Predicting America's Future Courtesy Of Ancient History

[Horn]

It is amusing that just like the Imperial decline of the Roman empire in the Common Era was matched by unprecedented fiscal profligacy, we have precisely the same thing now. As to what happens next...



“With few exceptions the Emperors of the third century pursued a policy of wasteful expenditure. Personal extravagance, donatives to the populace at Rome, costly civil and foreign wars, in which a pandering to the greed of the soldiery was a condition of success, had drained the wealth of the provinces…The conception of a national debt was as foreign to the Emperors of the third century as it had been to the statesmen of the Republic. Instead, to give an air of SUPERFICIAL PROSPERITY, resort had been had to a POLICY OF INFLATION (my emphasis).”
“The gold coinage lost all stability and regularity, while the debasement of the silver proceeded till Gallienus flooded the market with a worthless billon. The State had virtually declared itself bankrupt…In consequence PRICES SOARED TO AN ENORMOUS HEIGHT, trade was undermined and speculation flourished. Individual fortunes were lost, and in town and country alike the honest citizen was faced with untold hardships without any prospects of better days to come.”
I wanted to explore the extent and timing of Rome’s hyperinflation in quantitative terms and compare what happened then with what’s happening to prices today.
Inflation data during the Roman Empire is not exactly easy to come by, but there is a remarkably good proxy in my opinion, which is the price of Egyptian wheat. The source I used was the research paper “Another View on an Old Inflation: Environment and Policies in the Roman Empire up to Diocletian’s Price Edict” by the Centre of Planning and Economic Research in Athens. Relying heavily on a multitude of other sources, this paper contains a time series for wheat prices stretching from 18 B.C. to 301 A.D.
It’s important to explain why Egyptian wheat prices serve as a good proxy for inflation across the Roman Empire. In very succinct terms, it was probably best expressed by Lionel Casson in “The Role of the State in Rome’s Grain Trade”:
“Grain was to antiquity what oil is to the world today”
It’s worth making three more detailed observations with regard to the role of wheat in the Roman economy. Firstly, agriculture was overwhelmingly the dominant sector in the economy. Here is Paul Erdkamp from “The Grain Market in the Roman Empire – A Social, Political and Economic Study”:
“agriculture was by far the predominant sector within the economy, and in both the Roman world and early modern Europe, agriculture was dominated by the cultivation of grain…It is a commonplace that in antiquity about 80 per cent of the population were engaged in agriculture, leaving only 20 per cent for all other sectors of the economy.”
Secondly, the importance of wheat to both the agricultural sector and the economy of the Roman Empire as a whole. In “Price behaviour in the Roman Empire”, Peter Temin argued:
“Wheat is a good index of inflation because its quality does not vary much over time and it forms a large part of ordinary diets.”
And this from Wikipedia:
“The staple crop grown was wheat, and bread was the mainstay of every Roman table.”
Thirdly, Egypt was at times the largest supplier of wheat to Rome, although other important regions included North Africa and Sicily. According to Wikpedia:
“Egypt was also important in providing wheat to Rome. Normally, shipments of Egyptian wheat may have amounted to 20 million modii or more annually. This number can be found in the Epitome de Caesaribus. Twenty million modii of wheat was enough for half or two thirds of Rome.”
Having established Egyptian wheat as the best proxy we have for price levels in the Roman Empire, the chart below shows the price from 18 B.C. to 301 A.D.:
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/images/TR%201_0.jpg (http://www.zerohedge.com/sites/default/files/images/user5/imageroot/images/TR%201.jpg)
The largely predictable conclusion:



The point I’m trying to emphasize is that the relationship between the debasement of the coinage and price levels is non-linear. A monetary system can be abused for a long period, but not indefinitely. A tipping point is reached when CONFIDENCE in the value of the currency collapses, leading to a surge in inflation – hyperinflation in this case.
The corollary with today’s financial system is that the quantity theory of money is not linear either. However, the abuses are piling up in obscene fashion and we are approaching the tipping point. Today the “path of runaway inflation and fiscal irresponsibility” incorporates all manner of abuses like trillion dollar deficits, bank bailouts, near zero interest rates and Q1, QE2…!
In the next chart, I overlaid the price level for the last 223 years, i.e. 1814-2010, over the price level in the Roman Empire in a way that gave me the best fit. Please note – the price level for the last 223 years uses data for Britain from 1788-1843 and from the US from 1844-2010 – hence the term “Anglo-US 1788-2010” in the chart below.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/images/TR%203_0.jpg (http://www.zerohedge.com/sites/default/files/images/user5/imageroot/images/TR%203.jpg)
Pretty much says it all.

http://www.zerohedge.com/article/charting-non-linearity-hyperinflation-and-predicting-americas-future-courtesy-ancient-histor

[vacuum]

Wish I knew what the vertical axis was. Was the modern data stretched vertically as well as aligned horizontally?

[Ponce]

The future of America?......you won't like it.........will be going back in time at least 100 years and the help from other countries will be like throwing money in a bucket without a bottom. In order to have any future at all we must start with the education of the childrens where everything but paper, pencil, ruler and a compas is thrown out, they must learn how to learn by using their heads and then maybe someday they will come with ideas of new products that we will be able to export once again...........export is the blood that runs in the veins of the US and the veins being the highways that leads to the ports from where we should be able to export once again.

As we all know the government dosen't care about us so that we must take care of ourselves......I asked our city mayor the following question "What will we do WTSHTF here and the people will need help?" and his answer was "If we have any kind of trouble I will call so and so to send in the troops"...........say what?.........the people will need food and we will give them bullets.

Like I wrote before........it is my intentions to make this city into an oasis where everyone will eat, work and feel the safety that will not exist in the rest of the country, but of course the government will want to send in troops to "protect" us and sooner or later they will want us to "share" our extra food with the rest of the state.........I am sure that we can produce around 87% of every thing that we might need and the other 13% will consist of gasoline, prescription medecine, prophane and so on..........but.........I am also sure that for the presc medecine we will be able to produce the rest of what we might need................only one road from the BIG city to the coast runs thrue out our town so that it would be very easy to blow up a small bridge (we have many) or to blow up a hill on to the highway.

I feel that like the Edo era of Japan we can isolate ourselves and survive without contact with the outside world, a world where my will want to join us but where we will take in very few......if I sound crazy you are then right but it takes people like me to see and think outside the box.

If the government had shown the way to survive what is to come then things would not have been as it will be so that the people and not the situation will make things worse than what it should be.......anyway, be ready to leave the big cities because it will be worse than what you think it will be

[Horn]

Like I wrote before........it is my intentions to make this city into an oasis where everyone will eat, work and feel the safety that will not exist in the rest of the country, but of course the government will want to send in troops to "protect" us and sooner or later they will want us to "share" our extra food with the rest of the state.........

Sounds like you need to start a Non-profit with funding from the E.P.A.

http://www.epa.gov/greenkit/finance.htm

Ps. "Silver Island" will be used as collateral.

[Neuro]

Very interesting how history tends to repeat itself. However according to the charts, there was a short period in the Roman era, corresponding to today, where deflation happened, which appeared to have set off the subsequent hyperinflation. However they didn't have Ben "print-PRINT" Bernanke back then, as far as I know...

[vacuum]

Very interesting how history tends to repeat itself. However according to the charts, there was a short period in the Roman era, corresponding to today, where deflation happened, which appeared to have set off the subsequent hyperinflation. However they didn't have Ben "print-PRINT" Bernanke back then, as far as I know...

I noticed that as well. Another interesting thing is that there is a linear ramp then it rounds off. The modern data seems a lot like the linear ramp part, suggesting that there might be a few more years until we're at the same point they were when hyperinflation occurred. It really depends if the y axis is scaled in the modern data to make the graphs look similar, or if it's an absolute scale for both that just happen to have the same height at the current time.

[undgrd]

That deflationary dips was probably the insiders getting themselves set up before the Hyperinflation.

[vacuum]

Ok, I think this article is telling us two things:

1) We're potentially very close to hyperinflation
2) The next time a 2008-style deflationary burst happens, you know it's starting

[Neuro]

I noticed that as well. Another interesting thing is that there is a linear ramp then it rounds off. The modern data seems a lot like the linear ramp part, suggesting that there might be a few more years until we're at the same point they were when hyperinflation occurred. It really depends if the y axis is scaled in the modern data to make the graphs look similar, or if it's an absolute scale for both that just happen to have the same height at the current time.
I think the scale is the same! At the beginning of the chart price level was indexed at 100 for Rome in 73 AD and 100 for Anglo-US in 1788.

[Neuro]

That deflationary dips was probably the insiders getting themselves set up before the Hyperinflation.
Yes, they stole the money through the decades of inflation prior to the bust, and bought Real Estate at the bust with the stolen money, which got them through hyperinflation in good condition. Ben Bernanke priority is to buy Mortgage Backed Securities, now... Another bust, and all Real Estate ends up in the bankers hands. If you are skilled at something usefull, and you want roof over you're head, you have to willingly accept their terms (slavery), but to really make you appreciate their kindness, they will let you starve through a decade or so of hyperinflationairy depression...

[Horn]

Ok, I think this article is telling us two things:

1) We're potentially very close to hyperinflation
2) The next time a 2008-style deflationary burst happens, you know it's starting

Either that , or 2008 was the start of the dip,

And Bernanke's endless QE3 is equivalent to the "Gallienus flooded the market with a worthless billon" spikey part.

[Shami-Amourae]

Wont things be different now though with the Internet, and the fact that basically no one is self sufficient anymore? I'm just saying, how can we compare now with anything in the past?

[Horn]

Wont things be different now though with the Internet, and the fact that basically no one is self sufficient anymore? I'm just saying, how can we compare now with anything in the past?

Petroleum based economy vs. wheat.

[mamboni]

Wish I knew what the vertical axis was. Was the modern data stretched vertically as well as aligned horizontally?

It looks to be a fourfold rise in the CPI over a 4-5 year period. So visualize 2016 America with inflation running at 40% per annum, gasoline at $16-20, gold well above $7000 and an economy in a crushing stagflationary depression. This is exactly what John Williams of ShadowStats.com is forecasting. IMHO, I think it is a shoe-in.

[Shami-Amourae]

Petroleum based economy vs. wheat.

Oh yeah that's even bigger. I can't believe I just overlooked that.

[Carl]

I'm impressed that so many believe in the infinite fungibility of credit.

[mamboni]

I'm impressed that so many believe in the infinite fungibility of credit.

No one here has indicated that. Hyperinflation proves it to be false.

[Carl]

No one here has indicated that. Hyperinflation proves it to be false. So, what will be the medium of exchange used in this hyperinflation?

[mamboni]

So, what will be the medium of exchange used in this hyperinflation?

Anything except government script, obviously.

[chad]

So, what will be the medium of exchange used in this hyperinflation?

the same as always. carrots, a hog, onions, political favors, liquor, the list goes on.

[Carl]

the same as always. carrots, a hog, onions, political favors, liquor, the list goes on. So you believe that hogs, onions, political favors, liquor along with a list of other things are going to drive hyperinflation? That, everyone is going to be running around with truckloads of these items trying to spend them as fast as they can because they are losing value faster than they can get them?

[mamboni]

So you believe that hogs, onions, political favors, liquor along with a list of other things are going to drive hyperinflation? That, everyone is going to be running around with truckloads of these items trying to spend them as fast as they can because they are losing value faster than they can get them?

Wow - this is obtusity raised to the next level. LOL

[Ponce]

From my experience in Cuba I know that what is junk today will be the treasures of tomorrow.......the same way that the trash dumps of today will be the gold mines of tomorrow.........miners will not be looking for gold but for plastic and metal.

[Carl]

Wow - this is obtusity raised to the next level. LOL My response was "obtuse"????

That's funny.....

[chad]

So you believe that hogs, onions, political favors, liquor along with a list of other things are going to drive hyperinflation? That, everyone is going to be running around with truckloads of these items trying to spend them as fast as they can because they are losing value faster than they can get them?

no, i don't believe any of those things will drive hyperinflation at all. you asked what the medium of exchange during such a situation would be, and i gave you an answer. you didn't ask "what medium of exchange would drive hyper inflation." i think the answer to that is obvious. the items i listed have an intrinsic value, as you cannot create 10,000,000,000 carrots every other quarter by magic.

[mamboni]

My response was "obtuse"????

That's funny.....

Carl:

I would venture that Chad intended the perfect opposite of your supposition. But I will allow him to speak for himself if he so desires.

[Carl]

no, i don't believe any of those things will drive hyperinflation at all. you asked what the medium of exchange during such a situation would be, and i gave you an answer. you didn't ask "what medium of exchange would drive hyper inflation." i think the answer to that is obvious. the items i listed have an intrinsic value, as you cannot create 10,000,000,000 carrots every other quarter by magic. You list barter items.

Barter items are not a medium of exchange.

A medium of exchange is an intermediary used in trade to avoid the inconveniences of a pure barter system.

It takes a medium of exchange to drive hyperinflation.

98% of the, so called, "money supply", our "medium of exchange", is credit.

[Carl]

Carl:

I would venture that Chad intended the perfect opposite of your supposition. But I will allow him to speak for himself if he so desires. No he didn't and neither did you...

[mamboni]

No he didn't and neither did you...

Ok Carl. You win.

[chad]

You list barter items.

Barter items are not a medium of exchange.

A medium of exchange is an intermediary used in trade to avoid the inconveniences of a pure barter system.

It takes a medium of exchange to drive hyperinflation.

98% of the, so called, "money supply" is credit.

completely not true. i have a good friend who lived in argentina during the 1988 run up. hyperinflation happened with everything, including barter items. the main difference was with currency. the inflation would be 100% in a week with currency. with eggs, cheese, etc, it would only be 30% or 40%. according to someone i know who live through it (supporting 3 old grandparents at the time), barter items became currency in such a situation. a "medium of exchange" in such a situation does not not exist, and from the stories i heard, it wasn't an "inconvenience" to trade food.

[Carl]

Ok Carl. You win.

No I didn't..

[mamboni]

no i didn't..

lol

[Carl]

completely not true. i have a good friend who lived in argentina during the 1988 run up. hyperinflation happened with everything, including barter items. the main difference was with currency. the inflation would be 100% in a week with currency. with eggs, cheese, etc, it would only be 30% or 40%. according to someone i know who live through it (supporting 3 old grandparents at the time), barter items became currency in such a situation. a "medium of exchange" in such a situation does not not exist, and from the stories i heard, it wasn't an "inconvenience" to trade food.

Geez....

What the fuk does that have to do with the supposition that we're headed towards hyperinflation?

Why do you feel that telling me what occurred DURING Argentina's currency, their medium of exchange, based hyperinflation somehow supports your response to my original question?

[vacuum]

I think what Carl is saying is this:

- In Rome, the coinage was debased until eventually it didn't have precious metals in it. It then took a lot of these coins to buy stuff.
- In Wiemar Germany and Zimbabwe, notes were printed endlessly until it took massive numbers of notes to buy stuff.
- In Argentina, their currency became less and less valuable relative to dollars (I guess).

However, in our case, there aren't enough dollars around to drive the hyperinflation itself. X number of people divided by Y number of dollars doesn't allow each person to possess a large enough number of them.

There are two things I see that could happen though:
1) Foreign countries would change reserve currencies, and all their dollars would come back to the US.
2) Our currency wouldn't be worth anything outside of the country. Inside the US our currency would be worth something, however, every item that comes from abroad (which is almost everything) would be extremely expensive for us.

Remember, the Egyptian wheat was an export from Egypt. Maybe Roman coinage continued to hold value in Rome itself regardless of the content of the coins, but when you couldn't use that money to import things like wheat, people simply didn't want the money anymore. It didn't matter if the supply of it was limited or not.

There are a limited supply of barbie dolls too. However, they aren't valuable because, among other things, foreign countries don't want them. Put another way, if foreign countries did accept barbie dolls as currency, they'd be valuable. The only difference between barbie dolls and dollars is that dollars are legal tender within this country. However, if the government can't use those dollars to buy stuff from other countries, then that government won't last very long to make legal tender status worth anything.

Based on this thought experiment, we know that hyperinflation will happen from outside this country, not inside of it.

[Horn]

You would need a global term to describe a global dollar's hyperinflation.


A petrodollar is a United States dollar earned by a country through the sale of its petroleum to another country. The term was coined in 1973 by Georgetown University economics professor, Ibrahim Oweiss, who recognized the need for a term that could describe the dollar receiving by petroleum exporting countries (OPEC) in exchange for oil.

[Carl]

I think what Carl is saying is this:

- In Rome, the coinage was debased until eventually it didn't have precious metals in it. It then took a lot of these coins to buy stuff.
- In Wiemar Germany and Zimbabwe, notes were printed endlessly until it took massive numbers of notes to buy stuff.
- In Argentina, their currency became less and less valuable relative to dollars (I guess).

However, in our case, there aren't enough dollars around to drive the hyperinflation itself. X number of people divided by Y number of dollars doesn't allow each person to possess a large enough number of them.

There are two things I see that could happen though:
1) Foreign countries would change reserve currencies, and all their dollars would come back to the US.
2) Our currency wouldn't be worth anything outside of the country. Inside the US our currency would be worth something, however, every item that comes from abroad (which is almost everything) would be extremely expensive for us.

Remember, the Egyptian wheat was an export from Egypt. Maybe Roman coinage continued to hold value in Rome itself regardless of the content of the coins, but when you couldn't use that money to import things like wheat, people simply didn't want the money anymore. It didn't matter if the supply of it was limited or not.

There are a limited supply of barbie dolls too. However, they aren't valuable because, among other things, foreign countries don't want them. Put another way, if foreign countries did accept barbie dolls as currency, they'd be valuable. The only difference between barbie dolls and dollars is that dollars are legal tender within this country. However, if the government can't use those dollars to buy stuff from other countries, then that government won't last very long to make legal tender status worth anything.

Based on this thought experiment, we know that hyperinflation will happen from outside this country, not inside of it. Not, quite. What people don't seem to realize is that 98% of the "dollars" held globally are Credit Based. Unlike paper dollars, credit doesn't gain or lose value, you either have credit or you don't. So, when you talk about the collapse in the value of the "dollar" what you're really talking about is a collapse of credit as currency, "POOF!".

All credit is somebody else's debt. Debt will absorb all cash dollars and demand more, at least $54 trillion more...

If you're looking for a global term to describe a global dollar's hyperinflation try, "NoDollars". Or maybe "YouOweMeDollars".

[vacuum]

Here are some comments from ZH:


Some final comments on hyperinflation
We have noticed of late that there’s a debate on whether or not the US dollar zone will end in hyperinflation and whether or not the world can again embrace the gold standard. We will not discuss the latter today. With the regards to the former, we think it is still early to talk about hyperinflation. We don’t know when it will take place. All we can guarantee is that there are certain conditions necessary to see inflation spike up and morph into hyperinflation, and such conditions have not crystallized yet. However, there is a high risk at this stage in the game that they do, and we briefly examined that risk for the Euro zone, on September 10th (http://sibileau.com/martin/2012/09/10/why-draghi-opened-the-door-to-hyperinflation-and-denied-the-fed-an-exit-strategy/).
Money has two purposes: to store value and to transact. There is however another use of money, which is a derivative of the storage-of-value use. The use of money to repay debt.
Those who demand money to repay debts do not do so to store value or to transact. But as long as there are debts outstanding, there will be a demand for currency to repay that credit. This means that, in order to see such demand diminish, we need to see defaults first, which will along eliminate credit extended in fiat, debased currency. As this process unfolds, the banking system goes bankrupt, is nationalized, and credit is directed towards and centrally managed by the government. This may easily takes years, but it is taking place in the Euro zone right now. The repo market and futures markets die along and central banks end up becoming counterparties in cross currency and interest rate swaps. Once this stage is reached, the private sector is out of the system and fiat money is only demanded to transact. Here’s when the velocity of circulation of money starts to rise exponentially.
As these successive steps are passed, slowly, central banks suffer structural changes in their balance sheets. For instance, let’s take the example of Argentina. At one point, after many devaluations of the peso, the central bank by 1982 had become the main USD swap counterparty for corporate credit. However, to avoid a wave of bankruptcies after the June 1982 devaluation (after the Falklands War), it refinanced USD denominated debt at a 23% lower exchange rate, and in the process sold FX insurance at a cost (for the corporations entering the transaction) of 5%/month, when the inflation rate was 7.9%/month. This was going to be a huge burden that accelerated the deficit of the central bank, which of course was monetized (refer here (http://www.usalvador.com.ar/fce/informes/doc2.pdf)), unleashing the first high inflation of 1985.
The parallel with the situation in the Euro zone is self-evident: If the ECB starts buying sovereign bonds as fiscal deficits continue, the recent transitory appreciation of the Euro (to $1.3150 was mainly driven by short covering and the capital gains in financials, mentioned above) is not sustainable. In the long run, the intervention of the ECB would only devalue the Euro, creating a currency mismatch for those companies in the Euro zone that issued USD denominated debt. Thanks to the FX swaps by the Fed and the crowding out of the ECB in favour printing Euros for government debt, these companies are more numerous than they would have been. Therefore, the ingredient for an hyperinflationary process is already present, but we’re not quite there yet…
In the end, by the time the use of fiat money is reduced to its transactional role, central banks run huge deficits, called quasi-fiscal. They have backstopped government debt, money markets, repo markets, future markets and derivatives markets. The interest they pay on their liabilities to sterilize their actions always ends being higher than the one they receive for their assets. And it makes perfect sense: Otherwise, nobody would have asked these central banks to be their backstop! An additional source of fuel for this fire is the so called Olivera effect (http://en.wikipedia.org/wiki/Olivera%E2%80%93Tanzi_effect) (after Julio H. Olivera). This is another ingredient to turn a mild inflationary process into hyperinflation. This effect refers to the fact that when inflation reaches a relevant number, it becomes profitable for taxpayers to delay their tax filings, which reduces the tax burden. Governments are thus forced print more money to cover the loss in real revenue they suffer.
The fact that we are still in the early chapters of the story just narrated does not allow us to state that hyperinflation is only a tail risk. The tail risk is (again) the reverse: That all the steps central banks took since 2008 won’t lead to spiraling quasi-fiscal deficits.


http://www.zerohedge.com/news/2012-10-01/guest-post-risk-convergence-over-determined-systems-and-hyperinflation

[Ponce]

Do as Iceland did and tell the IMF and the bankers to get fuuk and that's it.........why complicate something so simple? what are the bankers going to do? sue the US? hahahahaahaahahah.........as a matter of fact we can be "nice" to them and pay them back with . and - the same way that they created money.

[chad]

sorry, when you posted:

So, what will be the medium of exchange used in this hyperinflation?

i thought you wanted a real answer. i didn't realize you just wanted to argue with people.

[madfranks]

Carl does have a point, and (I think) that point is that all those examples in history of hyperinflation are irreconcilably different than what is now facing us. In Roman times, they issued tons of coinage, they didn't have a central bank lending it, creating debt. In Germany, they issued tons of paper money, they didn't lend it out, creating debt. Here, in theory, every dollar created means one dollar of debt, so balancing the massive money printing is a massive black hole waiting to suck it all back in. I'm trying to figure all of this out, but I can see it going both ways. Hyperinflation can be driven primarily through the confidence of the people, some say hyperinflation is as much a psycological event as a monetary one. If China dumped all their Treasuries on the market at once, the fed would have a hell of a time managing the dramatic loss of confidence in the USD. As people decide they don't want the USD, it will take more and more of them to buy things, and this is a hyperinflation scenario, is it not? But, others like Dr. Gary North argue that hyperinflation is matter of policy decision, and noted how Israel was experiencing hyperinflation in the '80s but was able to shut it off via policy change. (http://lewrockwell.com/north/north1031.html) Not to say it wasn't horribly damaging to the economy, it just didn't result in a hyperinflationary collapse. So what's in store for the future of the US? Probably massive inflation, price controls, wage controls, etc., but probably not hyperinflation, unless the gov't nationalizes the Fed and makes it a policy to print money in perpetuity.

[Carl]

sorry, when you posted:

So, what will be the medium of exchange used in this hyperinflation?

i thought you wanted a real answer. i didn't realize you just wanted to argue with people. You are correct, I wanted a real answer, but all I got was a smartass remark.

[Bigjon]

You list barter items.

Barter items are not a medium of exchange.

A medium of exchange is an intermediary used in trade to avoid the inconveniences of a pure barter system.

It takes a medium of exchange to drive hyperinflation.

98% of the, so called, "money supply", our "medium of exchange", is credit.

Most of our money supply is in the form of savings and checking accounts, not credit. The medium of exchange will be debit cards and checks and cash.

Credit was used to create the money held in checking and savings accounts, but once created the credit remains on the banks side of the ledger as an asset of the bank and the money in the savings and checking accounts is a liability against the banks assets.

[undgrd]

Geez....

What the fuk does that have to do with the supposition that we're headed towards hyperinflation?


You asked
So, what will be the medium of exchange used in this hyperinflation?




Why do you feel that telling me what occurred DURING Argentina's currency, their medium of exchange, based hyperinflation somehow supports your response to my original question?

Isn't it relevant because it's what ACTUALLY happened rather than guessing what MIGHT happen?


BTW, why are you getting so uppity when your supposition is a medium of exchange will even EXIST. Maybe things are so bad, people aren't accepting anything other than raw materials.

[Carl]

Most of our money supply is in the form of savings and checking accounts, not credit. The medium of exchange will be debit cards and checks and cash. Yes, checking and savings accounts that are credited with a dollar amount, not a dollar to be found in any of them.

Debit cards and checks draw on bank credit that is tied to individual accounts. If banks don't have dollars or credit, your bank account, which never held dollars in the first place, won't have any either. (it's all debt)

The Fed is under no legal obligation to make any of it good by printing FRNs.

[vacuum]

Carl does have a point, and (I think) that point is that all those examples in history of hyperinflation are irreconcilably different than what is now facing us. In Roman times, they issued tons of coinage, they didn't have a central bank lending it, creating debt. In Germany, they issued tons of paper money, they didn't lend it out, creating debt. Here, in theory, every dollar created means one dollar of debt, so balancing the massive money printing is a massive black hole waiting to suck it all back in. I'm trying to figure all of this out, but I can see it going both ways. Hyperinflation can be driven primarily through the confidence of the people, some say hyperinflation is as much a psycological event as a monetary one. If China dumped all their Treasuries on the market at once, the fed would have a hell of a time managing the dramatic loss of confidence in the USD. As people decide they don't want the USD, it will take more and more of them to buy things, and this is a hyperinflation scenario, is it not? But, others like Dr. Gary North argue that hyperinflation is matter of policy decision, and noted how Israel was experiencing hyperinflation in the '80s but was able to shut it off via policy change. (http://lewrockwell.com/north/north1031.html) Not to say it wasn't horribly damaging to the economy, it just didn't result in a hyperinflationary collapse. So what's in store for the future of the US? Probably massive inflation, price controls, wage controls, etc., but probably not hyperinflation, unless the gov't nationalizes the Fed and makes it a policy to print money in perpetuity.

Here's the way I see it. Once countries don't want USD anymore, foreigners will just use all their dollars to buy up American property, goods, and other things. Other currencies will replace it everywhere in the world. Then we'll be just like any other 3rd world currency, people won't really want it in other countries so things will be very expensive for us. People will still be able to use it inside the country, but just like USD is preferred over other currency in 3rd world countries, we'll prefer gold or something else over dollars.

[Carl]

You asked


Isn't it relevant because it's what ACTUALLY happened rather than guessing what MIGHT happen?


BTW, why are you getting so uppity when your supposition is a medium of exchange will even EXIST. Maybe things are so bad, people aren't accepting anything other than raw materials.

People are guessing we're headed towards hyperinflation, my question is framed by that supposition.

Hyperinflation REQUIRES a Physical Medium of Exchange to drive it. In Argentina, hyperinflation of the local currency was instigated by the CIA and bolstered by the value contrasting USD that was also circulating within their economy.

What people used DURING Argentina's hyperinflationary event is irrelevant, immaterial and beside the point to the question as presented.

And no, my "supposition" is not that a medium of exchange will exist, my "point" is that there is No Medium of Exchange available to drive or fulfill the supposition that we're headed towards hyperinflation.

[Carl]

Here's the way I see it. Once countries don't want USD anymore, foreigners will just use all their dollars to buy up American property, goods, and other things. Other currencies will replace it everywhere in the world. Then we'll be just like any other 3rd world currency, people won't really want it in other countries so things will be very expensive for us. People will still be able to use it inside the country, but just like USD is preferred over other currency in 3rd world countries, we'll prefer gold or something else over dollars.

There are $1,061 billion FRNs in circulation around the globe, existing debt will suck up nearly all of them.

What people will be left with is a sense of value with no standardized medium available to express it in....

[Hatha Sunahara]

What they did in Israel in the 1980s to stave off hyperinflation was to allow people to hold bank accounts denominated in foreign currencies. So an Israeli could have a Deutschmark account, a Dollar account, a Swiss Franc account at his local bank. As these currencies didn't lose value as fast as the Israeli money, they could be converted into Israeli money as the account holder needed cash.

That cannot be done now in an era where all fiat currency is inflating uniformly. The most likely scenario is the usual one with the Hegelian dialectic. We go through a period of extreme disorder in the money situation, and TPTB introduce a global currency that will appear better than the disorder that exists, and people will have manufactured confidence in it. Bingo--hyperinflation is staved off. That global currency will likely be backed for a time with PMs.

Hatha

[Neuro]

So, what will be the medium of exchange used in this hyperinflation?
Credit, just more of it required to buy the same!

[Carl]

Credit, just more of it required to buy the same!Could you please explain how that works in hyperinflation.

People who don't want dollars will continue to accept credit promising to pay dollars later?

[Neuro]

Could you please explain how that works in hyperinflation.

People who don't want dollars will continue to accept credit promising to pay dollars later?
Not people, corporations! The transfer of the account dollar digits are immediate. For what was sold, they could transfer the digits to purchase something of value immediatelly, the system allows for fantastic hyperinflation, when you don't have to go through the hassle of printing physical money, and run out to buy something with said paper money...

[Carl]

Not people, corporations! The transfer of the account dollar digits are immediate. For what was sold, they could transfer the digits to purchase something of value immediatelly, the system allows for fantastic hyperinflation, when you don't have to go through the hassle of printing physical money, and run out to buy something with said paper money... So you're saying that credit, a promise to pay later, will not only retain its fungibility in a currency collapse, it will expand to support hyperinflation? You're saying people will continue to believe they're getting something via a promise to pay later for their hard assets? I don't understand your rational... Where are the corporations getting the credit, do you anticipate that banks will continue to function normally, transacting in credit, while the very assets that gives life to the credit they use to populate their customer accounts with the digits that people and corporations assume to be "their money", loses all value? And the people that these corporations are going to dump their digital dollars upon, they're going to be oblivious to the collapse of the dollar and will gladly accept digits promising to pay dollars later for their assets.....OK...

[Hatha Sunahara]

Not people, corporations! The transfer of the account dollar digits are immediate. For what was sold, they could transfer the digits to purchase something of value immediatelly, the system allows for fantastic hyperinflation, when you don't have to go through the hassle of printing physical money, and run out to buy something with said paper money...

That implies that they pay their employees with credit, who then go out and buy stuff the corporations produce with that, and possibly even more credit. This is analogous to having a credit card that keeps racking up all your deficit spending. Like you pay off your purchases each month with your entire paycheck, and whatever you cannot pay off, becomes a balance that accumulates.

That system already exists today. You sell off everything of value to support your eating habit. When you no longer have any assets to sell, you rely on the value of your labor to provide enough money to live, but it doesn't because you have to spend some of your money to pay interest on debt. Eventually the interest on your debt will consume your entire paycheck, and you will have nothing to support your eating habit. This is the point where the money system has transferred ownership of everything--including all the debt slaves to TPTB. On top of owing interest on your personal debt, you are also obliged to support the 'collective' debt that the government has incurred in your name. It will all come crashing down when nobody can afford to eat. This is what happens in all usury schemes. It's why in the bible there is this thing called the Jubilee. Why does everybody think that the world has changed so much that none of our history will be repeated? Is it because the world has not had computers until just recently? Does that change our need to eat?


Hatha

[undgrd]

So you're saying that credit, a promise to pay later, will not only retain its fungibility in a currency collapse, it will expand to support hyperinflation? You're saying people will continue to believe they're getting something via a promise to pay later for their hard assets? I don't understand your rational... Where are the corporations getting the credit, do you anticipate that banks will continue to function normally, transacting in credit, while the very assets that gives life to the credit they use to populate their customer accounts with the digits that people and corporations assume to be "their money", loses all value? And the people that these corporations are going to dump their digital dollars upon, they're going to be oblivious to the collapse of the dollar and will gladly accept digits promising to pay dollars later for their assets.....OK...

Can you please define the bold text? As far as I know, it's the faith in the credit system itself that's the asset.

Thanks

[Bigjon]

Yes, checking and savings accounts that are credited with a dollar amount, not a dollar to be found in any of them.

Debit cards and checks draw on bank credit that is tied to individual accounts. If banks don't have dollars or credit, your bank account, which never held dollars in the first place, won't have any either. (it's all debt)

The Fed is under no legal obligation to make any of it good by printing FRNs.

The game the Fed is playing is buying worthless assets from the should be bankrupt banks at full face value of the worthless instruments. This is where all the money comes from to pay those entries in your checkbook account.

If the bank can't make good on your check, they get sold to a nice Jewish bankster, who has an inside track at the Fed.

Checks spend just as good as cash, no FRN's needed, same with Debit cards.

You are confused if you think that there has to be an FRN for every checkbook entry, it doesn't work that way.

[Neuro]

So you're saying that credit, a promise to pay later, will not only retain its fungibility in a currency collapse, it will expand to support hyperinflation? You're saying people will continue to believe they're getting something via a promise to pay later for their hard assets? I don't understand your rational... Where are the corporations getting the credit, do you anticipate that banks will continue to function normally, transacting in credit, while the very assets that gives life to the credit they use to populate their customer accounts with the digits that people and corporations assume to be "their money", loses all value? And the people that these corporations are going to dump their digital dollars upon, they're going to be oblivious to the collapse of the dollar and will gladly accept digits promising to pay dollars later for their assets.....OK...
The digits is transferred from the debit/credit card of the Wal-mart shopper, to Wal-mart immediately, they don't have to wait for "Money" to come in. Wal-mart can spend those digits immediately, and they would in an environment of hyperinflation. Why wouldn't banks continue to function in hyperinflation? I remember when studying economics in the late 80's, that banks became very efficient in Brazil during their hyperinflation in early 80's in executing very fast transactions, in Europe at the time it generally took 3-5 days to handle a simple transfer of money from one bank account in one bank to another bank, while in Brazil it only took a few hours. And this was before the Internet. Banks make money from transactions, with the increased turnover of money in a hyperinflationary scenario, banks will do very well... Further the very trigger of this coming hyperinflation is the injection of digital dollars to the banking system perpeated by Bernanke et al. They are the least likely to collapse!

The banks will only collapse if Bernanke turns of his Trillion$ centrifuges, but we haven't seen any indication of that yet, have we?

[Carl]

~ while the very assets that gives life to the credit ~ Can you please define the bold text? As far as I know, it's the faith in the credit system itself that's the asset.

Thanks
Faith is the glue that binds.

The particular assets referred to in that statement are debt instruments, with the yet to be realized true market value of $0.00, that are used as the basis of the credit issued.

[Carl]

The game the Fed is playing is buying worthless assets from the should be bankrupt banks at full face value of the worthless instruments. This is where all the money comes from to pay those entries in your checkbook account.

If the bank can't make good on your check, they get sold to a nice Jewish bankster, who has an inside track at the Fed.

Checks spend just as good as cash, no FRN's needed, same with Debit cards.

You are confused if you think that there has to be an FRN for every checkbook entry, it doesn't work that way. You are assuming that everything will continue to function as it always has and that the only difference will be the speed of transactions.

You really don't understand the subject you're attempting to address....

[Bigjon]

You are assuming that everything will continue to function as it always has and that the only difference will be the speed of transactions.

You really don't understand the subject you're attempting to address....

Explain it to me Carl, I'm a good listener.

[Carl]

The digits is transferred from the debit/credit card of the Wal-mart shopper, to Wal-mart immediately, they don't have to wait for "Money" to come in. Wal-mart can spend those digits immediately, and they would in an environment of hyperinflation. Why wouldn't banks continue to function in hyperinflation? I remember when studying economics in the late 80's, that banks became very efficient in Brazil during their hyperinflation in early 80's in executing very fast transactions, in Europe at the time it generally took 3-5 days to handle a simple transfer of money from one bank account in one bank to another bank, while in Brazil it only took a few hours. And this was before the Internet. Banks make money from transactions, with the increased turnover of money in a hyperinflationary scenario, banks will do very well... Further the very trigger of this coming hyperinflation is the injection of digital dollars to the banking system perpeated by Bernanke et al. They are the least likely to collapse!

The banks will only collapse if Bernanke turns of his Trillion$ centrifuges, but we haven't seen any indication of that yet, have we?

Neuro, you're laboring under the same false assumptions as Bigjon.

Do you not realize the implications of a collapse in the value of the dollar?

If the tangible product known as the dollar is worthless, how much worth, do you suppose, is retained by a promise to pay dollars?

If the banks base their creation and maintenance of credit on the value of assets that are shown to have no value, then how much credit will be maintained and created by those banks?

If the banks have no credit, how much credit do you think you will get from the bank?

[Golden]

Although I don't believe in the classic hyperinflation scenario I do believe in being prepared. If you ain't holdin you ain't golden.

Cheers! It's happy hour drink up ye bitches.

[Bigjon]

Neuro, you're laboring under the same false assumptions as Bigjon.

Do you not realize the implications of a collapse in the value of the dollar?

If the tangible product known as the dollar is worthless, how much worth, do you suppose, is retained by a promise to pay dollars?

If the banks base their creation and maintenance of credit on the value of assets that are shown to have no value, then how much credit will be maintained and created by those banks?

If the banks have no credit, how much credit do you think you will get from the bank?

As I said the Fed stands ready to pay for those worthless assets at the value the bank assigns to those assets.

The Fed has a bottomless checkbook.

In the USA dollars are the only game in town.

[Carl]

Explain it to me Carl, I'm a good listener.

What is the purpose and function of the FDIC? Why does it exist?

If credit is always good then why bother with an FDIC?

If credit is always good then why has over $40 Trillion of credit vanished since 2008?

If credit is always good then why are the people in Greece, Spain, Itily, etc. rushing to get out of credit and into cash?

If credit can fail and 98% of the "money" supply is credit, how much credit is left over after it fails?

[mamboni]

I defy someone here to separate hyperinflation from inflation. Don't give me the "lost confidence in the currency" diatribe. No one can define hyperinflation. But everyone agrees that hyperinflation is a worse type of inflation. If 5% of the population is buying gold and silver and eschewing dollars is that not a symptom of inflation? A few decades ago $20 bought an ounce of gold. Today you need $1800 to buy that same ounce of gold. Is this not severe inflation? Have we not been experiencing inflation for years now, especially since the 1970s? Some say 4% inflation is not too bad. Others say only 20% inflation is hyperinflation. I call bull shit on both. Inflation is and must be zero! This was the case for over a century following the Constitutional Conventional and up to 1913. When the money is a store of value, people practice thrift and save. Today, the people do not save. They borrow and live way beyond their means. They don't respect money because money is losihg value all the time. So debtors are rewarded for fiscal irresponsibility while savers and pensioners are punished for thrift and a lifetime of honest hard work. 4% per annum inflation will destroy the working man's family just as surely as 20%; it's all a mtter of degrees and time. We are being destroyed by inflation now. And if history is any guide then the inflation is going to quicken and the dollar is going to weaken even more. Today's dollar is worth but 2 percent of a 1913 dollar. If that isn't death by hyperinflation, I don't know what is. Some of you want to spend valuable time arguing about credit and currency and physical versus virtual electronic dollars. Feel free to waste time on such unimportant nuances. I'll keep stacking real tangible like metals, food, supplies and ammo, thank you. We'll see whose strategy wins out in time.

[chad]

I defy someone here to separate hyperinflation from inflation. Don't give me the "lost confidence in the currency" diatribe. No one can define hyperinflation. But everyone agrees that hyperinflation is a worse type of inflation. If 5% of the population is buying gold and silver and exchewing dollars is that not a symptom of inflation? A few decades ago $20 bought an ounce of gold. Today you need $1800 to buy that same ounce of gold. Is this not severe inflation? Have we not been experiencing inflation for years now, especially since the 1970s? Some say 4% inflation is not too bad. Others say only 20% inflation is hyperinflation. I call bull shit on bought. Inflation is and must be zero! This was the case for over a century following the Constitutional Conventional and up to 1913. When the money is a store of value, people practice thrift and save. Today, the people do not save. They borrow and live way beyond their means. They don't respect money because money is losihg value all the time. So debtors are rewarded for fiscal irresponsibility while savers and pensioners are punished for thrift and a lifetime of honest hard work. 4% per annum inflation will destroy the working man's family just as surely as 20%; it's all a mtter of degrees and time. We are being destroyed by inflation now. And if history is any guide then the inflation is going to quicken and the dollar is going to weaken even more. Today's dollar is worht but 2 percent of a 1913 dollar. If that isn't death by hyperinflation, I don't know what. Some of you want to spend valuable time arguing about credit and currency and physical versus virtual electronic dollars. Feel free to waste time on such unimportant nuances. I'll keep stacking real tangible like metals, food, supplies and ammo, thank. We'll see whose strategy wins out in time.

well done, sir, well done.

[gunDriller]

I defy someone here to separate hyperinflation from inflation. Don't give me the "lost confidence in the currency" diatribe. No one can define hyperinflation. But everyone agrees that hyperinflation is a worse type of inflation. If 5% of the population is buying gold and silver and exchewing dollars is that not a symptom of inflation? A few decades ago $20 bought an ounce of gold. Today you need $1800 to buy that same ounce of gold. Is this not severe inflation?

hyperinflation is 'just' the integral (over time) of substantial inflation.

by 'substantial' i mean, 10% per year at least like we have in the USA.

I defy someone here to separate hyperinflation from inflation. Don't give me the "lost confidence in the currency" diatribe. No one can define hyperinflation. But everyone agrees that hyperinflation is a worse type of inflation. If 5% of the population is buying gold and silver and exchewing dollars is that not a symptom of inflation? A few decades ago $20 bought an ounce of gold. Today you need $1800 to buy that same ounce of gold. Is this not severe inflation?

hyperinflation is 'just' the integral (over time) of substantial inflation.

by 'substantial' i mean, 10% per year at least like we have in the USA.


the Weimar inflation was remarkable in that it happened so quickly. like if the inflation we've had in the US for the last 100 years was compressed into 2 years. sort of.

[Carl]

As I said the Fed stands ready to pay for those worthless assets at the value the bank assigns to those assets.

The Fed has a bottomless checkbook.

In the USA dollars are the only game in town.

The Fed Has Been Buying Those Assets With CREDIT!!

Credit poofing out of existence after they've issued it, is not their problem.

You just don't get it...

The Fed isn't financially liable for the credit it issues, but they are financially liable for every FRN.

[Bigjon]

The Fed Has Been Buying Those Assets With CREDIT!!

Credit poofing out of existence after they've issued it, is not their problem.

You just don't get it...

The Fed isn't financially liable for the credit it issues, but they are financially liable for every FRN.

The Fed has a checkbook and as long as it carries those assets they have the value the Fed says they do.

You just don't get it!

[Bigjon]

What is the purpose and function of the FDIC? Why does it exist?

If credit is always good then why bother with an FDIC?

If credit is always good then why has over $40 Trillion of credit vanished since 2008?

If credit is always good then why are the people in Greece, Spain, Itily, etc. rushing to get out of credit and into cash?

If credit can fail and 98% of the "money" supply is credit, how much credit is left over after it fails?

There was a time when the Fed wanted to maintain the value of our money and now they wish to devalue our money and they are doing a good job of it.

Got gold?

[Carl]

The Fed has a checkbook and as long as it carries those assets they have the value the Fed says they do.

You just don't get it!
The assets held by the fed are irrelevant immaterial and their values are less than a moot point.

It's the assets, to include Treasuries and FRNs, held by the banks that create and maintain the credit everyone uses to buy the things that keeps them alive, which should concern you.

Answer my questions Bigjon.

[mamboni]

hyperinflation is 'just' the integral (over time) of substantial inflation.

by 'substantial' i mean, 10% per year at least like we have in the USA.


hyperinflation is 'just' the integral (over time) of substantial inflation.

by 'substantial' i mean, 10% per year at least like we have in the USA.


the Weimar inflation was remarkable in that it happened so quickly. like if the inflation we've had in the US for the last 100 years was compressed into 2 years. sort of.

We're on the same page Gunny!;D

[Bigjon]

The assets held by the fed are irrelevant immaterial and their values are less than a moot point.

It's the assets, to include Treasuries and FRNs, held by the banks that create and maintain the credit everyone uses to buy the things that keeps them alive, which should concern you.

Answer my questions Bigjon.

The monetary base is a lot larger than just Treasuries and FRN's, it also includes all expanded money (credit based). And the Fed stands ready and willing to create more money to bail out the banking system while it drives the value of the FRN to zero.

I did answer your questions.

[Bigjon]

Originally Posted by Carl
The Fed Has Been Buying Those Assets With CREDIT!!

Credit poofing out of existence after they've issued it, is not their problem.

You just don't get it...

The Fed isn't financially liable for the credit it issues, but they are financially liable for every FRN.



The Fed has a checkbook and as long as it carries those assets they have the value the Fed says they do.

You just don't get it!

At what point do you think the Fed can't write anymore checks against the American public?

[Neuro]

At what point do you think the Fed can't write anymore checks against the American public?
If the Fed was an ordinary company, they would have been bankrupt long ago, and no-one would have accepted their checks. They are not an ordinary company, and they will continue writing checks with increasing numbers for as long as anyone accepts them. That is the reality.

[Carl]

At what point do you think the Fed can't write anymore checks against the American public?

The Fed isn't "writing checks" against the public, it is providing credit on assets of little to no value.

And you did not answer my questions, you just quoted them and posted some irrelevant sentimental nonsense.

And again, you fail to grasp the whole point of this conversation.

It is the inevitability of the Failure Of Credit as a Medium of Exchange prior to any hyperinflationary event.

[Neuro]

It is the inevitability of the Failure Of Credit as a Medium of Exchange prior to any hyperinflationary event.
Why?

[Horn]

The Fed isn't "writing checks" against the public, it is providing credit on assets of little to no value.

The public of course being one of those assets.

Along with a monopoly on oil trade.

[Bigjon]

The Fed isn't "writing checks" against the public, it is providing credit on assets of little to no value.

And you did not answer my questions, you just quoted them and posted some irrelevant sentimental nonsense.

And again, you fail to grasp the whole point of this conversation.

It is the inevitability of the Failure Of Credit as a Medium of Exchange prior to any hyperinflationary event.

Why?

If not the American public, who do you think is going to pay for all the checks the Fed is writing?

Actually the point of the failure of the credit market has already occurred in 2008, but the Fed stepped in and changed the rules. No more mark to market nonsense, now the banks and the Fed dictate what the value is.

Your deflationary event came and went with the new rules, courtesy of the Fed.

At what point will the banks and the Fed be forced to play by 'the rules"?

I guess the whole point of this conversation IS Carl is a genius who just can't put it into words us mere mortals can understand.

[Libertytree]

I'm certainly no scholar in these matters but the topic does intrigue me.

I think it's to no ones surprise that that the end game is to get the dollar to zero and I think we all agree on that? They've been pursuing this goal and it's well documented. Now, the question I ask is how far past -0$ is all faith lost both globally and domestically before the USD is declared DOA?

The banks/Fed don't play by rules, they make them up and expect us to follow them.

There can be no hyperinflation if the whole system has gone to shit down the toilet, likewise with some of the other scenarios.

I predict that real goods and pre 64 silver will be our medium of exchange. Just my 2¢.

[Horn]

There can be no hyperinflation if the whole system has gone to shit down the toilet, likewise with some of the other scenarios.

If they're controlling the entire system they will support (and stretch thru time) massive inflation of it at some point to rid themselves & introduce the new.

If they lose control of the system due to some outside unseen competition, I imagine you'll see it hyper-inflate lose any power to purchase. Along with a global WWIII.

As in 3rd century Rome.

[Carl]

Why?

If not the American public, who do you think is going to pay for all the checks the Fed is writing?

Actually the point of the failure of the credit market has already occurred in 2008, but the Fed stepped in and changed the rules. No more mark to market nonsense, now the banks and the Fed dictate what the value is.

Your deflationary event came and went with the new rules, courtesy of the Fed.

At what point will the banks and the Fed be forced to play by 'the rules"?

I guess the whole point of this conversation IS Carl is a genius who just can't put it into words us mere mortals can understand.

What can I say,

If you want to believe that no one anywhere will ever ask for their cash, or demand payment in cash, or question the monetary validity of digits on a banks computer....

[Neuro]

What can I say,

If you want to believe that no one anywhere will ever ask for their cash, or demand payment in cash, or question the monetary validity of digits on a banks computer....
No one anywhere is stretching it a bit, no? What particular scenario do you foresee where Wal-mart for instance will only accept cash? Most banks collapsing or an EMP black out of the electronic communications system. Bernanke gave the banks $16 Trillions to not collapse 2008, and I haven't seen any indication that he will stop providing liquidity for the too big to fail banks to continue operating. If he did stop yes then there would be a deflationary collapse, but I can't see any reason for him to do so, can you?

[Bigjon]

What can I say,

If you want to believe that no one anywhere will ever ask for their cash, or demand payment in cash, or question the monetary validity of digits on a banks computer....

The only event where this will happen is when people are afraid of a deflationary collapse. Then cash and treasury notes will be king. I don't see this happening, as long as the Fed can keep the system afloat via fraud and ignorance and collusion by the courts and the government.

Gold traditionally has done just as well as cash in a deflation, but in the past gold has always been money.

It probably would be a good idea to hedge your bets with a few treasury bills.

[Carl]

No one anywhere is stretching it a bit, no? What particular scenario do you foresee where Wal-mart for instance will only accept cash? Most banks collapsing or an EMP black out of the electronic communications system. Bernanke gave the banks $16 Trillions to not collapse 2008, and I haven't seen any indication that he will stop providing liquidity for the too big to fail banks to continue operating. If he did stop yes then there would be a deflationary collapse, but I can't see any reason for him to do so, can you? It appears you're just attempting to be contrary for contrary's sake because there is no logic to your argument.

Why would there be a deflationary collapse if Ben stopped providing the banks with "liquidity"? Aren't the banks sitting on 16 trillion "new dollars"?

[Neuro]

It appears you're just attempting to be contrary for contrary's sake because there is no logic to your argument.

Why would there be a deflationary collapse if Ben stopped providing the banks with "liquidity"? Aren't the banks sitting on 16 trillion "new dollars"?
Is life beautiful in your static universe Carl?

[Carl]

Is life beautiful in your static universe Carl? You got that backwards, I'm not the one on here preaching "so that it is, so shall it ever be".

You're the one arguing "Credit Is Money" and that an entire nation, indeed the entire globe, will hold steadfast to the notion that digits on a bankster's computer is money and those digits will continue to function as such into hyperinflation and beyond...

[Neuro]

You got that backwards, I'm not the one on here preaching "so that it is, so shall it ever be".

You're the one arguing "Credit Is Money" and that an entire nation, indeed the entire globe, will hold steadfast to the notion that digits on a bankster's computer is money and those digits will continue to function as such into hyperinflation and beyond...
Well believe it or not, but you haven't actually outlined any reason why they shouldn't! You have been continuously asked to provide that reasoning. Oh tell us wise one why digits on a computer will not continue to function in an environment of increased inflation rate? What particular event(s), will stop corporations from accepting credit/debit cards?

[Carl]

Well believe it or not, but you haven't actually outlined any reason why they shouldn't! You have been continuously asked to provide that reasoning. Oh tell us wise one why digits on a computer will not continue to function in an environment of increased inflation rate? What particular event(s), will stop corporations from accepting credit/debit cards? OK I'll repeat, yet again: How about the collapse of the dollar? Isn't that the theme of this thread?

Why do you believe nations, corporations, producers, farmers and people in general will continue to accept an un-fulfill-able, intangible promise to pay (DEBT) administered by failed and indebted banks that will be embroiled in legal battles around the globe for their thefts and swindles, for their tangible products?

[Carl]

I just can't understand why people hold fast to the notion that a digital representation of a failed currency will retain it value as a medium of exchange like a Zimbabwe note.

[midnight rambler]

OK I'll repeat, yet again: How about the collapse of the dollar? Isn't that the theme of this thread?

Why do you believe nations, corporations, producers, farmers and people in general will continue to accept an un-fulfill-able, intangible promise to pay (DEBT) administered by failed and indebted banks that will be embroiled in legal battles around the globe for their thefts and swindles, for their tangible products?

The dollar collapsed in 1933. What we (mostly) have now is evidence of debt being used to discharge debt with limited liability (as opposed to the actual PAYING of debt and thus extinguishing the debt being PAID). It's a game of musical chairs and at some point the music is going to stop - completely. Reset, game over, call it what you will, but imo there will be a struggle/contest/fight as to what the 'new rules' will be - and it's going to get fucking ugly.

[old steel]

You list barter items.

Barter items are not a medium of exchange.

A medium of exchange is an intermediary used in trade to avoid the inconveniences of a pure barter system.

It takes a medium of exchange to drive hyperinflation.

98% of the, so called, "money supply", our "medium of exchange", is credit.

I'm only this far into the thread but Karl is correct.

[old steel]

completely not true. i have a good friend who lived in argentina during the 1988 run up. hyperinflation happened with everything, including barter items. the main difference was with currency. the inflation would be 100% in a week with currency. with eggs, cheese, etc, it would only be 30% or 40%. according to someone i know who live through it (supporting 3 old grandparents at the time), barter items became currency in such a situation. a "medium of exchange" in such a situation does not not exist, and from the stories i heard, it wasn't an "inconvenience" to trade food.

I disagree and Argentina is not the USA.

[chad]

I disagree and Argentina is not the USA.

you're right, at one time it was even richer than the u.s.a. why do you think human nature will be different here?

[old steel]

Still not done but this is what i see happening. China is stiffed by the USA but they want something for all the debt they got stuck with so they invade and take or try to take some land for themselves, others follow or act in tandem with China.

Remember the USA at this time will not be the USA of today or bear much resemblance to it.

[chad]

Still not done but this is what i see happening. China is stiffed by the USA but they want something for all the debt they got stuck with so they invade and take or try to take some land for themselves, others follow or act in tandem with China.

Remember the USA at this time will not be the USA of today or bear much resemblance to it.

okay, i can buy that. black swan scenario.

[old steel]

you're right, at one time it was even richer than the u.s.a. why do you think human nature will be different here?

Demographics for one. Isn't diversity wonderful?

[Carl]

Still not done but this is what i see happening. China is stiffed by the USA but they want something for all the debt they got stuck with so they invade and take or try to take some land for themselves, others follow or act in tandem with China. ~

They don't have to invade here, they hold all of our industries there.

[Horn]

Demographics for one. Isn't diversity wonderful?

Then take Europe for example, once the politicians can't garner enough from local taxes.

They'll simply print, then join an Amero-union & you'll exchange 2old for 1new.

Rome may have tried this with change of Caesars? The new one always gets a hot "hyper" boost to acceptability.

[old steel]

I defy someone here to separate hyperinflation from inflation. Don't give me the "lost confidence in the currency" diatribe. No one can define hyperinflation. But everyone agrees that hyperinflation is a worse type of inflation. If 5% of the population is buying gold and silver and eschewing dollars is that not a symptom of inflation? A few decades ago $20 bought an ounce of gold. Today you need $1800 to buy that same ounce of gold. Is this not severe inflation? Have we not been experiencing inflation for years now, especially since the 1970s? Some say 4% inflation is not too bad. Others say only 20% inflation is hyperinflation. I call bull shit on both. Inflation is and must be zero! This was the case for over a century following the Constitutional Conventional and up to 1913. When the money is a store of value, people practice thrift and save. Today, the people do not save. They borrow and live way beyond their means. They don't respect money because money is losihg value all the time. So debtors are rewarded for fiscal irresponsibility while savers and pensioners are punished for thrift and a lifetime of honest hard work. 4% per annum inflation will destroy the working man's family just as surely as 20%; it's all a mtter of degrees and time. We are being destroyed by inflation now. And if history is any guide then the inflation is going to quicken and the dollar is going to weaken even more. Today's dollar is worth but 2 percent of a 1913 dollar. If that isn't death by hyperinflation, I don't know what is. Some of you want to spend valuable time arguing about credit and currency and physical versus virtual electronic dollars. Feel free to waste time on such unimportant nuances. I'll keep stacking real tangible like metals, food, supplies and ammo, thank you. We'll see whose strategy wins out in time.

This is true but what percent of the population is doing what you're doing, stacking PM's, food, supplies and firearms/ammo?

What will they use to acquire what you have when they need it?

[old steel]

They don't have to invade here, they hold all of our industries there.

They will want the raw land for agriculture.

[Horn]

Inflation as 0% is an impossibility in a growing economy.

Once there were 2 for only you, now there is 1 only one for each.

Your single coin will get you less.

[mamboni]

Inflation averaged over the 19th century was ~0% in America, the period of greatest growth, wealth creation and expansion. Fancy that.

[Horn]

Inflation averaged over the 19th century was ~0% in America, the period of greatest growth, wealth creation and expansion. Fancy that.

You can spread your peanut butter chunky or smooth, its still peanut butter... :)

It was also one of the most destructive centuries in the U.S. per capita.

[Neuro]

OK I'll repeat, yet again: How about the collapse of the dollar? Isn't that the theme of this thread?

Why do you believe nations, corporations, producers, farmers and people in general will continue to accept an un-fulfill-able, intangible promise to pay (DEBT) administered by failed and indebted banks that will be embroiled in legal battles around the globe for their thefts and swindles, for their tangible products?
No they won't, but the transition out of the dollar is and will continue to be a gradual and accelerating one, people, nations and corporations will/is stop holding dollars as a store of value, trying to get rid of it faster, and eventually stop using it as an instrument for trade, but different actors will react at different times. Sure very few would accept the digits of a bankrupt bank, if they knew the bank was bankrupt, but since 2008 this is a grey zone, all major banks are technically bankrupt, including the Central Banks that have balance sheets where the assets value is way below their liabilities, but most people don't know it, and most of those who knows it act as everything is fine. Gradual and increasing knowledge of this means a classic parabolic hyperinflation curve in terms of currency units needed to buy an apple or whatever which has an intrinsic value...

[vacuum]

Right now, the Bretton Woods system means our dollars are held by other nations' central banks as reserve money. This creates a great demand for our money and allows us to run perpetual deficits.

This system will be abandoned because other countries don't like the fact that they must pay for our dollars while we can freely make as many as we want.

The question is, what happens at that point?

[mamboni]

You can spread your peanut butter chunky or smooth, its still peanut butter... :)

It was also one of the most destructive centuries in the U.S. per capita.

Outside of Civil War, what destruction are you referring to? If you refer to the creative dustruction inherent in a thriving free market, then yes, lots of it. Even the snakes must shed it's old skin from time to time.

[sirgonzo420]

Right now, the Bretton Woods system means our dollars are held by other nations' central banks as reserve money. This creates a great demand for our money and allows us to run perpetual deficits.

This system will be abandoned because other countries don't like the fact that they must pay for our dollars while we can freely make as many as we want.

The question is, what happens at that point?

The next round!

Wash, rinse, repeat!

but it's fun to watch 'em pull different kinds of rabbits out of the hat.

[Bigjon]

OK I'll repeat, yet again: How about the collapse of the dollar? Isn't that the theme of this thread?

Why do you believe nations, corporations, producers, farmers and people in general will continue to accept an un-fulfill-able, intangible promise to pay (DEBT) administered by failed and indebted banks that will be embroiled in legal battles around the globe for their thefts and swindles, for their tangible products?



The point you seem to be missing is who owns these courts, that are going to be prosecuting these banks???

JEWS

PS: I had to take a time out to take an old drinking buddy out for a couple of beers and I "hic" had a great time.

( couple = not less than 4 and not greater than 10)

[Horn]

Even the snakes must shed it's old skin from time to time.

yes, much skin was shed in the civil war.

http://www.xtimeline.com/__UserPic_Large/9015/ELT200804301137238906948.JPG

[Carl]

The point you seem to be missing is who owns these courts, that are going to be prosecuting these banks???

JEWS

PS: I had to take a time out to take an old drinking buddy out for a couple of beers and I "hic" had a great time.

( couple = not less than 4 and not greater than 10)

OK Brown Eyes, what the fuk ever....

[Bigjon]

OK Brown Eyes, what the fuk ever....

I am hundre prosent Norsk and blue eyed, you fuker.

[Horn]

Why do threads always turn to be congeniality contests for you, Carl?

[Libertytree]

This seems rather apro pos right about now.
.................................................. ........................
http://www.zerohedge.com/news/2012-10-03/fed-confused-reality-does-not-conform-its-economic-models-shocked-models-predict-hyp
Fed Confused Reality Doesn't Conform To Its Economic Models, Shocked Its Models Predict "Explosive Inflation"





Below are several excerpts only the brains of those practicing the world's most useless profession (and we are very generous with that assessment) could possibly come up with, in attempting to explain the shocking outcome of reality continuously refusing to comply with their exhaustive and comprehensive Dynamic Stochastic General Equilibrium (http://en.wikipedia.org/wiki/Dynamic_stochastic_general_equilibrium)(DGSE - don't worry: it sounds complicated - it must be very serious and important, and be thus very credible and good at predicting stuff; it is neither) models.



With short-term interest rates at the zero lower bound, forward guidance has become a key tool for central bankers, and yet we know little about its effectiveness. Standard medium-scale DSGE models tend to grossly overestimate the impact of forward guidance on the macroeconomy—a phenomenon we call the “forward guidance puzzle.”
New Keynesian DSGE models following the work of Christiano et al. (2005) and Smets and Wouters (2007) are in principle well suited to study the effects of forward guidance
While the literature has provided strong theoretical justications for the use of such forward guidance (e.g., Eggertsson and Woodford (2003)), the evidence on the quantitative effects of such a policy tool on the macroeconomy is scarce
Empirically, Gurkaynak et al. (2005) and more recently Campbell et al. (2012) found strong evidence that FOMC announcements move asset prices. Yet when Campbell et al. try to assess the impact of exogenous anticipated changes in monetary policy on the macroeconomy, they find that this has the opposite sign than expected, highlighting these identication challenges.
Given that policymakers seldom if ever experimented with forward guidance this far in the future, there is little data to guide them.
The problem, however, is that these DSGE models appear to deliver unreasonably large responses of key macroeconomic variables to central bank announcements about future interest rates (a phenomenon we can call the "forward guidance puzzle")

It gets better:


In general it will always be hard, if not impossible, to test the predictions of DSGE models by looking at the outcome of policy counterfactuals such as the ones in our paper: even if the counterfactual is implemented, this will not occur in a controlled environment.
Nonetheless, we argue that counterfactuals like the one performed here are useful for policy makers in order to quantify the potential eects of their policies, particularly when alternative approaches are lacking as is the case here.

The problem is that the results the Fed's own models predict, fail to comply with the resultant reality:


Our proposed solution to the "forward guidance puzzle" is based on the realization that the apparently straightforward experiment "let us fix the short term interest rate to x percent for K periods" has implications for the short term rate that go well beyond the K-th period in medium scale DSGE models.
As a consequence, these counterfactuals appear to have an over-sized effect on the macroeconomy.
We view the implications of these experiments of short term interest rate in the far future as incredible. They are at odds with both common sense and the empirical evidence of the effects of announcements

Yes, it is ironic that the Fed is talking about "common sense", we know. But the absolute punchline you will never hear admitted or discussed anywhere else, and the reason why the Fed can no longer even rely on its models is that...


Carlstrom et al. show that the Smets and Wouters model would predict an explosive inflation and output if the short-term interest rate were pegged at the ZLB (Zero Lower Bound) between eight and nine quarters. This is an unsettling finding given that the current horizon of forward guidance by the FOMC is of at least eight quarters.

In short: the Fed's DSGE models fail when applied in real life, they are unable to lead to the desired outcome and can't predict the outcome that does occur, and furthermore there is no way to test them except by enacting them in a way that consistently fails. But the kicker: the Fed's own model predicts that if the Fed does what it is currently doing, the result would be "explosive inflation."
You read that right: if Bernanke does what he not only intends to do but now has no choice but doing until the bitter end, the outcome is hyperinflation. Not our conclusion: that of Smets and Wouters, whoever they are.
And these are the people who are now in charge of everything.
Full paper from the NY Fed (http://newyorkfed.org/research/staff_reports/sr574.pdf):

[Carl]

Funny thing about the DEflation of the 1930's the actual circulating money supply did change all that much.

Funny thing about all the "liquidity" Bernanke has added to the system since 2008, the actual circulating money supply hasn't changed all that much.

The 1930's DEflation was a cascading collapse of credit as money. When the "Liqidity" that was driving the roaring 20's ceased to function as money in the 30's, what did it become? Debt.

When Bernanke's $14 Trillion in "liquidity" ceases to function as money, what will it become?

Hint: It won't be hyperinflation....

Oh by the way Bigjon, I'm surprised you didn't get the inference of "brown eyes", I thought its meaning was commonly understood... I guess it's a southern thing. I still love ya man...

[Horn]

Are we talking about liquidity in the domestic U.S., or the entire planet?

Where are those numbers? All's I can find are pictures...

http://outofcentralasianow.files.wordpress.com/2009/11/pallets-of-100-dollar-bills.jpg

http://outofcentralasianow.wordpress.com/2009/11/24/your-tax-dollars-at-work-the-top-100-war-contracts-expanding-bases-out-of-iraq-into-the-gulf-malalai-joyas-new-book-a-woman-among-warlords-read-it/

[Carl]

Are we talking about liquidity in the domestic U.S., or the entire planet?

Where are those numbers? All's I can find are pictures...

http://outofcentralasianow.files.wordpress.com/2009/11/pallets-of-100-dollar-bills.jpg

Federal Reserve Porn.

Type in google "Money in circulation" And note the Feds response. It appears that they know the difference between cash and credit.

They also add the $40 Billion in U.S. coin and the $270 Billion U.S.D. that's still in circulation (mostly in Africa) to their total.

If there were a hard press for cash, there are going to be millions of disapointed people....

[Golden]

If there were a hard press for cash, there are going to be millions of disappointed people....

Promises fit the bill. Silver dimes are too valuable for use as a medium of exchange. (Good as preps in case of power failure.) The trend is electric.

[Horn]

Type in google "Money in circulation"


The jews own Google too, Carl

Far as I know most foreign banks are swimming with the stuff,

Can't find enough holes to stick it in.

[Bigjon]

Funny thing about the DEflation of the 1930's the actual circulating money supply did change all that much.

Funny thing about all the "liquidity" Bernanke has added to the system since 2008, the actual circulating money supply hasn't changed all that much.

The 1930's DEflation was a cascading collapse of credit as money. When the "Liqidity" that was driving the roaring 20's ceased to function as money in the 30's, what did it become? Debt.

When Bernanke's $14 Trillion in "liquidity" ceases to function as money, what will it become?

Hint: It won't be hyperinflation....

Oh by the way Bigjon, I'm surprised you didn't get the inference of "brown eyes", I thought its meaning was commonly understood... I guess it's a southern thing. I still love ya man...

I got it, and you're full of it.

[Bigjon]

Funny thing about the DEflation of the 1930's the actual circulating money supply did change all that much.

Funny thing about all the "liquidity" Bernanke has added to the system since 2008, the actual circulating money supply hasn't changed all that much.

The 1930's DEflation was a cascading collapse of credit as money. When the "Liqidity" that was driving the roaring 20's ceased to function as money in the 30's, what did it become? Debt.

When Bernanke's $14 Trillion in "liquidity" ceases to function as money, what will it become?

Hint: It won't be hyperinflation....

Oh by the way Bigjon, I'm surprised you didn't get the inference of "brown eyes", I thought its meaning was commonly understood... I guess it's a southern thing. I still love ya man...

In the 1930's banks could call in their loans and that is what they did. They reduced the monetary circulation by 1/3 of the total circulation. That may not seem significant to you, but it seems pretty significant to me.

Banks can't call in most of todays loans and it is not their goal to reduce the circulating monetary stock this time around. The goal today is to move us to a one world currency. Do you think they are going to do that by making FRN's more valuable or by making them worth less?

[Carl]

In the 1930's banks could call in their loans and that is what they did. They reduced the monetary circulation by 1/3 of the total circulation. That may not seem significant to you, but it seems pretty significant to me.

Banks can't call in most of todays loans and it is not their goal to reduce the circulating monetary stock this time around. The goal today is to move us to a one world currency. Do you think they are going to do that by making FRN's more valuable or by making them worthless?Sequence of events: The banks called their loans after the credit that was posing as money collapsed, there wasn't enough to cover their debts and they failed, some 4,000 of them. Credit's a blast going up, but a real bitch coming down...

I think the Fed will do whatever it takes to remain in control, to include allowing credit to collapse and reaping the rewards from the debt that remains.

Every FRN put into circulation is backed by the assets of the Federal Reserve so, why do you believe the Fed would be so intent upon destroying their basis of power and willingly put all of their assets at risk by printing excessive amounts of FRNs, especially so when they can use credit and its subsequent collapse to accomplish the same ends?

[Horn]

why do you believe the Fed would be so intent upon destroying their basis of power and willingly put all of their assets at risk by printing excessive amounts of FRNs, especially so when they can use credit and its subsequent collapse to accomplish the same ends?

Because they can't track each and every dollar, and they hate competition.

Assets are transferable to new denominations.

[Carl]

Because they can't track each and every dollar, and they hate competition.

Assets are transferable to new denominations. Are you agreeing with my postulation or are you contradicting yourself? I can't tell...

[Neuro]

Carl how do you see the Fed stop honoring the digital currency? Wouldn't that mean an instantenous collapse of government?

[Carl]

Carl how do you see the Fed stop honoring the digital currency? Wouldn't that mean an instantenous collapse of government? The Fed didn't honor the digits 1929/30, I don't see why this time will be any different. I think that what their intent, and there's been no activities to indicate otherwise, is to build up the Gov debt so huge that it would be pointless to ask for cash, it would be worthless before it left the presses. I think their intent is default in lieu of payment and I think the rest of the world is well aware of it. The government won't collapse, too well armed. In the end, the limited supply of FRNs comes out smelling like a rose and the Fed will get a monument for their valiant efforts in the face of the futility of attempting to save us from those other greedy banksters... (It will always be sombody elses fault)

[Bigjon]

The Fed didn't honor the digits 1929/30, I don't see why this time will be any different. I think that what their intent, and there's been no activities to indicate otherwise, is to build up the Gov debt so huge that it would be pointless to ask for cash, it would be worthless before it left the presses. I think their intent is default in lieu of payment and I think the rest of the world is well aware of it. The government won't collapse, too well armed. In the end, the limited supply of FRNs comes out smelling like a rose and the Fed will get a monument for their valiant efforts in the face of the futility of attempting to save us from those other greedy banksters... (It will always be sombody elses fault)

I guess I should have read all of your statement. FRN's will indeed come out on top of a DEflation.

If they allow a default on the outstanding credit markets, that is classical deflation on the money supply and the value of cash in hand rises in direct proportion to the size of the default.

In order for the cash to be made worthless they have to keep honoring and paying for those checks drawn against the system. Current cash reserves are minuscule in comparison to the outstanding money in Demand Deposit Accounts.

I do think that because they have such power over our court systems, they can swing the balance scale of DEflation/INflation in whichever direction they chose. There is no rule of law, no rules of accounting only rules set by men who are in all intents an organized crime syndicate.

If "they" allow a deflation it would be a boon to all of us stacking physical gold and silver and cash. Our especially silver will show a loss if we have been stacking all along as prices rise and be a non-taxable event. I have been really worried about all the taxes that will come due in the event of runaway inflation, but now that you have guaranteed us a deflation, all is well and the sky is blue.

[Mouse]

It has to be deflation, because inflation wipes out the bond markets and the bankers. Deflation wipes out YOU. Then they get your stuff.

[Horn]

Are you agreeing with my postulation or are you contradicting yourself?

Neither.

[Neuro]

Neither.
Both.

[Horn]

Both.

If we were to simply compare Rome's wheat, & U.S. oil. We might need more detailed history to investigate whether or not there were large swaths of farms being torched then.

My entire world is based on petroleum, either refined or byproduct.

According to this chart the U.S. just started to enter the export market for these around 9-11 2001.

http://research.stlouisfed.org/fred2/data/IQ111_Max_630_378.png

http://research.stlouisfed.org/fred2/series/IQ111

[Horn]

Anywho, watch for Huns.


http://www.youtube.com/watch?v=vHnG7DaJgaI