Dumb question about hyperinflation ... or maybe not

Me too. I have my POV, but I know others who are more extreme. I'm not a survivalist, but I'm in the middle of a novel based on a future 15 years from now, so I'm glad to hear the give and take on the forum. I'm in some survivalist forums too, and they are REALLY fertile for research!

My gold cache, as small as it is, is an investment and hedge, like most of the gold bullion represented here. I wish I could afford some beautiful coins because I love them, but I'm not a numismatist and I know it.

I'm writing the novel, not reading it. Think: :whistle: "Love Story meets Alas Babylon"

 

Log in or Sign up to hide this ad.

Nice writeup but the problem is, the numbers simply don't lie. Plugging your ears, ignoring the facts and painting a nice picture of how everything will be solved doesn't fix anything. The numbers do not lie:

http://www.usdebtclock.org/

The country is bankrupt. Comptroller general David Walker, the head accountant of the U.S. admitted it. What more do you want? Given *historical* tax revenues (which were likely much higher than are coming in now), in 2040, all the taxes collected will be enough to pay for social security, medicare and nothing else. From David Walker's mouth. Not mine.

I'm not saying PMs are going to make anybody rich. Far from it. But they may be the only thing left that allows people to retain whatever wealth they have when everything does hit the fan. Gold will still buy what gold buys today. Maybe a little more. Even if it is valued in $10k inflated U.S. dollars an ounce. It sounds great for gold but it's really not a great situation. It makes no difference when valuing something that actually has value vs. something that has little or no value (and falling).

 

Completely agree on both points.

Most everything reported is bogus. When they report that unemployment was 10.2 percent, the economy had a net loss of 'X' number tens of thousands of jobs in the next month, but unemployment numbers dropped to 10% *after the net loss* (because how many millions stopped looking for work or settled for underemployment?), what has any competent person to really gain from that percentage figure they throw out?

If you read or listen to any other non-MSM or government source, real unemployment is between 17 to 22% at this time. The official numbers aren't even calculated the same way they were 20 years ago in order to make things look better than they are. Most people don't know that.

Which is not a surprise because most people have forgotten they were getting the "Making Work Pay" tax credit back incrementally on their pay checks since last April as well, and that was implemented less than a year ago. (And, they don't realize yet that their tax returns will be significantly less this year because of it.... if they don't end up paying more in.)

Inflation is never accurate either. Didn't even think it was debatable, but perhaps it was just the wording you chose in order to appease a handful of trusting people.

 

Figures often beguile me, particularly when I have the arranging of them myself; in which case the remark attributed to Disraeli would often apply with justice and force: "There are three kinds of lies: lies, damned lies and statistics." Mark Twain :smile

 

“The most powerful force in the universe is compound interest”


-Albert Einstein

The very fact that we can carry so much debt only tells us that it hasn't been long enough yet for it to hit the wall! From 1940 through the late 70s, the national debt managed to stay flat and under 500 billion the entire time. This whole time period it was still manageable with little growth.

They didn't hit 1 trillion until the early 80s. Now, in 2010 it's up to 12.3 trillion with projected 1 trillion dollar deficits ANNUALLY as far as the eye can see.

Despite inflation, this is a drastic change in policy that has only been happening for a relatively short period of time. People can't wrap their minds around the figures anymore.
You give it another 20-40 years of this and it will not be able to sustain at this rate. At some point, tax revenue will not pay the compounding interest on the liabilities. Something has to give. Maybe some new creative math? Who knows. 2010? Sure. We're great. 2040? Nothing would surprise me.

We only got to this point because of a lot of foreign lending that will not be happening anymore. Take a guess as to what the alternative is when they need more money?

 

Start another "splendid little war"?

 

I'll bite too. If hyperinflation happened, your gold would be severely undervalued. As the money to buy it can buy more and more in terms of dollars. So, if you had 10,000 dollars total U.S. money (think of it as billions of dollars or whatever, just for arguments sake) and gold cost 10$. Now the money supply goes to 20,000 but nobody realizes it, so gold stays $10. Then the supply goes to 40,000 and gold makes a tiny jump to $15 and everyone is excited, but they are losing out.

Likewise, people will be jumping jobs left and right. Most employers aren't willing to give raises that compare to inflation. Inflation goes up 4%, employer gives a 2.5% raise. With hyperinflation, why take a 8% increase in pay, when you can quit and go across the street and get a 30% raise. Of course, there will have to be jobs available for this to happen.

Sooner or later, the hyperinflation will be put to rest. 10,000 dollars will be 400,000 dollars. Gold will just be $100, lagging 75% of it's value. The dollar bill will look very different, as will coins. Eventually, things will return to "normal" and people will start to use the new money. Those that kept money will see their $10 as now worthless. Those that took that $10 and bought the gold will now see $100, which is better than the $10 they could of been holding. As the economy improves, more and more people will want to buy gold, maybe as jewelry, or investment. The price will eventually get to where it should be at $400-$500. And then you can sell it, maintaining the orginal $10 "worth". Now, imagine if you kept the $10, instead of buying the gold. That seems pretty foolish to me.

Of course, this is all hypothetical.:rolling:

One last point.....we are talking about U.S. hyperinflation. Remember, there is a world economy, and the price of gold will be held up by other countries who aren't experiencing hyperinflation.

 

Another interesting comment is "gold is a leading indicator of inflation." This is usually followed by "the real value of gold should be $7000." To me, it sounds like it is lagging, not preceding. So, everytime to see a jump in gold price, it's inflation setting in.

 

Do you think the new money will be backed by anything this time around? I'm not sure the world would accept another FRN doing the backing.

 

Indeed. Tampons and baby wipes......oh, oh, that's gonna draw an infraction. Time for me to say "nitey nite".

 

I'll bite.

Price and value are not the same thing. Price is a measure of value based on a specific currency. A valid measure of value based on price requires a stable currency - hyperinflation is an unstable currency. Basing value on unstable money is a losing proposition every time. If the USD were to experience a sustained period of hyperinflation - I suspect the value of gold and other precious metals would increase faster on the front end, level off quickly and then trend downward when valued against energy, agricultural commodities, land, necessary goods and necessary services.

 

That is a very important observation that I've debated with various folks on CoinTalk for a long time. Most people just don't seem to be able to grasp the concept.

 

I agree completely. I thought people here would be the ones who would best understand this concept, but as Cloudsweeper noted just above, maybe not.

So, if gold lags behind an inflation curve, and even more so behind a h-inflation spike, what commodities might be better to buy? I've heard it suggested that those who can't buy gold, but can still buy food, buy two of everything since food will closely reflect an inflationary curve. So buying a can of chili & beans today will save us the cost increase a year down the road; buying a case of c&b might be even smarter. The value of the food is in its nutritional value: We don't have to sell it to somebody before realizing and using it for its value. We can just use it and thereby save the money inflation would cost us.

Is that too far afield? I know it's "small money" versus "big money and investing," but it's what some people can afford ...

 

OOPS, wish I could delete one of these !

 

Well kind of, at least in some cases ....

 

Howdy,

Everything I read has both gold and silver as your best hedge against deflation OR inflation.

The 15-20 year cycle they talk about is for natural resources in general and including precious metals. It's because unlike a auto plant that can add another shift, in order to increase the supply of gold, silver, nickel, copper, iron ore, etc., you have to prospect, discover, assay, permit, develop, extract, refine, and market before supply increases. This is a long drawn out process historically, but worse today because all the easy stuff has been found. New sources of gold, just like oil, are few and far between and generally much more expensive to produce.

The bull in pm's started in 2001/2 and most figure we still have another 6-7 years without anything weird happening.

peace,

rono

 

Howdy,

Yeppers, to paraphrase Rogers, 'give me a few trillion dollars and I'll throw a great party too.'

Inflation is being manifest in the stock market. Enjoy the ride. Figure they're dropping dollars from bombers, keeping interest rates at zero and spending $1T on fiscal stimulus. The stock market (and pm's for some of us) is about the only game in town. You can't make anything on a CD.

Just be nimble because when the music stops . . .

rono

 

Good points, yakpoo,

So far, in spite of enormous increases in supply, the velocity has been around zero as the banks have cut way back on credit and spending is down. The Fed is hoping to increase the velocity along with improving the economy sufficiently to start decreasing supply and keeping interest rates low enough to accomodate the improvements to the economy.

Alas, don't measure it with stock prices or corporate profits. The former is inflation being manifest in a class asset bubble and the latter is via cost cutting and job elimination. Not good folks.

If I hear one more pundit mention a 'jobless recovery', I'm going to scream. Sorry, but without jobs, there is no recovery.

and so it goes,

rono

 

Hi sponge,

Let me try to clarify this. The value of gold is constant but the value of fiat currencies flucuate with the market and as the value of the dollar decreases, the price of gold as expressed in dollars increases.

It's curious but when I was growing up, I could take a avg circulated 1960 quarter and go to the store and buy a loaf of bread. Gee, I can take that same 1960 (silver) quarter and still buy that same loaf of bread. Granted the breads price in dollars is $2.75-3.00 but the value of that silver quarter in dollars is also $2.75-3.00.

They say that in the Roaring 20's, an ounce of gold would buy a good suit of clothes. Well, that same ounce is worth about $1100 in dollars today and would buy a good suit of clothes. Rumor has it that an ounce of gold in ancient rome would by a nice toga and sandals.

Perhaps in all three transactions it was the very same ounce of gold.

peace,

rono

 

Hi Vess,

You've got it. The official debt is some $12T, but the Unfunded Liabilities are pushing $70 TRILLION FREAKIN DOLLARS. This is social security, medicare/aid, the various trust funds, service on the debt, etc.

There is no politically viable way that this tab can be covered by any combination of tax increases or benefit reductions - other than outright default and I don't give that much chance. Their only solution is to monetize this sucker and that means paying it with warm dollar bills hot off the presses. I read where they estimate they must devalue the dollar by half in the next 12 years to even get within striking distance.

They will attempt to do with without crashing the dollar or hitting hyper inflation. Will they be successful? WTF do I know? The problem I see it is the elected officials unwilling to do anything but kick the can down the road.

and so it goes,

peace,

rono


QUOTE=Vess1;788440]“The most powerful force in the universe is compound interest”


-Albert Einstein

The very fact that we can carry so much debt only tells us that it hasn't been long enough yet for it to hit the wall! From 1940 through the late 70s, the national debt managed to stay flat and under 500 billion the entire time. This whole time period it was still manageable with little growth.

They didn't hit 1 trillion until the early 80s. Now, in 2010 it's up to 12.3 trillion with projected 1 trillion dollar deficits ANNUALLY as far as the eye can see.

Despite inflation, this is a drastic change in policy that has only been happening for a relatively short period of time. People can't wrap their minds around the figures anymore.
You give it another 20-40 years of this and it will not be able to sustain at this rate. At some point, tax revenue will not pay the compounding interest on the liabilities. Something has to give. Maybe some new creative math? Who knows. 2010? Sure. We're great. 2040? Nothing would surprise me.

We only got to this point because of a lot of foreign lending that will not be happening anymore. Take a guess as to what the alternative is when they need more money?[/QUOTE]