printLet’s see: When did this column begin to warn of hyperinflation? In 2003, together with other Austrian-Americans, in numerous columns, all dismissed by readers back then. The latter were more enamored of the dime-a-dozen neoconservative war harpies. I was persona non grata. Here are a couple of scattered quotes from assorted columns:
Given its debt, the U.S. government is fast becoming a bad risk as a borrower. To finance the war, then, it’ll have to steal over and above the usual call of duty. … inflation is an increase in the money supply by the government. Having adopted deficit spending as an article of faith, Bush will call on the Federal Reserve and the printing press to print money to pay the costs of the war. The endemic price hikes and economic distortions that’ll follow are but a by-product of this legalized counterfeiting. …
… we’re into Keynesian deficit spending—the government is borrowing and inflating the money supply to fund its profligacy, a practice that will accelerate the depreciation of the dollar, and may even lead to the horror of hyperinflation.”
I want you to listen carefully to the hyperinflation forecasts of two formidable Austrian forces (Peter Schiff, naturally, called it). I depart from Marc Faber who forecasts Zimbabwe-style hyperinflation. As I explained in “Inflation 101 For Women Pundits & Other Tyrants,” “few Zimbabweans are now capable of substantial production, the amount of goods in the Zimbabwean economy keeps decreasing. At the same time, the money supply keeps increasing, hence hyperinflation.”
Conversely, “While America’s $12.98-trillion economy groans under the weight of the federal debt, it is still fabulously robust. The private productive sector is just too driven and ingenious to crush.”
I still stand by that statement, with some reservations given the efficiency of the Obama wrecking ball. Moreover, Americans had better start making things. Fast.
When I was a kid we could buy play money at the dime store, and it was real Confederate money, the actual stuff. Somebody must have accumulated it and found a market for it as play money. This may be the future for the American Federal Reserve notes. What with color copiers so plentiful, there would be no end to the supply. Oh, never mind. It’s already being done. Well, there’s always the British Pound.
“…the efficiency of the Obama wrecking ball.”
You’d think he knew exactly what he was doing.
Mr. Obama does know what he is doing. He is establishing a fascist economy. Will he establish a fascist dictatorship?
Good Stuff, Ilana
What do you think politicians would do with the information if they happen to stumble across Murray Rothbard’s America’s Great Depression or the essay Austrian Theory of the Trade Cycle?
Why preclude a Zimbabwe-style hyperinflation? We’ve already elected our own Robert Mugabe. 🙂
Seriously, our whole economy, including agriculture, runs on petroleum. We import about two thirds of the petroleum we use, and pay for it with a fiat currency that owes it value solely to the Tinkerbell Effect. If the Obammunists were to inflate the money supply to such an extent that our foreign suppliers lost their faith in Tinkerbell, then America would develop a striking resemblance to Zimbabwe.
My dystopian hometown of Washington, D.C. already resembles Zimbabwe.
Ditto for Detroit.
And a host of others.
As for oil, no worries: The Barnett Shale here in North Texas has an estimated 25 to 50 TCF (trillion cubic feet) of natural gas. Then there are the other massive shale gas plays like the Haynesville and Marcellus shales. You will not have to worry about freezing in the winter, though you will pay much more for gas since the price is set on the world market.
Also, the United States is known as the “Saudi Arabia of coal.” It has an estimated 400+ years of coal at current rates of consumption. And as Ilana can tell you, oil can be derived from coal.
The real thing to worry about is a massive outbreak of violent crime and ethnic strife on a scale that would make Yugoslavia look tame.
There is no place to run to in a Balkanized US.
Now do you know why gun control is uppermost in the minds of the current elites?
I expect some Carter-era inflation, but not much more. Could get proven wrong, but here are some things to consider:
1. When the Fed expands the money supply by buying up commercial paper, the increased supply of money is offset by obligations to pay the Fed back. (The federal government also has such an obligation on paper, but since the federal government owns the Fed, it matters not.)
2. The dollar is still backed up by trillions in mortgage obligations. Some of those obligations become more potent if we get some inflation as the borrowers become less likely to default.
Mortgage and other debt obligations back up a currency just as taxing authority and gold reserves do. Now, if a government inflates the currency aggressively enough to make all those fixed rate mortgages worthless to the lenders, then expect a bifurcation and possible hyperinflation.