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Showing posts with label Hyper Inflation. Show all posts
Showing posts with label Hyper Inflation. Show all posts

Saturday, April 7, 2012

$8 a Gallon Gas?

Are you planning for any changes if fuel costs double this year? What are you willing to do without or how are you otherwise going to stretch those dollars as well know as fuel jumps so does all other commodities?

Some analysts are saying that even $8 a gallon is on the low side for the potential price increase especially if thee is a conflict in the Middle East involving Iran. Military analysts are suggesting that the least aggressive tactic that Iran could employ would be to lay anti-ship mines in the Straits of Hormuz. Which would take the U.S. and probable ally England many weeks to clear. Imagine the sinking of one of our aircraft carriers and/or one large oil transport ship in the Straits. Sure, the very probable U.S. relatiation would be massive, but it would do nothing to ease the price of oil.

Others are suggesting that oil at $200 a barrel/gas at $8+ a gallon would spur a massive downturn of the U.S. economy; causing businesses to lay off people; propell another large stimulus; cause the Federal government to borrow more to pay entitlements; devalue the U.S. dollar and push the Fed into another rounds of Quanitative Easing - which of course if injecting more money into financial institutions further devaling the dollar causing inflation,....and posibly the Survivalist Prepper's fear, a hyper inflationary period.

Dominique de Kevelioc de Bailleul's article, titled "Worried About $6 Gas Prices? Try $8" from ETF Daily is a necessary read. To summarize the key points of this article:

$6 gas in the U.S. may be even a low-ball estimate.

We are now back above $4 per gallon for the first time since May 2011,” “In Europe it is close to the $10 mark.”

Expect a record gas price this summer. The oil market has entered the perfect storm.

We will see a minimum of $6 per gallon gasoline in the United States this summer.”

Military conflict with Iran could throw the $6 price target far off the mark, as approximately 17 percent of the world’s oil supply could be shut out for, not a matter of weeks as the Pentagon has estimated, but months.

There is virtually no limit to the upside for oil prices. The oil price could easily double.

Oil trading above $200 per barrel could easily take gasoline to $8 in the U.S., as a panic to secure already-tight global supplies could shock the American people into another significant downturn in the U.S. economy.

This could turn into really tough times, because the economy will be struggling in that environment, we could see QE3 in the midst of already record high gasoline prices. Now that will be wildly inflationary.”

Sunday, February 12, 2012

Wealth From the Ground has mentioned several times about it being a good idea to become a recipient of the Martenson Newsletters as Chris Martenson publishes newsletters and links to information of value to Survivalists and indicators of the coming collapse.

In one of his latest newsletters, Martenson post’s an article written by James Dines, titled “Owning 'Wealth In The Ground' Is Your Best Bet to Surviving the Coming 'Supernova of Inflations”. Although I have never heard of James Dines, apparently his record of making good calls is pretty strong.

Go here to read the whole article.

Dines made some pretty good comments, among them he sees the excessive credit in the financial system as having placed the global economy on a collision-course with hyperinflation. And of course we know that is true. 15+ Trillion dollar debt by the U.S. Government and really now way to fix it. Too much of an austerity program will induce a collapse as well continued spending. We have fenced ourselves in. And before some of hurl electronic bullets at me, the “we” I’m talking about is America and our elected politicians.....not “we” as Survivalists.

The rapidly increasing demand, increasing prices and shrinking supply of oil may be the catalyst. Dines predicts that at some point, when the military grasps the declining supply, they will seize the remaining supplies and you will not be able to drive your car until the last drop.

Dines states that the price of gold and silver did not go up. It is the fiat currency value that went down. Gold and silver are the ultimate money, coins of which are good anywhere in the world, no matter what is stamped on them, and that is the money. Gold (and Silver) are the only investible asset in the world that has gone up the last 11 years without interruption, and that is because they are just running the printing presses. The more they do, the more value builds into gold and silver. If a Survivalist does not have any precious metals then they run the risk of having a hole, large or small, in the plan.....plain and simple.

The point of the Wealth in the Ground article is about the only assets that would survive an economic collapse and the chaos that went with it is hard assets. Hard assets, in part being, being physical commodities, mining companies, gold and silver. When I first read the title and linked to it, I thought I would find someone advocating Wealth in the Ground” to mean,…a safe and secure survival site; a full time, year round water supply; ability to grow crops to sustain your survival family;......but Dines did not touch n that, but it is a logical extension of the wealth in the ground argument.

Anyway, a good article to read in it’s entirety and the Martenson newsletter at the very least motivates you to prep harder. He is one of many sources I tune to almost each and every day,…sometimes spending 2 or 3 minutes looking for something of interest,…and sometimes spending 20 minutes or more reading something where I’ll think,…”that’s a good point”.

Thursday, December 22, 2011

Economic Collapse: Watch Out For QE3

QE3 is of course Quantitative Easing Round Three, where more fiat currency is printed further devaluing the current paper money in circulation and necessarily causing prices to inflate because the dollar is worth less. Once QE3 is announced or actually executed,.....expect the latter since the Government and the Fed have taken secrecy from the people to new heights,....precious metals will go up, particularly Gold.

In fact, when the major central banks launched a joint action to provide emergency U.S. dollar loans to banks in Europe, which put more money (not backed by anything but some politician's word) there became a rush to buy equities and commodities that would survive inflation and Gold rose $30 an ounce.

As 2011 ends, the four FED governors will be replaced and most analysts figure that the next four will be much more liberal in their monetary policies. QE3 will probably be snuck in, money created from air, without much publicity; and the present incredible low interest rates will climb as the dollar devalues. This will incite the $16.4 trillion Federal Debt to explode and the U.S. will be all probability start the slide to become like Greece. So the smart people are buying precious metals ahead of the very probable QE3.

It shouldn't end there for Survivalist. Everything will go up in price,... excepting your pay checks. The smart idea is to procure now what you can, because as the interest rates rise, the beginning of the dollar collapse begins. Scary times my friends. They will likely become much more scary in early 2012.

I am not advocating going into debt to purchase vehicles or property at the current low interest rates, although I know a couple people who are rationalizing that they would rather have new, reliable vehicles for a Bug Out
than to try and procure one when the interest rates are higher and the dollar buys less.  I'm not going to do that.  I'll continue on the same rate, maybe just step it up a notch, on procuring long stay food items and perhaps more Silver. 

2012 is going to be ugly.  Be prepared.

Monday, January 17, 2011

Urban Survival - World Economy Affects the U.S. and the Coming Collapse

Whether we like it or not, and most of us certainly don’t, a World economy exists and disruptions within this economy have major effects on the U.S. economy. For some of you knuckle draggers out there, the World economy s not the same as the infamous “One World Government” concept, however make no mistake about it there are people, and people in powerful positions who desire a one world government. But what I am talking about it the global economy and how inflation and collapses in other countries combined with nationalistic trends greatly effects not only how the U.S. economy reacts but dials up the chances and effects of a economic collapse in this Country.

The United States is a consumer and much less the manufacturer or provider like we were 50 years ago. We are simply dependent on other countries not only for consumer goods, but largely for foods and particularly so for oil. Without the our military power and demonstrated willingness to use it, our need for oil can be leveraged by the world’s producers and other large consumers (China, Russia and others). This can, and will, as some experts predict, drive the price of gasoline up to $7 a gallon by the end of this calendar year.

In China , trying for an orderly transition to new civilian leadership in the near future will face a threat from their own military which is executing an unprecedented growth in military expansion and technological development. There is a rift between the civilian Chinese leadership and the military that will only grow as their own economy suffers from reverberations from the decaying U.S. and global economy. If the U.S. defaults on debt owed to China , and as the U.S. necessarily voids or changes trade agreements as an effort in self preservation – the China problem will pick up steam.

Chinese needs for oil that grown at an incredible rate. It will only further grow not only driving the price up but create potential political firestorms as the global economy competes for a limited supply.

Just image gasoline at $7 a gallon. That means Diesel fuel even higher. That means all consumer goods, being trucked across the country, at never to expected high prices. Imagine bread at $6 a loaf,…..milk at $12 a gallon and you start to get the picture. Most people don’t know it now, but consumer commodities have risen an average of 43%. Some of you may admit that in the back fo your head you are aware of growing prices, but it will be really evident when that percentage increases to 400%, 600% or even $1000.

Fuel oil for heating will be at astronomical prices. Electricity, since much of it is produced by fuel oil driven plants, at twice to three times what you pay now. In short everything will go up in price and go up exponentially. This is inflation,…no,…this will be hyper inflation.

What will not go up is your income or buying power. In fact, that will take a dive. If you near the poverty level, this will have incredible and dire consequences for you and your family’s ability to survive. This will also produce a large class of people that will be desperate. This number may reach 60 million. Imagine 60 million people, a full 20% of the U.S. population who cannot sustain themselves.

The U.S. government will have to create large scale entitlement programs just in order to feed these people and keep anarchy at bay. I fully expect the deployment of first line U.S. military combat units to enforce martial laws in some high population density areas. The U.S. government will not be able to borrow more money, so they will print more fiat currency further driving us into hyper inflation….and eventual anarchy.

Beginning in maybe April, certainly no later than July, the banks, lenders, housing market and certainly the people will take a giant hit as adjustable rate mortgages will be re-set causing a large number of people to be upside down in their homes (that is owing much more than the property is worth), and interest rates will skyrocket. Foreclosures will exceed previous record highs. The government will try to control this with more stimulus money drawn from a empty bank account further deflating money and adding to the hyper inflation, and may try to control the dive through government take over (nationalizing) of banks and maybe the whole mortgage industry. This will embolden the U.S. Government to nationalize other segments of the economy such as health care, insurance, and possibly the oil industry.

All of this spells doom for us. What can you do? Do what you are doing now,…..preparing for inevitable. But do it smarter. And do it at an increase pace. And above all, wargame your plan against all the possible scenarios. I have long said that Survival is a Team Sport,..but it is also a thinking man’s game.

Friday, December 24, 2010

Urban Survival Planning - Hyper-Inflation will precede the Collapse

A buddy of mine sent me this video from the National Inflation Association with the theory that our Government isn't stupid. He justified this by stating all the things are government has done to stave off economic disasters, for clunkers, bailout of Fannie Mae and Fredie Max,...Stimlus I and II,....the bailout of AIG,.....nationalizing half of the automotive industry,.....passing Obamacare,...trying to pass Cap and Trade,....extending unemployment benefits (twice actually),....and the list goes on,...are not things a rational government does,..UNLESS they are very scared of the future economic viability of this Country, and indeed the viability of this Country as a country.

He sees it as a time buying plan and/or a plan to orient the historical record to efforts made and not results. He sees the end as a economic collapse of this Country preceded by hyper-inflation. He forecasts two scenarios a rapid collapse the speed of which as never been seen before, or less probable, a gradual collapse that will plunge this country into anarchy which will results in the Government suspended the Constitution in an effort, doomed to failure, to control the chaos.

God, I hope not, but I don't see any way out of it. His prediction mirrors that of Gonzalo Lira, although he said he has heard of Lira but not read any of his writings. But I see the writing and it is on the proverbial wall....Get prepared, have a plan and do it now.

Sunday, November 7, 2010

Survival Planning - No More Excuses received a private message from a reader: "In response to your post from the National Inflation Association, a great article from NIA by the way, on the probability of hyperinflation coming to call on us soon, I ordered 7 silver rounds from Northwest Territorial Mint today. I also set up an automated investment plan for Silver purchases through SilverSaver. I set it at $100 a month. After 20 ounces are accumulated, they can be delivered. I wish I didn't wait so long from when I first thought about buying Silver as a Survival insurance plan until now, the price has increase from around $17 an ounce to $25.

UrbanMan replies: Good call on your part - not the waiting, but the purchase now and not waiting anymore. I hear quite a few arguments about it's too late to prepare,....we won't be able to do anything anyway,.....don't you think the government knows what is going on and is planning for it?,.....

No, it is not too late to prepare. Anything you can do today to prepare,...well, do it. You'll be much better off, even if you just put more groceries in the pantry. But if you are even a little more serious about you and your families survival, then this site and others (see the links bottom right) will help you. Figure out what you need, always comes down to food, water and protection and a safe (or safer) place to Bug Out to when your current location is not tenable.

You won't be able to do anything about it anyway?? Are you kidding me? Or are you just from the age of entitlement? You are responsible for yourself, not the government, and there is so much you can do "about it" and the "it" is a collapse,.....economic, social, panademic, whatever,.....start planning and preparing now and remember Survival is a team sport, unless you want to live in a dugout in the Mountains and living off fern plants.

As far as the government planning for it? That deserves another "Are you kidding me"? Do you trust the government to take care of you? The only way the government can take care of you,.e.g..expending resources like food, water, shelter and security, to control you. The only way to control you is through martial law and/or camps. And no, I'm not a conspiracy theorist, I just know what is possible and what is not. If you think the government is going to subsidize food and water on local bi-weekly runs through your neighborhood, then I would ask you not to read this site anymore,...go join ACORN or and hope they take care of you.

Saturday, November 6, 2010

Survival Planning - Inflation Likely to Drive Food Prices Way Up

Most of you are already keeping track of the soaring prices of Gold and Silver, of course caused by the Fed's decision to print more money to buy U.S. Debt that nobody else will buy,...not even China who already holds massive amount of U.S. Debt.

The following is a article from the National Inflation Association that projects a large increase in U.S. food prices. And of course, Food, gold, silver won;t be the only things increasing,...fuel, commodities,...EVERYTHING will go up except your salary to keep pace. This my friends will also create shortages, increase the have not and have separation and likely set the stage for a economical collapse.

The NIA Article of 5 Nov 2010:

The National Inflation Association today announced the release of its report about NIA's projections of future U.S. food price increases due to the massive monetary inflation being created by the Federal Reserve's $600 billion quantitative easing. This report was written by NIA's President Gerard Adams, who believes food inflation will take over in 2011 as America's greatest crisis. According to Mr. Adams, making mortgage payments will soon be the last thing on the minds of all Americans. We currently have a currency crisis that could soon turn into hyperinflation and a complete societal collapse.

"For every economic problem the U.S. government tries to solve, it always creates two or three much larger catastrophes in the process," said Adams. "Just like we predicted this past December, the U.S. dollar index bounced in early 2010 and has been in free-fall ever since. Bernanke's QE2 will likely accelerate this free-fall into a complete U.S. dollar rout," warned Adams.

NIA projects that at the average U.S. grocery store it will soon cost $11.43 for one ear of corn, $23.05 for a 24 oz loaf of wheat bread, $62.21 for a 32 oz package of Domino Granulated Sugar, $24.31 for a 32 fl oz container of soy milk, $77.71 for a 11.30 oz container of Folgers Classic Roast Coffee, $45.71 for a 64 fl oz container of Minute Maid Orange Juice, and $15.50 for a Hershey's Milk Chocolate 1.55 oz candy bar. NIA also projects that by the end of this decade, a plain white men's cotton t-shirt at Wal-Mart will cost $55.57.

The report highlights how despite cotton rising by 54%, corn rising by 29%, soybeans rising by 22%, orange juice rising by 17%, and sugar rising by 51% during the months of September and October alone, these huge commodity price increases have yet to make their way into America's grocery stores because corporations have been reluctant to pass these price increases along to the consumer. In today's dismal economy, no retailer wants to be the first to dramatically raise food prices. However, NIA expects all retailers to soon substantially raise food prices at the same time, which will ensure that this Holiday shopping season will be the worst in recorded American history.

Friday, August 27, 2010

Urban Survival Planning - Hyper-Inflation Predicted and Explained

This is part of an article by Gonzalo Lira, entitled "Hyperinflation, Part II: What It Will Look Like", the entire article can be read at:

My apologies to Gonzalo Lira, but I decided to post only a portion of it as it gets fairly technical and I think readers are more interested in the indicators and the effects of Hyperinflation, rather than the technical market reasons.

I argue that Treasury bonds are the New and Improved Toxic Assets. I argue that, if there was a run on Treasuries, the Federal Reserve—in its anti-deflationary zeal, and its efforts to prop up bond market prices—would over-react, and set off a run on commodities. This, I argue, would trigger hyperinflation.

There are two issues that many people have a hard time wrapping their minds around, with regards to a hyperinflationary event. These two issues are an greatly increased money supply, hence deflating it's value, and, a big increase in the price of commodities while equities, real estate and other assets fall:

“Where’s all the dough gonna come from?” After all, as we know from our history books, hyperinflation involves people hoisting bundles and bundles of high-denomination bills which aren’t worth a damn, and tossing them into the chimney cause the bundles of cash are cheaper than firewood. If the dollar were to crash, where would all these bundles of $100 bills come from?

The second issue was, Why will commodities rise, while equities, real estate and other assets fall? In other words, if there is an old fashioned run on a currency—in this case, the dollar, the world’s reserve currency—why would people get out of the dollar into commodities only, rather than into equities and real estate and other assets?

Apart from what happened with the Weimar Republic in the 1920’s, advanced Western economies have no experience with hyperinflation. (I actually think that the high inflation that struck the dollar in the 1970’s, and which was successfully choked off by Paul Volcker, was in fact an incipient bout of commodity-driven hyperinflation—but that’s for some other time.) Though there were plenty of hyperinflationary events in the XIX century and before, after the Weimar experience, the advanced economies learned their lesson—and learned it so well, in fact, that it’s been forgotten.

During the period 1970–’73, Chile experienced hyperinflation, brought about by the failed and corrupt policies of Salvador Allende and his Popular Unity Government. Though I was too young to experience it first hand, my family and some of my older friends have vivid memories of the Allende period—vivid memories that are actually closer to nightmares.

The causes of Chile’s hyperinflation forty years ago were vastly different from what I believe will cause American hyperinflation now. But a slight detour through this history is useful to our current predicament.

To begin: In 1970, Salvador Allende was elected president by roughly a third of the population. His (Allende’s) election was a fluke.

He wasn’t a centrist, no matter what the current hagiography might claim: Allende was a hard-core Socialist who took over the administration of the country, and quickly implemented several “reforms”, which were designed to “put Chile on the road to Socialism”.

Land was expropriated—often by force—and given to the workers. Companies and mines were also nationalized, and also given to the workers. Of course, the farms, companies and mines which were stripped from their owners weren’t inefficient or ineptly run—on the contrary, Allende and his Unidad Popular thugs stole farms, companies and mines from precisely the “blood-thirsty Capitalists” who best treated their workers, and who were the most fair towards them.

One of the key policy initiative Allende carried out was wage and price controls. In order to appease and co-opt the workers, Allende’s regime simultaneously froze prices of basic goods and services, and augmented wages by decree.

At first, this measure worked like a charm: Workers had more money, but goods and services still had the same old low prices. So workers were happy with Allende: They went on a shopping spree—and rapidly emptied stores and warehouses of consumer goods and basic products. Allende and the UP Government then claimed it was right-wing, anti-Revolutionary “acaparadores”—hoarders—who were keeping consumer goods from the workers. Right.

Meanwhile, private companies—forced to raise worker wages while maintaining their same price structures—quickly went bankrupt: So then, of course, they were taken over by the Allende government, “in the name of the people”. Key industries were put on the State dole, as it were, and made to continue their operations at a loss, so as to satisfy internal demand. If there was a cash shortfall, the Allende government would simply print more escudos and give them to the now State-controlled companies, which would then pay the workers.

This is how hyperinflation started in Chile. Workers had plenty of cash in hand—but it was useless, because there were no goods to buy.

So Allende’s government quickly instituted the Juntas de Abastecimiento y Control de Precios (“Unions of Supply and Price Controls”, known as JAP). These were locally formed boards, composed of loyal Party members, who decided who in a given neighborhood received consumer products, and who did not. Naturally, other UP-loyalists had preference—these Allende backers received ration cards, with which to buy consumer goods and basic staples.

Of course, those people perceived as “unfriendly” to Allende and the UP Government either received insufficient rations for their families, or no rations at all, if they were vocally opposed to the Allende regime and its policies.

Very quickly, a black market in goods and staples arose. At first, these black markets accepted escudos. But with each passing month, more and more escudos were printed into circulation by the Allende government, until by late ’72, black marketeers were no longer accepting escudos. Their mantra became, “Sólo dólares”: Only dollars.

Hyperinflation had arrived in Chile. One of the effects of Chile’s hyperinflation was the collapse in asset prices.

This would seem counterintuitive. After all, if the prices of consumer goods and basic staples are rising in a hyperinflationary environment, then asset prices should rise as well—right? Equities should rise in price—since more money is chasing after the same number of stock. Real estate prices should rise also—and for the same reason. Right?

Actually, wrong—and for a simple reason: Once basic necessities are unmet, and remain unmet for a sustained period of time, any asset will be willingly and instantly sacrificed, in order to meet that basic need.

To put it in simple terms: If you were dying of thirst in the middle of the desert, would you give up your family heirloom diamonds, in exchange for a gallon of water? The answer is obvious—yes. You would sacrifice anything and everyting—instantly—in order to meet your basic needs, or those of your family.

So as the situation in Chile deteriorated in ’72 and into ’73, the stock market collapsed, the housing market collapsed—everything collapsed, as people either cashed out of their assets in order to buy basic goods and staples on the black market, or cashed out so as to leave the country altogether. No asset class was safe, from this sell-off—it was across-the-board, and total.

Now let’s return to the possibility of hyperinflation in the United States:

If there were a sudden collapse in the Treasury bond market, I argued that sellers would take their cash and put them into commodities. My reasoning was, they would seek a sure store of value. If Treasury bonds ceased to be that store of value, then people would invest in the next best thing, which would be commodities, especially precious and industrial metals, as well as oil—in other words, non-perishable commodities.

Some people argued this point with me. They argued many different approaches to the problem, but essentially, it all boiled down to the argument that commodities and precious metals have no intrinsic value.

Actually, I think they’re right. In a strict sense, only oxygen, food and water have intrinsic value to human beings—everything else is superfluous. Therefore the value of everything else is arbitrary.

Yet both gold and silver have, historically, been considered valuable. Setting aside a theoretical or mathematical construct that would justify the value of gold and silver, look at it from a practical standpoint: If I went to a farmer with five ounces of silver, would he give me a sack of grain? Probably. If I offered him an ounce of gold for two or three pigs, would he give them to me? Again, probably.

Where there is a human society, there is a need to exchange. Where there is a need to exchange, a medium of exchange will soon appear. Gold and silver (and copper and brass and other metals) have served that purpose for literally millennia, but then they were replaced by paper.

Right now, there are two forms of paper currency: Actual dollars, and Treasury bonds. One is a medium of exchange, the other a store of value.

If Treasuries—the store of value—were to collapse in price, people in a Treasury panic would buy commodities. This ballooning of non-perishable commodities would be as a means to store value. Because that’s what people do in a panic—they batten down the hatches, and go into what’s safest. And this rush to commodities, I argued, would trigger hyperinflation.

Now, I said I would answer two questions—one was why commodities would outpace all other asset classes in a Treasury panic and subsequent hyperinflation. The other question was, “Where’s all the dough to feed my fireplace gonna come from, in a hyperinflationary event?”

The first wave of dollars in a hyperinflationary event will come from people’s savings accounts.

If Treasuries tank, and the markets all barrel into commodities, then prices will rise for regular consumers—this should not be a controversial inference. What would consumers do, with suddenly much higher gas prices, and soon much higher food prices? Simple: They’ll bust open their piggy banks, whatsoever those piggy banks might happen to be: 401(k)s, whatever equities they might have, etc.

But if the higher consumer prices continue—or become worse—what will happen to the 320 million American consumers? They’ll start buying more gas now, rather than wait around for tomorrow—and the market will react to this. How? Two way: Prices of commodities will rise even further—and asset prices will fall even lower.

If American consumers are getting hit at the gas station and the supermarket, they’ll start selling everything so as to buy gas, heating oil (most especially) and foodstuffs. The Treasury panic will thus be transfered to the average consumer—from Wall Street to Main Street by way of $15 a gallon gas prices, and $10 a gallon heating oil prices.

All other consumer prices would soon follow the leads of gas, heating oil and food.

Would there be Federal government intervention of some sort? Most definitely—people would be screaming for it. Would food rationing be implemented? Probably, and probably by way of the current Food Stamps program. Troops on the streets, protecting gas stations and supermarkets? Curfews to prevent looting? Palliative dollar printing? Yes, yes, and very likely yes.

That last bit—palliative dollar-printing: That’s the key. When palliative dollar-printing happens, it will be the final stages of hyperinflation—it’s when sensible people ought to realize that the crisis is almost over, and that a new normal will soon appear. But this stage will be f@#$*^ awful.

Palliative dollar printing will take place when the Federal government simply runs out of options. The whole boatload of fools in Washington, on seeing this terrible commodity-driven crisis unfold, with consumer prices shooting the moon, will scream for dollars to be printed—and their rationale will be perfectly reasonable, I can practically hear it now: “We've got to get cash into the hands of the average American citizen, so he or she can buy food and heating oil for their families! We can’t let Americans starve and freeze to death!”

Now, this fairly Apocalyptic scenario is simply horrifying.

If Treasuries tank and commodities shoot up so high that they essentially break the dollar, civilization will not come crashing down into anarchy. At worst, there’ll be a three-four years of hell—economic hell. Financial hell. But then things will settle down into a new normal.

This new normal might well have unsavory characteristics. I tend to be a pessimist, and just glancing through history, I can see that just about every period of hyperinflation has been stabilized by some subsequent form of autocratic or totalitarian government. The United States currently has all the legal decisions and practical devices to quickly transition into an authoritarian or totalitarian regime, should a crisis befall the nation: The so-called PATRIOT Acts, the Department of Homeland Security Agency, the practical suspension of habeas corpus, etc., etc.

But as I said in my previous post, and reiterate here: Speculations about the new normal are pointless at this time. The future will happen soon enough.

What I do know is, One, a hyperinflationary event will happen, following the crash in Treasuries. Two, commodities will be the go-to medium for value storage. Three, all asset classes will collapse in short order. And Four—and most importantly—civil society will not collapse along with the dollar. Civil society will stumble about like a drunken sailor, but eventually right itself and carry on with a new normal. disagrees somewhat with Lira,...there is a good possibility that the "new normal" won't happen, and if it does, it may take much longer than a few years.

Wednesday, August 18, 2010

Urban Survival Planning - The Case for the Coming Hyper Inflation

I am including this article on because I believe much of what Dr. Roberts puts forth as an explanation of why a collapse of the dollar and subsequent Hyper-Inflation is not only coming it is unavoidable given just how far we have tumbled. And with Hyper Inflation will come a collapse that will create chaos.

This article is written by Paul Craig Roberts and can be read in it’s entirety at
Dr. Paul Craig Roberts is the father of Reaganomics and the former head of policy at the Department of Treasury. He is a columnist and was previously an editor for the Wall Street Journal. His latest book, “How the Economy Was Lost: The War of the Worlds,” details why America is disintegrating.

The United States is running out of time to get its budget and trade deficits under control. Despite the urgency of the situation, 2010 has been wasted in hype about a non-existent recovery. As recently as August 2 Treasury Secretary Timothy F. Geithner penned a New York Times column, “Welcome to the Recovery.”

As John Williams has made clear on many occasions, an appearance of recovery was created by over-counting employment and undercounting inflation. Washington cannot spend the economy out of recession. The deficits are already too large for the dollar to survive as reserve currency, and deficit spending cannot put Americans back to work in jobs that have been moved offshore.

Let’s get real. Here is what the government is likely to do. Once Washington realizes that the dollar is at risk and that they can no longer finance their wars by borrowing abroad, the government will either levy a tax on private pensions on the grounds that the pensions have accumulated tax-deferred, or the government will require pension fund managers to purchase Treasury debt with our pensions. This will buy the government a bit more time while pension accounts are loaded up with worthless paper.

The only remaining financier will be the Federal Reserve. When Treasury bonds brought to auction do not sell, the Federal Reserve must purchase them. UrbanMan comment: This is already happening.

The Federal Reserve purchases the bonds by creating new demand deposits, or checking accounts, for the Treasury. As the Treasury spends the proceeds of the new debt sales, the US money supply expands by the amount of the Federal Reserve’s purchase of Treasury debt.

Do goods and services expand by the same amount? Imports will increase as US jobs have been migrated off shore and given to foreigners, thus worsening the trade deficit. When the Federal Reserve purchases the Treasury’s new debt issues, the money supply will increase by more than the supply of domestically produced goods and services. Prices are likely to rise.

How high will they rise? The longer money is created in order that government can pay its bills, the more likely hyperinflation will be the result.

The economy has not recovered. By the end of this year it will be obvious that the collapsing economy means a larger than $1.4 trillion budget deficit to finance. Will it be $2 trillion? Higher?

Whatever the size, the rest of the world will see that the dollar is being printed in such quantities that it cannot serve as reserve currency. At that point wholesale dumping of dollars will result as foreign central banks try to unload a worthless currency.

The collapse of the dollar will drive up the prices of imports and off shored produced goods on which Americans are dependent. Wal-Mart shoppers will think they have mistakenly gone into Neiman Marcus.

Domestic prices will also explode as a growing money supply chases the supply of goods and services still made in America by Americans.

The dollar as reserve currency cannot survive the conflagration. When the dollar goes the US cannot finance its trade deficit. Therefore, imports will fall sharply, thus adding to domestic inflation and, as the US is energy import-dependent, there will be transportation disruptions that will disrupt work and grocery store deliveries.

Panic will be the order of the day. Will farms will be raided? Will those trapped in cities resort to riots and looting?

UrbanMan’s rhetorical Questions: Just how many banks will fall? How long will the “have nots” go without? Will the U.S. impose martial law? How will you survive?