ETF Daily News: US Hyperinflation Warning
Source: ETF Daily News
Author: Jeff Nielson
Hyperinflation (i.e. the U.S. dollar going to zero) is not a “possibility” for the U.S. economy. Rather, it is an absolute certainty. Indeed, as was clearly demonstrated in a previous commentary, the U.S. dollar is already worthless, based upon three, distinct analyses of the dollar’s fundamentals.
The mere shape and magnitude of this extreme, exponential function is a classic/obvious representation of a hyperinflation-in-progress. Any exponential function this extreme, is a mathematical definition of the phrase “out of control”. Not only can this money-printing never be undone, there is no way to reverse/alter the consequence: hyperinflation.
Even if the U.S. government or Federal Reserve simply “pulls the plug” on their ultra-insane/ultra-extreme money-printing, the deflationary collapse which would be triggered would necessitate a new wave of hyperinflationary money-printing (to “bail out” the U.S. economy), unless the government – and the bankers – were willing to accept all of the following, catastrophic consequences:
1) Complete debt-default of the U.S. economy, and thus the instant vaporization of the U.S. Treasuries market
2) Total collapse of U.S. equities markets
3) Total collapse of the “derivatives market”
4) A domino-like collapse of most/all of the bankers’ other, fraudulent currencies
5) A Soviet Union-style disintegration of the U.S. war-machine
6) The Mother of All Depressions in the U.S., along with all the civil unrest and political upheavel which such an economic catastrophe implies.
Because it is extremely unlikely that either the Banks or the U.S. government would ever be willing to (voluntarily) accept the consequences of “pulling the plug” on this Ponzi-scheme economy; it is reasonable to conclude that hyperinflation is the only, possible economic outcome for the United States.
Furthermore, the chain of events listed above would/must still result in the destruction of the dollar, for reasons which will be made clearer later in this analysis. Therefore, since even suffering all of the consequences above would not/could not save the dollar, there is little-to-no incentive to avoid hyperinflation – as a means of at least briefly delaying this cataclysm.
However, in reality (and as has also been previously pointed out); hyperinflation is almost always a “confidence event”, not an economic event. This means that in a typical hyperinflation episode, the fundamental value of the currency falls considerably sooner than its official exchange rate collapses, which is not triggered until the Average Person loses confidence in that particular currency.
Thus because hyperinflation is generally the final result of a Grand Deception (and fraud), our best clues as to when this monetary collapse will occur come from looking at developments which can/will (must?) cause confidence in the dollar to collapse, and so reveal its real value. In this respect; we have recently been provided with a very significant “clue”, from the statistical reporting of the U.S. government itself.
The U.S. Department of Agriculture recently (and very reluctantly) announced that U.S. food-inflation has exploded this year. Just until May; beef/veal prices have already risen by 10%, which works out to an annual inflation rate of 22%. Egg prices increased by 15% in the month of April, alone (an annual inflation rate of 180%). Pork prices have risen even faster – but at least there government can point to disease as the (partial) culprit.
It further warned of (imminent) future price-shocks of a “large and lasting” nature for fruits, vegetables, and dairy products. We know the USDA was very reluctant in releasing this tiny glimmer of the Truth, for several reasons. First of all, this announcement comes from the same government which continues to yammer on and on that inflation is (supposedly) “too low”. Understand the absurdity of this lie.
Our starting-point for analysis is not simply that the U.S. government is lying to us about inflation, but, rather, it is telling huge/absurd lies about inflation – which would not be able to fool any eight-year-old child with a reasonable grasp of arithmetic. Regular readers are aware that there are a multitude of purposes for this Great Inflation Lie, but ultimately, at the top of the list, the biggest reason to lie about inflation is to delay/conceal the inevitable hyperinflation which is on the way.
We can further detect the reluctance of the USDA to reveal this sliver of Truth via the facile “reason” it provides to explain these alarming numbers/warning (and thus mollify the Sheep). Supposedly this sudden, official spike in inflation – in the Land of Too-Low Inflation – is because of “the drought in California”.
However, this pretend-reason was fully/competently rebutted by another commentator:
…“large and lasting effects” on agricultural production in California will be avoided this year by pumping 5 million acre feet of groundwater from underground lakes, known as aquifers. The aquifers are a relic of the era when the Pacific Ocean covered much of the state. California has over 850 million acre feet of water stored in 450 known groundwater aquifers, enough to cover the state to a depth of 8 feet.
The State of California-sponsored UC Davis/ERA Economics farm report dated May 19th stated that only about 410,000 acres or 7.5% of California’s Central Valley farmland will be taken out of production this year. Losses for the 80,500 farms and ranches in California due to the drought will be limited to only be about $738 million, or 2% of the state’s $42.6 billion annual agricultural revenue. [emphasis mine]
So the data from the State government for California totally contradicts the propaganda of the USDA. The only way in which a minor supply-disruption of this level could possibly produce the impact on prices previously described would be if these “drought conditions” were a global phenomenon – and thus the shortfall could not be met simply/easily by increasing imports (at little additional cost).
We can therefore state with confidence that this sudden spike in U.S. food-inflation is a direct consequence of the insane/extreme money-printing depicted in the chart above, and the strongest visible sign of the inflation tidal-wave that is coming, to date.Here readers require some additional explanation, in order to be able to put the significance of this inflation data fully into context.
The U.S. Greater Depression continues to relentlessly transform the Middle Class into the Working Poor, for the steadily shrinking number of Americans lucky enough to have any employment at all. For the 50+ million U.S. unemployed, all of their dependents, and nearly everyone on “fixed incomes”, they’re simply poor.
With the U.S. standard of living having fallen by more than 50% over the past 40+ years, this means that the “basket of goods” being purchased by the Average Consumer circa 1970 is dramatically different from the basket of goods being bought by the Average Consumer in the Impoverished States of America, of 2014.
Specifically, today’s (much poorer) consumer spends a much greater percentage of their incomes on food than any generation of Americans since (at least) the Great Depression. As the Working Poor/poor continue to get poorer and poorer; the percentage of their disposable dollars going to food purchases steadily approaches 100%.
For the vast majority of Americans; the “food inflation rate” is the inflation rate.
So, as one branch of the U.S. government claims that inflation is below 2% (and falling), we have another branch of the same government reporting food-inflation (real inflation) of 20%-or-more (and rising) for much of the average “food basket”.
Those knowing their history will know that the term “con man” derives from the original vernacular “confidence man”. The reason? Success or failure of the “con” was wholly/entirely dependent on acquiring and maintaining the confidence of the Chump(s). And Western currencies are very clumsy, transparent cons, indeed.
Even apart from the abysmal economic fundamentals of these Western, paper currencies; the monetary fundamentals of these paper currencies dictate their worthlessness. There are only two ways for any money/currency to have (real) value.
The legitimate way for a currency to acquire value is to be “backed” (by gold or silver, our only monetary metals), in which case its status is elevated to (real) “money”. It can be backed directly, such as with gold and silver coins, where the metal is literally in the money. It can also be indirectly backed: paper notes, backed by physical (audited) gold or silver “reserves”. In this case our money/currency would be units of value.
The illegitimate way for a (paper) currency to acquire value is to attach cost to it, i.e. to “borrow it” into existence. In this case, as essentially IOU’s, our currencies are mere units of obligation. The paper retains value only as long as the issuer of the currency remains solvent, and can thus (theoretically) redeem those IOU’s. This is the way the now-fraudulent Western currencies used to be created – but no longer.
Today, in our era of “quantitative easing” (which is a euphemism derived from a euphemism), our worthless paper currencies are simply conjured into existence, neither backed nor borrowed. They are not “units of value” (money). They are not “units of obligation” (quasi-legitimate currency). They are simply units, with no possible fundamental basis for value.
Compounding this worthlessness; the major Western economies are now all insolvent, and thus no longer able to back the (previously issued) units of obligation. All of their paper is now worthless. However, this is only the beginning of the U.S. dollar’s problems.
As noted in before, (in theory, at least) the Federal Reserve could ‘pull the plug’ on its money-printing, but this would trigger a devastating collapse of almost unimaginable proportions. The point is that those Armageddon-like consequences are so catastrophic that they would undoubtedly shatter confidence in the dollar, and thus cause the very collapse-in-value of the dollar that the Fed would be trying to prevent.
The Federal Reserve (and the U.S. government) is already well past the point-of-no-return. The monetary/economic damage already caused by their past crimes/fraud has made any form of economic salvation impossible. This is what makes any significant official inflation (and the erosion of confidence which comes with it) so dangerous. The U.S. dollar is perched upon the ultimate “slippery slope”.
Clearly the Fed is aware of this slippery-slope, which is why it no longer officially reports all its money-printing – now resorting to simple/literal counterfeiting. This can be demonstrated (has been demonstrated) in several ways, beginning with a recent commentary which totally disproves the myth of “tapering”. It is also indicated in the Fed’s clumsy money-laundering operations, which are now becoming openly visible.
If the Federal Reserve was actually reporting all of its money-printing, the vertical line on the chart above would be even straighter, and much taller than the current curve. The collapse-in-confidence which is the death-knell of all paper currencies would be even more imminent.
Yet even the mass-counterfeiting of dollars (in order to falsify the chart above) would not/could not save the dollar, because there is still the Sword of Damocles which hovers over the dollar, now ever-so-close: its loss of “reserve currency” status. This devolution of the dollar is not simply inevitable, it is well-advanced.
Already, seven of Asia’s strongest/most-dynamic economies now use China’s renminbi – not the dollar – as their official, reserve currency. Meanwhile, China continues to relentlessly engage in “currency swaps” and “bilateral trade agreements” around the world, in amounts equivalent to trillions of USD’s.
The currency-swaps remove dollars out of the hands of China’s trading-partners, while supplying them with Renminbi (‘draining the swamp’). The trade-agreements exclude the use of the dollar in future trade. Nothing can reverse this process.
When it is completed (or even nearly completed); most of the global supply of dollars – which is held outside the U.S. – will be surplus, unnecessary, no longer used. It will simply be obsolete. What is the value of (un-backed) obsolete currency? If it’s not “zero”, it’s a number very, very, very close to it.
Even if the dollar was “strong”, and even if the U.S. government was (somehow) still solvent; no un-backed paper currency could ever survive the loss of reserve-currency status. The only way to “save the dollar” would be for the U.S. government to “retire” (or redeem) all of those $trillions of surplus dollars no longer used in international trade.
But such a redemption would require that the U.S. government supply those dollar-holders with something else of real/tangible value. It has nothing. The only (supposed) reserves of the U.S. government are its “gold reserves” (supposedly the world’s largest), which have not been seen by any human being outside the U.S. government in sixty years.
Clearly, with a government (and central bank) so desperate to maintain confidence in the dollar that it now resorts to simple counterfeiting, showing those gold reserves to the world would boost that confidence. And since when has the U.S. government ever been reluctant to show-off the fruits of its Empire?
Undoubtedly, if the U.S. government still had (and owned) its “gold reserves” it would be shown-off, much like the U.S. “deploys” units of its war-machine. Military units are sent to every corner of the Earth, directly in the faces of “friend” and “enemy” alike – reminding all the nations of the world who is still its Big Bully. Now that creates confidence.
Hiding its (supposed) gold reserves, counterfeiting its own currency, and lying about inflation does not “create confidence”. Manipulating all of the world’s other currencies downward in value simply so that the dollar can win this (paper) Reverse Beauty Contest does not “create confidence”. Losing its reserve-currency status because it is being shunned by the global community does not “create confidence”.
Furthermore, as China relentlessly ‘drains the swamp’, and the supply of U.S. dollar instruments held by other governments steadily approaches zero; the amount of harm they will suffer from U.S. dollar hyperinflation steadily dwindles as well. The incentive of other nations to prop-up the worthless dollar (for their own well-being) evaporates.
In 1971, when the Nixon government defaulted on the U.S.’s “gold obligations” (essentially a debt-default), and took the world off the gold-standard; then-Treasury Secretary John Connally was quoted as uttering the following, infamous remark:
“It’s our dollar, but it’s yourproblem.”
Sadly, in 1971 this was essentially true. But in 2014; such arrogance is rapidly becoming just as obsolete as the dollar itself. One day soon (maybe tomorrow?), the other nations of the world, victims of the One Bank’s U.S. dollar hegemony will say to the U.S. government (and the bankers):
“It’s your dollar, andit’s your problem.”
On that day; the value of the U.S. dollar will immediately and officially go to zero – and there is absolutely nothing which either the U.S. government or its Banker Overlords can do to prevent this. This “hyperinflation warning” is not really a warning, at all. It is merely stating the obvious.