Hyperinflation coming to U. S. Like Runaway Train.
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Newsmax writer Julie Crawshaw has written a glum, dark report saying “investing experts now worry that inflation in the United States will approach that in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates when it should.”
The Federal Reserve appears concerned about deflation. Clearly somebody has their head up their derriere.
Admittedly Crawshaw’s forecast fortrays the more dire picture imaginable. Zimbabwe’s inflation rate was last reported at 231 million percent in July. It takes a wheelbarrow full of its dollars to buy a loaf of bread.. Zimbabwe’s currency has been essentially worthless in-country for months. Now the Zimbabwe dollar is officially worth more on eBay, where collectors can snap up a few trillion-dollar notes for less than $25. Technically, a currency exchange would give you 37 million Zimbabwe dollars for every U.S. dollar, but since Zimbabwe’s government recently suspended its currency altogether, you probably shouldn’t bother. They’re worth far more as novelty items.
Against that grim picture Cramshaw says hyperinflation is headed for America for numerous reasons including: the Fed has kept rates at or near zero and has promised to continue to keep rates low for as long as necessary. According to the last Fed minutes, members were still concerned about deflation, not inflation.
“I am 100 percent sure that the U.S. will go into hyperinflation,” contrarian guru Marc Faber told Bloomberg News.
“The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”
Faber doesn’t think, however, that gold will run up right away.
“I never sold gold and I’m still buying gold,” he says, adding that gold “has been an adequate hedge against inflation.”
“If you bought (gold) in 1980 at the price of $850, then it hasn’t been a good hedge against inflation, but if you bought it in 1999 at $251, then it has done very well,” he notes.
David Rosenberg, chief economist at Gluskin Sheff, believes inflation won’t take hold until consumer spending rebounds, which he thinks could take years.
“Not until the household sector expands its balance sheets are we likely to see the re-emergence of inflation on a sustained basis,” Rosenberg told The Wall Street Journal.
However, Universa Investments, the hedge fund firm that reaped huge rewards betting against the market last year, is about to open a new fund premised on another wager: that the massive stimulus efforts of global governments will lead to hyperinflation.
Meanwhile, students at China’s Peking University literally laughed out loud after U.S. Treasury Secretary Timothy Geithner on Monday reassured the Chinese government that its trillions in dollar-denominated holdings was safe from inflation.
China holds $768 billion in Treasuries as of March, but the total value of its dollar-based assets is likely to closer to $2 trillion by some measures.
“Chinese assets are very safe,” Secretary of the Treasury Geithner told Chinese students, a comment which drew laughs from the crowd.
Comment by slowsmile on 3 June 2009:
Richard…With a murky pedigree such as Geithner’s — IMF, Council for Foreign Relations, Kissinger Associates and New York Fed — I’m really not surprised he was laughed at by the Chinese during his speech at Peking Uni. Larry Summer’s pedigree makes equally interesting reading and is easily as bad. And Obama trusts these people with your dollar? Bye the way, the situation is much the same in UK, who are also monetizing like crazy. Gordon Brown has no chance for New Labour to be re-elected in 2010. I can also guarantee that Gordon Brown’s socialist party, who continue to r*pe the OK economy and the value of sterling, will be politically hung, drawn and quartered by both the UK media and its citizens at these elections.
But the Chinese aren’t that stupid, and from all my readings they now know what’s going on — they are to be one of several sacrificial lambs dedicated to Geithner’s desperate and ruthless battleplan for more credit. Meanwhile, Geithner continues to lie freely and boldly to the world, spouting rubbish and trusting very successfully and cleverly in the fact that no ordinarily lay-person — no citizen — could possibly understand the barest explanations between the essentials of good monetary economics and Fed policy and market manipulations with all the economic lies etc. that pervade and are so much an accepted part of the system. If Geithner, Summers or Obama said that black was white, it seems that the ordinary US citizen would probably believe them. This is the strange level of trust that US citizens seem to have in their own government. I have great difficulty understanding this, since if the dollar trashes, the ordinary citizen will pay and suffer economically like never before — and this is the way it seems to be going.
As yet, I am undecided on whether the US Economic outcome will be hyperinflation or (hyper)deflation. Both are almost entirely dependent on human action, so their timing and nature are virtually impossible to predict. Either of these outcomes, excess economic Yin or Yang if you like, is capable of ruining the US economy and each is capable of triggering the other.
I enjoyed this article too. Perhaps the US media is at last waking up and becoming more suspicious and questioning of both Geithner’s and Bernanke’s economic intent. A good thing…
Comment by Richard on 3 June 2009:
When it comes to economics I am at best a parrot and compiler. Media like NEWSWEEK are determined to make Obama successful at any cost regardless of the cost. It is not amusing to me to imagine the consequence of leftist lawyers supported by jounalism school graduates huddling on the East Coast like a swarm of 1960’s coffeee house refugees plotting to resurrect those ideas.