12 Warning Signs of Hyperinflation

The 14th warning sign of hyperinflation, the economic "advisor" that wants to sell you gold will not take cash, he will only except cans of beans, and ammunition for his gold and invaluable advice.

 

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This may be so but this does not render WingedLiberty's anectode irrelevant. If a shortage were to manifest itself, it would likely appear in the weakest links in the supply chain and then work it's way to the core. There have been shortages of various things in the past and shortages of various things will happen in the future. If you want to refute the assertion, perhaps you could provide some hard analysis on the supply side.

Regards,

Bluesboy65

 

Your 13th and 14th warning signs are killing me!

Regards,

Bluesboy65

 

Seems like 1930s Germany.

 

Excellent post. It takes time, patience and concentration to fully appreciate. In my experience, some of the best insights require early and difficult digging. Here's a link to Bill Gross's Investment Outlook for March 2011. For those of you who do not know who he is, he is the world's most successful bond manager. He is also the CEO at PIMCO, an investment firm that has sidestepped a lot of potholes over the years. Over the last decade, his bond fund has beat over 90% of all equity funds. As a disclosure, I have been and currently am employed by a Swiss bank as an operations specialist.

In Mr. Gross's monthly piece Investment Outlook, he asks the question "Who will buy Treasuries when the Fed doesn't".http://www.pimco.com/Pages/Two-Bits-Four-Bits-Six-Bits-a-Dollar.aspx

As you mention in your post, Bill Gross sold treasuries in the PIMCO Total Return Fund in February. While this move has not looked prescient in the short term (due to the Japanese Earthquake) it has a high probability of success longer term.

Robert Arnott, another of PIMCO's managers (PIMCO All Asset & All Asset Authority Fund) has published articles and videos during the past recommending buying inflation protection now while it's cheap.

While I agree that higher inflation is on the way, I disagree that "hyperinflation" will occur. Even though inflation will likely get messy, there will be enough common interest among the biggest economies to find a solution since all will be affected.

I also disagree that owning gold and silver are the only ways of fighting inflation and decreasing purchasing power. Other ways of doing this include a basket of commodities (grains, oil, base metals, etc) sovereign debt of emerging economies, and bond funds which effectively short the bond market with negative duration during times of rising interest rates. I own some of all of the above (plus others) in a tactical allocation fund where the fund manager will increase or decrease these components based on the long term outlook for inflation.

Currently,I feel that my 10% PM position (5% Gold derivatives & 5% Silver Bullion) is enough hard insurance for my portfolio.

Although there are storms on the horizon, I expect in the long term that the skies will clear, but it's still wise to prepare ahead of time.

As an old Sufi proverb says "Trust in God, but tie your camel first."

 

I think what is offensive is the fact that you seem to think I was offending Cloudsweeper. The truth of the matter is I was not. He and you and every other person is entitled to their own opinion, just as I have mine. I take your post as offensive, rude, and lack of tact. With being a dealer of coins in most all major shows, I would consider keeping my mouth shut. I for one will never buy from you.
I did not say that any of you were ill-informed, nor did I call you a moron, those are your words, not mine. But by your remarks, I now think very differently of you.
I still hope you are prepared for the calamity to come, after all you are a dealer and should have hoards of PM's right?

 

There has been a strong bull market in silver for sure. I attribute it to declining inventories and increasing uses for the metal combined with rising costs of production. I have been a large holder of precious metals since 2004, hardly a silver bear. Recently I have started selling some mining stocks. But this is a long way from the authors of the article you cite providing evidence that we are in a hyperinflationary cycle. My point is that just because a website run by largely unknown people with slightly disreputable histories who prefer to remain hidden and have no apparent expertise in economics or investing says there is going to be hyperinflation doesn't make it true. People are attracted to opinions similar to their own beliefs and rarely demand to see any analysis. This is just the modern equivalent of buying snake oil from the salesman passing through town.

 

You would have a hard time backing up that statement with anything I've said. I don't mind if you disagree with me, but please don't just make stuff up. If you have paid any attention, I've spoken many times about the problems that the country faces and the terrible policy decisions that led up to the present situation. Where I draw the line is to assume that this naturally and inevitably leads to hyperinflationary economic collapse and the road warrior scenario that is popular with the survivalist community on CoinTalk.

 

Instead of attacking the messenger, is there any of the 12 points they make that you could disprove?. You may not agree with what they predict based on how you interpret these 12 signs, but attacking the NIA is kinda like the old fabled Roman law of "killing the bearer of bad news". And whos to say the people at the blog you posted is any less biased in their views?

 

I won't argue that the financial outlook of this country looks grim, but there are enough issues with the article for me to take it with a grain of salt.

#3 China's monetary policy is atrocious. No one will be using the yuan as the new reserve currency any time soon. China's comments, however, point to this possibility in the distant future. The U.S. needs China to stop undervaluing their currency which is feeding their exports so that our exports have a fighting chance. China wants to starve the world's exports so that only they have any sort of manufacturing capability left. Once they find themselves in that position they can correctly value their currency which will make it shoot up. However, this is a tricky thing to do and if their past performance is any indication their currency will still be too unstable to be depended on.

#8 The U.S. doesn't spend money evenly throughout the year. Cherry picking February's numbers and annualizing it over a year is disingenuous at best.

#10 Obama never campaigned as the "anti-war president". That's what the opposition painted him as. He said from the very beginning that the country "needed to focus on Afghanistan". Troop deployments overseas in 2008 was over 500,000; it's currently under 400,000 (so it went down, not up). No U.S. troops are being deployed to Libya, and overall Obama wants to lower military spending (like Clinton did in the 90s which is the only time in recent history we didn't run a deficit). This point is full of lies, and I'm not even sure how "lying about foreign policy" is directly related to hyperinflation.

#11 Obama isn't redefining what a balanced budget is. Presidents and politicians have been using that same bad definition for decades. Obama is guilty of continuing to use it, though.

#12 This isn't even a point! It's more predictions disguised as another point. They probably didn't even think anyone would read this far (unless they fully agreed at which point you could pull a fast one on them).

Like I said, I'm not saying we're in a great financial position, but this article has too many obviously incorrect points to let me trust the other points at face value. I would have to research them individually to determine their truthfulness and relevancy.

I'm not sure what the point of the article is. If you're an innocent bystander who is truly concerned about this issue, wouldn't you keep this a secret? I would buy up all of the silver while I could at the current price. If I told others they should be hoarding silver that would only make the price go up! However, if I was selling silver then putting this type of article up would be perfect for business.

 

Raqem did a pretty good job of answering you. I guess what bothers me more is that the NIA missed what is perhaps the only important point in predicting hyperinflation -- that it occurs only when the increase in supply of money vastly exceeds the increase in demand for money. We aren't in that situation. The demand for money to increase the financial reserves of financial institutions, fund underfunded pension plans, and repay debt is enormous. So it is very important to attack the messenger when the messenger doesn't have the knowledge they pretend to possess.

I've said many times that I think there is about an equal chance that we will have inflation or deflation. The recent price increases in commodities might turn out to be inflationary, and might not. It depends on how the Fed reacts. In the 70s, they decided to monitize the price increases and set off a wage/price spiral. So far, there has been no general increase in the income of consumers, so a price increase in, say, gasoline has to be offset by a reduction in the price or quantity purchased of something else. This is not systemic inflation where the general price level of just about everything rises.

 

In every matter I've read about dealing with economic near collapses in the US, the collapse, not matter how bad, only has a limited duration. Whether we are talking about the Civil War, the depressions of the 1870s, the timeframe that gave rise to the Fed and the IRS, the World Wars, the Great Depression, the 1970s, the S&L scandle, and the dot com bubble, the US dollar seems to rebound with a vengeance.

What makes you think the housing crisis will be a more powerful mover than any of those?

 

Let me add that even Germany pulled it's economic act together within 5 years of that famous picture of the old woman with the wheelbarrow full of worthless Marks.

 

True, but it should be pointed out that the peoples who savings were wiped out by the inflation were still wiped out.

 

And........ WE, as a country haven't learned our lesson yet! We keep spending, keep relying off our government programs to live, and the government role is expanding, not declining, and people who shouldn't be able to get loans still can. We will not be able to afford it, period. That's why we see Unions crying across the country when we have to cut their "benefits" and that's why we see 500,000 people strong protesting in England. We still haven't learned that we can't afford this way of life forever.

 

How about all this political chatter. On another forum I was chastised for these types of critiques, but now on most ALL the forums people have come around to not believing the government. One thing that's readily apparent is that they are fixing cost of living adjustments by stating that prices are not rising. What is happening is that instead of a whole gallon of ice cream, now we get 14 ounces -instead of 16- for the same price. That's how the conspiracy called government is subsuming our purchasing power. Personally, the Dems and the Republicans are gonna see some obscure nothing candidate run, and win. Maybe they won't assassinate him and we can see progress in our nation. I was talking with 84 year old Martha (whose mind is still sharp) and she said this is worse than the depression. And another old man said something striking: "Last depression there was plenty of food and no money". This one it seems there is plenty of money, but even my wife notices the shelves becoming deeper, and without products. And the 800 lb gorilla that is Japan sees an uninhabitable island where many of our products are manufactured. There may be a mass exodus from Japan and neighboring islands. Millions will emigrate, and I hope that a great percentage come here. The Japanese are wonderful, productive people. And they would contribute robust growth wherever they settle. It may help us turn the next page historically as well. Their educational base is superlative. And have you seen their coins?!

 

Of course we can. Don't drink the kool-aid. Wealth isn't a fixed limited quantity of "stuff" to hand out. Every single person on this planet can have a decent lifestyle, but there is a small cadre of controllers who want people to believe that if one person has something, it requires someone else to go without. That's the biggest lie of all.

 

"So it is very important to attack the messenger when the messenger doesn't have the knowledge they pretend to possess. "

My point is it is better to do this by discrediting their points, if you can, than by name calling.
I am not on the Hyperinflation bandwagon, I don't know for sure what exactly will happen. I will admit I think there is maybe a 10-20% chance of this occurring. But that is much higher of a chance then there should be!

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A couple of oberservations. On point #3, China has been working with Russia to move away from the dollar in cross border trade. Both China and the US have been screwing each other by devaluing their currency and both complain about each other as if each are innocent. China has the largest population on the planet, the greatest potential for economic growth and are working very diligently to position themselves as the #1 economic superpower. China also has problems but it would be at our peril to under estimate their ability to change the landscape.

#8: February budget deficit is the latest reference point. I think the official forecast is for $1.6 trillion in deficit spending this year and these numbers keep getting revised to the upside. Given the latest month's data and the unwillingness/inability to reign in spending I presonally think the prospect for continuing increases in deficit spending is likely. Or at least "possible" even if you are dove(ish) in your outlook. What points in time would you prefer to use in your version of the analysis?

Bluesboy65

 

I'm not drinking any Kool-Aid. You really don't think we can afford to keep going like this do you? I believe our standard of living can get better like it always has, but not with this spending spree we are on. We will have to pay for it eventually in some way.