usually with long term success and sometimes punctuated by very short term suffering.
...
I guess it depends on your definition of "long term". History shows that in the "long term" every government must collapse. Hyper inflation is inflation gone out of control...
... It's a game that always ends up the same. --> it's where the little guys lose.
Thank you for expanding upon my theme. Well said. "Long term" to a politician is the next election, to the party, the next two or three. The historical long term is, of course, as you said.
patience wrote:
RE: Social Security.
As a baby boomer, I have long believed that when the process goes negative, the govt won't renege on payments, which is political suicide, nor trash the economy for the same reason. Instead, I expect them to inflate away the value of the SS payments into oblivion, since so few of the public can accurately point to the cause of their problem. Obfuscation and confusion, the stock in trade of liars and thieves!
A magnificent display of political forethought! Also, IMHO, the most likely scenario. The question is, can they prevent hyperinflation? There is not only social security to worry about but the retirement trust fund for government workers. Again, I suspect if we look carefully, we'll find IOUs instead of investments. So the current multi Trillion dollar deficit in SS is compounded by the retirement account.
If extreme hyperinflation sweeps America, we face an end to the democratic experiment; and not just in the US (and no, socialism would not rise, my Marxist friends, totalitarianism would be the rule of the day). _________________ When somebody makes a statement you don't understand, don't tell him he's crazy. Ask him what he means. -- Otto Harkaman, Space Viking
Joined: Mar 07, 2007 Posts: 358 Location: Holland, United Kingdom (of the seven Netherlands)
Posted: Fri May 02, 2008 12:08 pm Post subject: Re: Get Rid of Yer Dollars While Ye Can: Hyperinflation Com
jlw61 wrote:
If extreme hyperinflation sweeps America, we face an end to the democratic experiment; and not just in the US
I don't see why hyperinflation would have an impact on the type of government. You'll just get a monetary reform. We had one after WW II. All the people that made money during the war lost it again after the war. That was considered justice. Everybody received 10 guilders (€ 4,50) to make it through the week and nobody complained.
Posted: Fri May 02, 2008 7:09 pm Post subject: Re: Get Rid of Yer Dollars While Ye Can: Hyperinflation Com
Pretorian wrote:
there is 1 point everyone is missing, when they talk about hyperinflation in US. Americans don't own anything; there are more mortgages than paid off houses, more car loans than a value of paid off cars, and a WAY more debt than savings. So what is a point of hyperinflation? To strip Americans of their personal debts?
Yup, stagflation is more on par though there may be some flirting with hyperinflation and hyperdeflation depending on the circumstances. It's about the insiders taking control and when it's all over the third world will have gone global. That is the goal. _________________ Just look at us. Everything is backwards; everything is upside down. Doctors destory health, lawyers destroy justice, universities destroy knowledge, governments destroy freedom, the major media destroy information and religions destroy spirituality.
Posted: Fri May 02, 2008 7:56 pm Post subject: Re: Get Rid of Yer Dollars While Ye Can: Hyperinflation Com
patience wrote:
RE: Social Security.
As a baby boomer, I have long believed that when the process goes negative, the govt won't renege on payments, which is political suicide, nor trash the economy for the same reason. Instead, I expect them to inflate away the value of the SS payments into oblivion, since so few of the public can accurately point to the cause of their problem. Obfuscation and confusion, the stock in trade of liars and thieves!
Agree. Politically speaking it's much easier just to run the printing press and say something like, "Inflation is caused by Arab countries raising the price of oil." You'll get 51% of the population buying into that story and as a politician that's all you need.
The "true" cause is of course our own actions (isn't that how life usually works) by running budget and trade deficits. I'm somewhat torn between two sides:
1) on one hand I do feel a little bit bad for people
2) on the other hand people choose their destiny. Americans have made it very clear they are not serious about running a balance budget
Posted: Fri May 02, 2008 8:18 pm Post subject: Re: Get Rid of Yer Dollars While Ye Can: Hyperinflation Com
mmasters,
Stagflation is what I see out there, and insiders making a power grab, I believe. What I don't get is why would these power mongers WANT to create a world of poor people? It looks to me like they would want a thriving world so they could have more pie, instead of making the pie smaller. Well, granted, the pie is getting smaller anyway, but do "they" want that? If so, why? _________________ Local fix-it guy..
Joined: Sep 14, 2004 Posts: 6428 Location: Rural Virginia
Posted: Fri May 02, 2008 8:28 pm Post subject: Re: Get Rid of Yer Dollars While Ye Can: Hyperinflation Com
Gerben wrote:
jlw61 wrote:
If extreme hyperinflation sweeps America, we face an end to the democratic experiment; and not just in the US
I don't see why hyperinflation would have an impact on the type of government. You'll just get a monetary reform.
Hyperinflation in Germany in the 1920s was one the principal events that put the Nazis in power. This is a historical fact. _________________ "Actually, humans died out long ago."
---Abused, abandoned hunting dog
"Things have entered a stage where the only change that is possible is for things to get worse."
---Me and my brother
One famous episode occurred during the reign of the Emperor Diocletian in last part of the third century AD.
............
But Diocletian had issued vast amounts of copper coins. This led to price increases. When prices rose Diocletian attributed the inflation to the greed of merchants. In 301 AD Diocletian issued an edict declaring fixed prices; i.e., price controls. His edict provided for the death penalty for anyone selling above the control prices. There was also penalties (less severe) for anyone paying more than the control price. Irate consumers sometimes destroyed the businesses of those who sold higher than the control prices.
Joined: Sep 03, 2007 Posts: 614 Location: Sunny Virginia, USA
Posted: Fri May 02, 2008 11:02 pm Post subject: Re: Get Rid of Yer Dollars While Ye Can: Hyperinflation Com
Gerben wrote:
jlw61 wrote:
If extreme hyperinflation sweeps America, we face an end to the democratic experiment; and not just in the US
I don't see why hyperinflation would have an impact on the type of government. You'll just get a monetary reform. We had one after WW II. All the people that made money during the war lost it again after the war. That was considered justice. Everybody received 10 guilders (€ 4,50) to make it through the week and nobody complained.
The world is a very different place since WWII; especially in America. Most people do not own their homes, are very deep in debt, and are heavily dependent on oil. Almost nobody grows their own food.
Hyperinflation, if carried on for very long, would threaten to destroy America. So say inflation has been in the triple digits for the last three years and some candidate steps forward telling everyone that the US is the greatest country on earth. He reminds everyone of the glories of America and how we will reclaim our national pride. He's swept into office.
Now lets say he hates Mexicans.
Believe me, America could go down the same path that Germany took in the 30's. Or we could get inventive and make things much worse. What if Americans start thinking, for real, that the oil in other countries belongs to them? If you think that can't happen, then I would ask you to think again.
BTW, should the American economy tank hard, do you think other economies might tank just as hard? Losing 25% of your market can be a pretty unsettling thing. _________________ When somebody makes a statement you don't understand, don't tell him he's crazy. Ask him what he means. -- Otto Harkaman, Space Viking
Joined: Apr 08, 2006 Posts: 1320 Location: Somewhere there
Posted: Sat May 03, 2008 2:01 am Post subject: Re: Get Rid of Yer Dollars While Ye Can: Hyperinflation Com
jlw61 wrote:
Pretorian wrote:
there is 1 point everyone is missing, when they talk about hyperinflation in US. Americans don't own anything; there are more mortgages than paid off houses, more car loans than a value of paid off cars, and a WAY more debt than savings. So what is a point of hyperinflation? To strip Americans of their personal debts?
What a great question, but while I'm not sure I have the full answer. I will however be happy to give it a stab.
First, if the Fed quits printing dollars and starts raising interest rates to stave off inflation, the money machine in the US will likely seize up and the economy will essentially crash. Sort of like a motorcycle going 60mpg suddenly having its engine seize up; it can throw the rider. However, AFAIK this is all theory as no country in our position has ever done it for the obvious reason - they don't want the masses marching on government.
The inflate-your-way-out has been accomplished several times, usually with long term success and sometimes punctuated by very short term suffering. There are lots of cases of similar countries who got into a mess like the US is facing now (different reasons, different circumstances, same inflate-our-way-out response). Often times, inflation hits, corrections are made, things work themselves out (Carter-Reagan period is a good modern example for US). However, sometimes it turns to hyperinflation and things get really tough for the common person. Not so much for government and the rich (with exceptions, I'm sure).
The Inflate-Your-Way-Out-Of-Trouble method works, and it usually works pretty well (to an economist's point of view). It can lead to problems, but the pulling back of money, as I understand it, will most likely cause pain and damage rather than lead you out of the problem.
So why are they doing it? Remember, we're talking about politicians. These people worry about one thing and that is getting reelected. You can't get reelected very easily when TSHTF in the financial markets. So they do not want to have to face the music on their watch. They will do everything possible to give the problem to the next guy or to put as long as possible.
Also, while the Fed controls the money system, they face similar problems as each fed member has to get renominated every few years in order to stay in the powerful position they are in. So there is some small pressure from the hill on what policy to set.
So why do we let our economy get into this mess every 50 or so years?
Because the people of this country do not understand money and the economy. They simply let government do whatever it wants, because "government knows better" and "it's really complicated".
If you or I need money, we either get a second job (providing services at the market price in exchange for money) or we cut our expenses (cut waste and non-necessities from our budget). If government wants money, it typically taxes its citizens (providing no extra service for the money it takes) or prints more money (refuses to cut waste or non-necessities). This is the first disconnect - Economic reality vs Economic coercion.
The idea that more is better and that we must continue to grow our economy at all costs is another problem. While it is very arguable that "that which does not grow, dies" the rampant colossal waste born by a system that prizes growth above all else is what has gotten us our disposable economy and ever inflated monetary system. People prefer stable, sustainable growth (as the typical person is planning for their life) while growth at all costs for government (planning for the next election) and business (planning for the next fiscal period) is the rule. This is the second disconnect - life planning vs economic planning.
Finally, in order to propagate the ability to allow government to grow and business to "do its thing" the people have, over the decades, been blinded to their duties as citizens. The duty of the citizen is to guard against government excess and firing those that fail in the job. Guarding against government excess will, in turn, lead to guarding against the excess of business. Thus, since the founding of this country, instead of teaching each successive generation the duties it must perform in order to enjoy the fruits of freedom, it has been trained to accept the needs of the very institutions that the people should control. The third disconnect - citizen responsibility vs control of the masses.
In the final analysis all I can conclude is that the chickens have accepted the farmer's decision to hire a fox to watch the hen house.
That's a great post however you are referring to inflation in general, and i was talking about hiperinflation. I know a guy who paid off his mortgage doing some overtime for 1 month, those hours paid for the house. I also know plenty of people who could have bought houses with their savings which currently sell for $1-1.5M and and had to settle with a bubble gum or a busfare; THAT'S what hiperinflation is.
Joined: Sep 03, 2007 Posts: 614 Location: Sunny Virginia, USA
Posted: Sat May 03, 2008 3:31 pm Post subject: Re: Get Rid of Yer Dollars While Ye Can: Hyperinflation Com
I should have added something right off the bat in reply to what you wrote:
Pretorian wrote:
So what is a point of hyperinflation? To strip Americans of their personal debts?
There is no point to hyperinflation; government does not want hyperinflation but once you're in it's hard to get out. Governments and administrations tend to fall, or at the very least, not have the ability to spend like maniacs. Thus hyperinflation is not what they want. _________________ When somebody makes a statement you don't understand, don't tell him he's crazy. Ask him what he means. -- Otto Harkaman, Space Viking
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