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Would love to hear your thoughts on this video about hyperinflation

Posted May 18th, 2010 by Roshana Ariel

A friend sent me a link to this movie: http://inflation.us/videos.html, called "Meltup," created by the National Inflation Association (which I'd never heard of).

It's about 55 minutes, in the style of the "Zeitgeist" movies, with "facts," or "perspectives," coming at you with accompanying graphics in rapid fire.

It's all about the current situation we're in, economically, internationally, and how hyperinflation is most surely on its way within the next year or two.

Would love to hear comments on this because I just don't know that much about the topic to know what's fact, or accurate perspective, and what's way off base.

It's very well produced, and current, mentioning the iPad briefly and talking about the situation in Greece.

Thanks!

Roshana

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Posted May 19th, 2010 by admin
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It's a very real threat

Posted May 22nd, 2010 by Robb Smith

Hi Roshana -

I didn't have time to watch the movie so I can't comment on it.  But as my last newsletter points out there are very well-respected economists who are pointing to the possibility of serious downstream inflation.  So yes, inflation is a real and present danger in the U.S. (present meaning within 3-5 years; if anything we're at risk of deflation right now).  The Eurozone is only one of the problem areas; arguably the largest problem area in terms of sovereign debt is the U.S.  Remember that the political class of a nation controls its spending and the investment markets control how much it will cost for any excess spending, known as deficits, will cost in the form of interest rates.  What's happening in Greece is more or less a case that the political class has now spooked the debt markets because the former don't have the fiscal discipline to make good on their debts.  When this happens the markets start selling off the debt, which causes the interest rates to rise on the debt: interest rates are merely an indication of how much a debtor has to pay a creditor to get them to hold the debt.  Riskier debt needs a higher return. The currency also start to devalue because the sovereign government has to print their way out of their debt, which makes their currency worth less.

In the U.S. we're in serious trouble.  We could easily face a 70s style stagflation scenario where we get poor growth, high unemployment and economic stagnation while at the same time facing major price inflation because our government runs us into a situation where our overall federal debt load can't be serviced with tax revenues: the deficits get out of hand (I argue they already are) and the bond markets jack up interest rates.  The value of the dollar plummets, and the prices on all those imports from China that sell at Wal-Mart start skyrocketing.  Think it can't happen?  If it didn't it would be the exception: the political class almost always drives a fiat currency to worthless.  It seems to be a socially autopoeitic fact of human life.  Which is why I've been in gold for 3 years. 

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Robb Smith