I thought Ron Paul was predicting hyperinflation...could someone explain please?

[acptulsa]

The really sad (but grimly funny) thing is that this inflationary bailout is supposed to help specifically with the mortgage crisis.

Do you want to buy long term credit that, if and when paid back, will be paid in what will amount to Monopoly money? Sounds like a good way to get dimes for your dollars to me. This is the key irony that makes all this look like the most incompetent solution possible or deliberate sabotage to our economy.

You solve an inability to dispose of long term debt instruments by ensuring that they will never be paid back at full value. It's like trying to make sure you sell all the cars on your lot by blowing up every gas station in town.

 

[HOLLYWOOD]

WELL WELL... CNBC Money GRUBS are talking about deflation... Don't you JUST LOVE... the DEVALUATION BASED CURRENCY in this country?

FOOLS SPINNING there WHEELS make lot of noise!

They are targeting a 3/4 rate cut... morons... the FED already did this!

The Great HOLLYWOOD Swammee predicts a 75 basis point cut!

 

[Paul.Bearer.of.Injustice]

With the Fed now buying commercial paper with non-recourse - meaning they aren't expecting the loans to be paid back - we may see inflation begin again in earnest.
If banks don't start lending to each other then the Fed/Treasury will, even though it's illegal.

If giving away free money to corporations doesn't free up the market, I think the Treasury will bypass the banks and give consumers another stimulus check, but this time in the 1000s of dollars. This will pave the way for 100% banking consolidation and the only banks remaining are Federal Reserve member banks.
If other banks are just sitting on the cash the Fed gives them, they are leeching the system and the government will probably take them over. A simple accounting change will make any bank insolvent and subject to FDIC takeover.

 

[weatherbill]

This could actually buy alot more time for the FED.

For instance, if all this liquidity comes loose, then we will see a glut of dollars hit the market from all thatmoney stock piled the fed was printing up, then when the inflation gets rough, the fed begins to raise interst rates to cool of the hot inflation going on....this gives the illusion that the dollar will rise in value with bernthebanke raising rates. The foreign banks will be happy with this illusion of the dollar gaining value and thus, they cycle starts itself all over again, but make no mistake, there will be alot more money on the market, but becasue of the power of the media and the FED to deceive, there may not be a panic with rising interest rates to cool off a coming hot economy being inflated, so I suspect, they are doing all they can to unfreeze liquidity, then a season of inflation afterwhich, begin to raise rates to cool it down some.
We also have the 2010-2011 ARMs that are coming into play with all this.

A huge factor I add into the equation is what happens in Iran, whether we or israel bombs them or whether they are allowed to continue with their oil exchange, transferring russian and venesuelan oil into euros and the riyal, thus, taking all that oil out of USD hedgemony. That would be the downfall of America in a massive way, as banks start dumping the dollar and it creates a domino effect, crashing the dollar. That is the big fear and tha'ts the real reason our media demonizes Iran.

 

[Paul.Bearer.of.Injustice]

http://hypertiger.blogspot.com/2008/10/to-find-your-greatest-enemylook-in.html

In 2007 US consumers were requesting commercial banks to manufacture on average 12 Billion dollars of new money/debt per day...

But by late 2007 and up until now the US consumer has slowed their requests for commercial banks to manufacture money...the daily rate of growth of the money supply/total debt has dropped by 42%...the most in 62 years...

That's kinda why you see all this stuff that needs 12 Billion a day to sustain inflation deflating now that only 6.99 Billion a day of new money/debt is being requested by consumers to be manufactured by commercial banks.

The Federal government BORROWS money from the money supply of the USA...By issuing Treasuries...

Money supply 51 Trillion...Public debt...lets say 9.5 Trillion...

Treasury sells 500 Billion dollars worth of treasuries into the market/money supply to borrow 500 billion of it...

Money supply 51 Trillion...Public debt...10 Trillion.

The money supply did not increase at all.

 

[Catatonic]

I could be wrong, but it was my understanding that the hyperinflation that Ron Paul is speaking of will come about when all the trillions of dollars that are being held in foreign banks right now come home to roost all at one time. Think about it. No one wants to be holding a worthless dollar so when one of the country's start cashing in their dollars the others will follow. And now all of a sudden your introducing literally trillions of "new" dollars into the domestic economy. There's your hyperinflation.

Again I'm no expert, but that's how I understand it to happen.

What is likely to trigger a simultaneous selloff of foreign banks' dollar reserves?

 

[gls]

What is likely to trigger a simultaneous selloff of foreign banks' dollar reserves?

I'm no expert but ISTM that one of the triggers could be the U.S. defaulting on its interest payments.

 

[tropicangela]

Here he says around 2:15 to look at the M3? The total money supply?

http://www.youtube.com/watch?v=N6V5ym9kx_8

"That rate is going up at 16% rate... massive inflation, massive devaluation of our dollar..."

 

[liberteebell]

What is likely to trigger a simultaneous selloff of foreign banks' dollar reserves?

Lack of confidence in the USD? Such as decoupling from the USD for oil sales (some say this is why we attacked Iraq and will attack Iran).

Anyway, so much of the market depends on the irrationality/rationality of human behaviour. Certainly not very predictable.

I'm no expert but I think this deflationary period is the calm before the hyperinflationary storm.

 

[Catatonic]

With the Fed now buying commercial paper with non-recourse - meaning they aren't expecting the loans to be paid back - we may see inflation begin again in earnest.
If banks don't start lending to each other then the Fed/Treasury will, even though it's illegal.

Source for non-recourse? I thought that just means its non-collateralized?

 

[rich34]

What is likely to trigger a simultaneous selloff of foreign banks' dollar reserves?

That's a good question and I'm certainly no expert, but all it will take is for one of those countries to start selling off U.S dollars and the others will follow because no one wants to get caught holding all those dollars when their just worth 5 cents a piece. So when the first country starts the sell off the others will follow because they'd rather get 75 cents on the dollar instead of 5.

As someone has already mentioned defaulting on those interest payments would be a quick way for these countries to sell off the dollars because of fear that they're not going to get their money back. Or just say the dollar keeps dropping and losing value they may want to drop it just for the fact that they know it's not worth anything. Whatever the case if this happens that's how things could go from bad to worse overnight. Also all those dollars being held overseas is out of the Fed's control. If all those dollars come back home it will be a financial tidal wave of hyperinflation.

 

[enjerth]

Petrodollars.

The reserve currency of the world.

What happens when the value of the dollar slides and the nations decide to stop holding the dollar? They spend it the only way they can, dumping it in our economy.

That money exists outside of our economy, currently, and so it doesn't affect our economy. Yet.

The day that foreign debt comes back, they will lay hold to our possessions and we will suddenly have to deal with an unrestrained inflow of cash, unless the government choses to restrict international buying, in which case our money will be absolutely worthless internationally.

They can either buy up our possessions and we have to deal with the great amount of inflation that follows, or we can choose not to honor the value of the dollar and see it completely crash. We will never again have our own currency for trade because no one would trust us.

The government will have to keep itself well funded, so in the face of this inflation they will ramp up deficit spending to keep up with rising prices, creating more money and more inflation. The rising prices will create more demand for credit and in order to keep the economy from crashing they will pump more money into the economy. Inflation begets inflation as markets require balance, and the government intervenes to try to bring balance.

Everyone but the rich gets totally screwed.

 

[Paul.Bearer.of.Injustice]

Source for non-recourse? I thought that just means its non-collateralized?

I can't find where I read it. I think it's a provision in the bailout bill.

 

[Isaac Bickerstaff]

In order to avoid another semantic discussion on "inflation", for the purpose of this post "inflation" will be the constant rising of prices (I don't like it either, but it is just simpler this way).

A distinction needs to be made between vendors raising prices because they can (larger money supply) and raising prices because they have to (interest on debt--higher costs). Hyper inflation due to a rapidly expanding money supply would be very inconvenient, but would not be totally devastating until it ended, leaving some with and many more without. Even then, the money would be there for those without money to try to gain.

Hyperinflation due to compound interest on the debt that granted the money existence, will not happen until the interest bill is near the total consumer earnings,(I would use "income" here, but I recently learned the legal definition of "income" and it does not apply. I am not entirely sure about "earnings" either, but it will have to do for now.) and all new money loaned into existence would be used to service the rapidly expanding debt.
Under this scenario, you would have inflation of the prices at the same time as deflation in the money supply. There would be no recovery, because there would be no money for the poor to try to earn.

So, I believe that since we are under a money system that attaches debt to the fiat money, we do not have to worry about runaway hyperinflation until 2016 or so-- possibly sooner now that the bailout just burdened us with a 1.5% increase in total interest bearing debt. It will just feel like it as prices keep rising and money available to purchase goods gets scarce.

Hey, its just a theory. Keep on producing real goods and develop trade partners within walking distance, and enjoy the ride.

 

[Swmorgan77]

I have heard Ron Paul make continual calls for a hyperinflationary depression - I'm just wondering if anyone knows whether or not he's changed his opinion. The reason I'm asking is that it's beginning to look more and more like a deflationary depression.

Just wait until the real effect of all of the money the Fed has been printing and pumping into the system to try to prop it up is felt. It takes time to filter through the economy.

http://www.prisonplanet.com/hyperinflation-catalyst-for-2000-gold.html

 

[jcarcinogen]

Bernake said today that the Fed may cut interest rates very soon. Which will basically pump more money into the economy. If you haven't noticed prices going up yet, you will very soon.

 

[Swmorgan77]

The REAL prices of metals are already significantly higher than the index prices due to scarcity. Check out what they're going for on eBay and what your local dealers are actually selling for.

Scarcity combined with massive infusion of new money will eventually mean dramatically higher prices.

 

[newbitech]

Hyperinflation means that our dollars are becoming worthless faster. Prices and the money supply have both been inflating ever since the FED Reserve act of 1913. Look at some charts.

Is it any surprise that 97% of our money (read debt) is held electronically? Especially considering that the value of our money has lost about 95% of its purchasing power?

That 97% of our money that is held electronically simply doesn't exist. Our debt doesn't really exist either. We owe nothing to no one. Except of course all the promises that our government made based on that 97%.

Now that the world has realized that the USA never really intended to repay its debt, the world financial system is in a complete free fall, dragging down the rest of the market with it.

Since our government will never keep those promises, the value of that paper that contains the other 3% of Americans' promises is absolutely worthless.

What we are seeing now is the very early stages of the collapse of our money system. The deflation in the markets will only be temporary as the old system unwinds and we begin to establish a new system of exchange.

The hyperinflation will occur because we will need to reset the system. Hopefully we will use gold and silver as the Constitution requires. This will get us back up and running quickly, within a few years.

I doubt that will happen though. We will start printing a new currency called the Amero and merge our exchange system with Canada and Mexico. OR and this is becoming a stronger possibility by the day, the New World Order will skip over that NAU step and go straight for the jugular.

Either way, look for it to become much harder for working folks all over the world to obtain food, water, medicine, shelter etc. Harder because we will have nothing worth value to trade with for these items.

 

[constituent]

I have heard Ron Paul make continual calls for a hyperinflationary depression - I'm just wondering if anyone knows whether or not he's changed his opinion. The reason I'm asking is that it's beginning to look more and more like a deflationary depression. As I'm sure everyone is well aware, central banks can create incredible incentives for people to borrow and banks to lend, but if they choose not to, then credit dries up, and there is a reduction in inflation. Does anyone know Ron Paul's reasoning for a hyperinflationary depression, other than the US Dollar becoming completely worthless all of a sudden (of which I'm not entirely sure will happen, given that everyone is rushing to it as a safe haven as credit dries up, just like in the 1930s)? I would like to know, not only for my own curiosity, but because I'm wondering whether or not I should hold cash and buy precious metals when they are cheaper (in the great depression, cash was king, and everything else became incredibly cheap). Will this deflationary phase pass? Will the American consumer experience both deflation, in terms of access to credit, and inflation, in terms of how expensive everything gets? Please explain, and if possible, with references to various theories (austrian school economics etc.). Thanks everyone!

exactly, someone that gets it.

great observations, you are exactly correct and i've wondered the same about paul's stance myself.

cash is king.

if that's not the case, then what exactly is it that's eating these big guys' lunch (a lack of cash)?

 

[constituent]

The REAL prices of metals are already significantly higher than the index prices due to scarcity. Check out what they're going for on eBay and what your local dealers are actually selling for.

Scarcity combined with massive infusion of new money will eventually mean dramatically higher prices.

but how much cash are they destroying?

how much cash is there relative to debt (still a scarcity by any measure)?