Halloween hyperinflation?

It is spooky time when central banks stop selling their gold. For a layman like me that means the cash is worthless.

Economists know stuff about hyperinflation. I don’t really understand their theories, but I lived through two hyperinflation shocks, so signs of those bother me.

If the country has a massive debt the politicians tend to get rid of it by inflating the currency. The losers with saving accounts see their money buying power fade. The problem with the USA was that folks used to carry a lot of personal debt (which also loses value during hyperinflation). So for the Feds to get rid of the national debt they have to make the folks save first.

The housing bubble worked for the Feds like a charm. Every foreclosure means one giant personal debt less.  Banks were loaded with a lot of hard assets (those are very valuable during hyperinflation).

In the panic people with savings will do anything and pay any price to get rid of the paper and buy something they can touch or eat. Selling real estate during hyperinflation and using the cash to cover old loans and debt can do miracles. You can get rid of a lot of personal debt if you act fast, before the central banks start adjusting the rates.

Of course the US government bought a lot of bad mortgages. Those will cover a nice chunk of the national debt if hyperinflation strikes.

Even spookier: the banks stopped the foreclosure procedures half way. They don’t want the houses sold. The paper may be worthless.  What good are those dollars? The banks will be better off with the real estate in their assets. In case of hyperinflation those houses will turn golden.

Did the housing bubble provide enough real estate stock-piled to encourage the crush of the dollar and getting rid of the national debt through hyperinflation?

For the last two years the folks sold their jewelry at gold parties. Many held their savings instead of investing in the hostile Wall Street market. My heart goes to those who have timed saving accounts during hyperinflation. Those are the people who lose everything. Done that, wouldn’t repeat.

Politicians keep saying that there are trillions of dollars sitting on the side lines of the economy without being invested. Those are the perfect fuel for hyperinflation.  If all that paper is considered worthless at any moment in time, America will be hit by an avalanche of panicking buyers.

The food will be hard to get.

America never defaulted on the debt before and always paid what was promised. This is the reason why people all over the world still invest here. Sudden hyperinflation would not only rob the people of America, but will crush the image of the country as a place you can trust. This would be the end of America. Once you lose your honor you lose everything.

One Response to “Halloween hyperinflation?”

  • Job Developers Networking:

    The leader of the Federal Reserve Bank of New York addressed the ongoing saga of mortgage foreclosures, saying “the Federal Reserve actively encourages efforts to find viable alternatives to foreclosure, like loan modifications, or deeds in lieu.” But he added, “we also support due process and access to legal counsel for homeowners facing foreclosure, for instance through legal aid programs.”The central banker offered a positive note on the darkest side of the housing market debacle, saying “our data indicate that, in recent quarters, borrowers are becoming less likely to fall behind on their mortgages, so fewer households are now entering the foreclosure process.”

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