Hyperinflation – The Economic Collapse

Go To The Stores And Stock Up Now Because Things Are About To Get Really Crazy

Michael — Tue, 01 Jun 2021 22:33:01 +0000

If there are things that you need to stock up on, you should do it right away. For weeks, I have been writing articles about the rampant inflation that we are witnessing right now. We haven’t seen anything like this since the Jimmy Carter era of the 1970s, and many are warning that it is going to get even worse in the months ahead. So that means that prices are never going to be lower than they are at this moment. Even more importantly, we are also being warned that the widespread shortages in our economy are about to get even worse. In fact, the largest meatpacker in the entire world was just hit by a cyberattack, and this has forced it to stop activity “at its plants in several U.S. states”…

The White House said on Tuesday that Brazil’s JBS SA has informed the U.S. government that a ransomware attack against the company that has disrupted meat production in North America and Australia originated from a criminal organization likely based in Russia.

JBS is the world’s largest meatpacker and the incident caused its Australian operations to shut down on Monday and has stopped livestock slaughter at its plants in several U.S. states.

Many of you may not be familiar with JBS, but this is a very big deal.

According to Bloomberg, “a fifth of America’s production” will be wiped out while these plants are down…

JBS’s five biggest beef plants in the U.S. — which altogether handle 22,500 cattle a day — have halted processing following a weekend attack on the company’s computer networks, according to JBS posts on Facebook, labor unions and employees. Those outages alone have wiped out nearly a fifth of America’s production. Slaughter operations across Australia were also down, according to a trade group. One of Canada’s largest beef plants was idled for a second day.

Until this crisis passes, and hopefully that will be as soon as possible, meat will be harder to get and prices will be higher.

The Biden administration is once again blaming Russia for this latest cyberattack. Whether that is true or not, relations between the U.S. and Russia will continue to rapidly deteriorate, and many are deeply concerned about where all of this hostility will eventually take us.

Sadly, this new meat shortage is just the tip of the iceberg. Earlier today, the Drudge Report linked to an article with this stunning headline: “How the World Ran Out of Everything”. The following is a short excerpt from that article…

In Conshohocken, Pa., Mr. Romano is literally waiting for his ship to come in.

He is vice president of sales at Van Horn, Metz & Company, which buys chemicals from suppliers around the world and sells them to factories that make paint, ink and other industrial products.

In normal times, the company is behind in filling perhaps 1 percent of its customers’ orders. On a recent morning, it could not complete a tenth of its orders because it was waiting for supplies to arrive.

You may have noticed that products are increasingly going “out of stock”, and this trend isn’t going away for the foreseeable future.

Meanwhile, inflation threatens to spiral wildly out of control. At this point, even Costco executives are publicly warning that inflation has become a major problem…

Don’t tell Costco executives that inflation is low.

The big-box club chain said it’s been seeing accelerating prices across a range of products, including shipping containers, aluminum foil and a 20% spike in meat prices over the past month.

“Inflationary factors abound,” CFO Richard Galanti said on the company’s fiscal third-quarter earnings call Thursday.

If you know that you are going to need something in the months ahead, buy it now, because with the way things are going there is a very good chance that you will be paying much more if you wait.

Have you noticed that some companies are trying to hide inflation by shrinking package sizes? This is a phenomenon that is known as “shrinkflation”…

Consumers are paying more for a growing range of household staples in ways that don’t show up on receipts – thinner rolls, lighter bags, smaller cans – as companies look to offset rising labor and materials costs without scaring off customers.

It’s a form of retail camouflage known as “shrinkflation,” and economists and consumer advocates who track packaging expect it to become more pronounced as inflation ratchets up, taking hold of such everyday items such as paper towels, potato chips and diapers.

For example, I absolutely love Tillamook ice cream. It is the best ice cream that I have ever had in my entire life, and if you have tasted it then you know what I am talking about.

Unfortunately, they recently felt forced to shrink the size of their packaging from 56 ounces to 48 ounces, but they kept the price the same.

Lots of companies are now doing this, because the cost of raw materials is going through the roof. Even Elon Musk is complaining about rising prices for raw materials…

Perhaps finally realizing it can’t turn a profit selling vehicles or perhaps truly between a rock and a semiconductor hard place, Tesla is raising prices (and ditching features) from its vehicles.

CEO Elon Musk took to Twitter late on Memorial Day to explain the hikes, blaming them on the convenient scapegoat of supply chain issues.

“Prices increasing due to major supply chain price pressure industry-wide. Raw materials especially,” Musk wrote in a Tweet late on Memorial Day.

Sadly, this is just the beginning.

Governments around the world continue to borrow and spend money as if tomorrow will never come, and global central banks continue to pump gigantic mountains of new money into their respective financial systems.

In this sort of environment, an “invisible sculpture” that is nothing but air can literally be sold for $18,000…

An Italian artist was able to sell his invisible “immaterial” sculpture – which technically does not exist (in this plane at least) – for thousands of euros.

Salvatore Garau, 67, challenged the boundaries of contemporary art even further after cashing in ¢15,000 (around $18,000 or P875,000) for his work titled “Io sono” (I am) at a recent auction, as per Il Giorno on May 21.

The inflationary nightmare that so many of us have been relentlessly warning about is here, and it is going to continue to get worse.

In addition, I have a feeling that quite a few major “surprises” are coming our way during the second half of this year.

So go to the stores and stock up now, because things will soon get really crazy.

***Michael’s new book entitled “Lost Prophecies Of The Future Of America” is now available in paperback and for the Kindle on Amazon.***

About the Author: My name is Michael Snyder and my brand new book entitled “Lost Prophecies Of The Future Of America” is now available on Amazon.com. In addition to my new book, I have written four others that are available on Amazon.com including The Beginning Of The End, Get Prepared Now, and Living A Life That Really Matters. (#CommissionsEarned) By purchasing the books you help to support the work that my wife and I are doing, and by giving it to others you help to multiply the impact that we are having on people all over the globe. I have published thousands of articles on The Economic Collapse Blog, End Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe. I always freely and happily allow others to republish my articles on their own websites, but I also ask that they include this “About the Author” section with each article. The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions. I encourage you to follow me on social media on Facebook, Twitter and Parler, and any way that you can share these articles with others is a great help. During these very challenging times, people will need hope more than ever before, and it is our goal to share the gospel of Jesus Christ with as many people as we possibly can.

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Biden’s $6 Trillion Socialist Budget Will Cause Even More Inflation And Even More Shortages

Michael — Fri, 28 May 2021 02:03:06 +0000

If you are enjoying the ride on the highway to hyperinflation, then you are going to absolutely love Joe Biden’s new budget. Instead of realizing the mistakes that he has made and reversing course, Biden has decided that now is the time to push the accelerator to the floor. That means that a lot more inflation is on the way, and I am encouraging all of my readers to do what they can to get prepared for that. In my latest book, I sound the alarm about what hyperinflation will eventually do to our economy. We are literally in the process of becoming Venezuela, and most Americans have absolutely no idea how horrific that will be. In Venezuela today, almost everyone is a millionaire, but just about everyone is also living in poverty because the money is absolutely worthless. We don’t want to end up like that, but that is the road that we are on.

While he was still in the White House, President Trump’s proposed budget for 2021 was $4.8 trillion. That is an extremely high number, but Joe Biden’s new budget for 2021 is actually 25 percent larger…

The proposal represents a 25 percent increase over what former President Donald Trump proposed in his final budget – in a year that would be upended by the coronavirus.

The spending levels would continue on an upward trajectory, hitting $8.2 trillion at the end of a decade, according to detailed top-line numbers leaked to the New York Times.

I could sit here all day and still probably not be able to come up with sufficient words to describe how insane it would be for the U.S. government to spend 6 trillion dollars in a single year.

According to Biden, his new tax increases will offset part of the new spending, but even his own projections show us running trillion dollar deficits long into the future…

The budget would have the nation continue running deficits of more than $1 trillion, a level it already topped with the onset of the pandemic – with estimated annual deficits of $1.3 trillion amid enacted and proposed federal programs.

Of course these sorts of projections are usually way too optimistic.

In my estimation, Biden’s plan would have us facing deficits of at least two trillion dollars per year throughout his presidency and beyond.

We can’t keep doing this to our children and our grandchildren. Already, borrowing and spending giant mountains of money that we do not have has resulted in the worst stretch of inflation since the Jimmy Carter years of the 1970s.

Larry Summers was the former director of the National Economic Council under Barack Obama, and even he is warning that big time inflation is coming…

He told a CoinDesk conference: ‘We’re taking very substantial risks on the inflation side.

‘I think policy is rather overdoing it. The sense of serenity and complacency being projected by the economic policymakers, that this is all something that can easily be managed, is misplaced,’ he added.

When even Larry Summers is sounding the alarm, you know that it must be really late in the game.

As I have detailed in numerous recent articles, prices are absolutely exploding all over the nation right now. And today we learned that one prominent analyst is claiming that “US inflation data surprises are at their highest in the 20-year history of the series”…

As we noted over the weekend, positive US data surprises seem to be normalizing (i.e. the Citi US econ surprise index has flatlined) due to a combination of analysts catching up with the prior stronger pace of growth, and also due to some evidence that the rate of change of US growth is peaking out (JPMorgan disagrees).

However as DB’s equity strategist Parag Thatte points out in his latest positioning piece, “US inflation data surprises are at their highest in the 20-year history of the series with the last 10 data points almost ‘off the chart’.“

We should be taking emergency measures to get inflation under control, but instead Joe Biden has decided that this is the perfect time for a spending spree.

Inflation is one of the hallmarks of a socialist economy, and another thing that we commonly see in socialist systems are shortages.

At this moment, we are witnessing the most severe shortages that the U.S. has experienced in my entire lifetime. As I discussed the other day, Bloomberg is reporting that “the world economy is suddenly running low on everything”.

When there are way too many dollars chasing way too few goods and services, it is inevitable that shortages will happen. And we are being told to expect that some of the shortages will get even worse in the months ahead. In fact, CNN is telling us to expect very serious gasoline shortages this summer…

And that could be the least of the problems for the those taking to the highways for summer vacations. The gas shortages experienced earlier this month when a key pipeline shut down could once again be on the horizon, according to experts.

This time, the squeeze could be triggered by the lack of tank truck drivers to deliver the fuel, and a repeat of panic buying by travelers topping off their tanks.

Meanwhile, economic conditions continue to deteriorate for those at the bottom of the food chain.

Earlier today, an article about current economic conditions in New York City really struck an emotional chord with me…

In Times Square, the most densely tourist-populated place in the United States, a mentally disturbed man known as Mr. Kim begs cops to kill him. ‘I want to die. You have a gun? Shoot,’ he pleads. After the officers demur, he picks up a plank of wood and starts smashing it against the Pele soccer shop.

On Sutton Place, one of the most affluent residential areas in the city, a lone man squats on the sidewalk, intently reading a paperback novel next to a shopping cart that contains his worldly goods. He begs for cash with a sign saying he has lost everything. ‘Trying to survive,’ it adds.

Joe Biden may think that he is going to bring the U.S. economy back to life with all of the borrowing and spending that he is doing, but the truth is that it is just going to make our long-term problems even worse.

Unfortunately, a lot of our long-term problems are rapidly becoming short-term problems, and that is not good news for any of us.

***Michael’s new book entitled “Lost Prophecies Of The Future Of America” is now available in paperback and for the Kindle on Amazon.***

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Warnings Of A Dramatic Inflationary Collapse Just Keep Getting Louder

Michael — Tue, 25 May 2021 01:39:32 +0000

Signs of impending economic doom continue to grow all around us. For years, highly respected experts have been warning about the steady destruction of our standard of living and the death of the U.S. dollar. Perhaps you didn’t listen to those voices at first, and that is understandable. Most Americans have their hands full making a living and taking care of their families. But then housing prices started to go absolutely nuts, health costs continued to spiral out of control and a trip to the grocery store just kept getting more painful. At this point, nobody can honestly deny that inflation has become a major problem.

But even though the chorus of voices that is warning of a dramatic inflationary collapse is growing by the day, the Federal Reserve just keeps pumping more giant piles of money into the financial system, and the federal government continues to engage in the most reckless spending binge in the entirety of U.S. history.

Despite the utterly insane policies of our “leaders”, the U.S. economy continues to languish in economic purgatory. Trillions upon trillions of dollars have been poured into the economy, and yet the U.S. still has 8.2 million fewer jobs than it did last February.

They had hoped to create an “economic boom”, but instead they are setting the stage for an implosion of epic proportions. In fact, John Williams of shadowstats.com insists that we are “eventually headed into a hyperinflationary economic collapse”…

So, is the choice inflation or implosion? Williams says, “That’s the choice, and I think we are going to have a combination of both of them. I think we are eventually headed into a hyperinflationary economic collapse. It’s not that we haven’t been in an economic collapse already, we are coming back some now. . . . The Fed has been creating money at a pace that has never been seen before. You are basically up 75% (in money creation) year over year. This is unprecedented. Normally, it might be up 1% or 2% year over year. The exploding money supply will lead to inflation. I am not saying we are going to get to 75% inflation—yet, but you are getting up to the 4% or 5% range, and you are soon going to be seeing 10% range year over year. . . . The Fed has lost control of inflation.”

And remember, when the Fed has to admit the official inflation rate is 10%, John Williams says, “When they have to admit the inflation rate is 10%, my number is going to be up to around 15% or higher. My number rides on top of their number.”

You don’t want to believe Williams?

That is fine.

He has just been right time after time over the years.

But feel free to ignore him if you wish.

If you are determined to ignore the truth, you probably will not like what Egon von Greyerz is saying either…

As technological developments and markets go parabolic, we observe many market “experts,” even intelligent ones, forecasting that we are now in an exponential economic era. Thus many believe that this will go on forever. This is the typical attitude at market and economic tops and guarantees that THIS WILL NOT END WELL!

It is clearly absolute nonsense to believe that exponential expansion based on deficits, debts and fake money is the beginning of a new era. Anyone studying the economy and history of markets knows that exponential moves indicate the end of an era and not the beginning. As I have repeatedly said, history is our best teacher and it both rhymes and repeats itself. And history now gives us dire warnings.

If you wish to reject what these experts are telling us, can you point to another time in history when officials have wildly created new money and everything has turned out just great?

“New money” is always such a tempting solution, because every time it always seems to work at the beginning. It is kind of like a tonic that instantly makes you feel better for a few hours but that ultimately kills you in the end as you keep taking it.

Now that we have greatly accelerated our journey toward an inflationary collapse, even Warren Buffett has started to sound the alarm…

“We are seeing substantial inflation,” Warren Buffett told attendees at last week’s annual Berkshire Hathaway shareholder meeting. “We are raising prices. People are raising prices to us, and it’s being accepted.”

Ordinary Americans are searching for “inflation” online more frequently now than they have in more than a decade, data from Deutsche Bank strategist Jim Reid shows.

But CNN insists that everything is going to be just fine.

So that means that we don’t have anything to be concerned about, right?

Personally, I am deeply concerned about the second half of this calendar year, and it appears that I am not the only one. Billionaires and corporate insiders have been offloading stocks at a very brisk pace in recent weeks…

When the country’s CEOs and billionaires start to head to the exits a little bit quicker than usual at the tail end of a 13 year bull market, it may be time to start paying attention.

That’s what we found noteworthy about a recent Bloomberg piece, which noted that stock sales by some of the world’s richest shareholders are “reaping a windfall”, thanks to our current inflated equity markets, “to the tune of trillions”.

Amazon.com’s Jeff Bezos and Google co-founder Sergey Brin are just two of the well known names that have been offloading stock. They are joined by names like Mark Zuckerberg and Larry Ellison.

If you have been snoozing for the last few years, now is the time to wake up.

Because we are steamrolling toward an economic implosion that will make the history books, and our economic problems are just one element of the “perfect storm” that our society is facing.

But a lot of people out there are going to be absolutely blindsided by what is coming, because they have no interest in listening to the warnings.

Instead, they have placed their trust in the talking heads that the corporate media puts on television, and those talking heads keep assuring us that everything is going to be just fine.

***Michael’s new book entitled “Lost Prophecies Of The Future Of America” is now available in paperback and for the Kindle on Amazon.***

The post Warnings Of A Dramatic Inflationary Collapse Just Keep Getting Louder appeared first on The Economic Collapse.

Has The Great Shaking Of The Financial Markets Finally Begun?

Michael — Fri, 26 Feb 2021 01:36:04 +0000

A whole host of prominent voices have been warning that volatility and chaos would be returning to Wall Street, and that is precisely what has happened. But is this just a temporary blip, or has the great shaking of the financial markets finally begun? Many stock market investors are very much hoping for the former, because the pain is already becoming quite severe. The Nasdaq has fallen more than 5 percent this week, and it is headed for its second consecutive weekly loss. But the bond market has actually been making even bigger news. On Thursday, the yield on 10-year U.S. Treasuries actually exceeded 1.6% at one point, and that was the highest level that we have seen in quite a long time. Some pundits are calling what just took place a “flash crash”, but it certainly appears that yields could move even higher in the days ahead.

Throughout the COVID pandemic, stock prices have just gone higher and higher, but everyone knew that the party would end eventually.

Have we now reached that point? The numbers tell us that Thursday was the single worst day for stocks so far in 2021…

The Dow Jones Industrial Average dropped 559.85 points, or 1.8%, to 31,402.01, slipping from a record high. The S&P 500 lost 2.5% to 3,829.34 in its worst day since Jan. 27. The tech-heavy Nasdaq Composite slid 3.5% to 13,119.43, posting its biggest sell-off since Oct. 28. Alphabet, Facebook, and Apple all fell more than 3%, while Tesla dropped 8.1%. Microsoft shed 2%.

We are being told that the biggest reason why stocks were falling so much was because of “a full on rout in the bond market”…

It’s “just a full on rout in the bond market. So that filters into everything else,” said Evercore ISI strategist Dennis DeBusschere. “It looks like we just had a flash move in bonds. With a puke move that drove [10-year] yields to 1.6%… We just have to wait for some form of equilibrium in bonds.”

Considering how much our money supply has been rising, there was simply no way that bond yields could stay where they were. It was just a matter of time before inflation fears scared investors, and finally on Thursday the rush for the exits became a stampede…

“It is all about bond yields today,” said Ryan Detrick, chief market strategist for LPL Financial. “There was a flash spike in the 10-year yield and that upset the apple cart, as higher yields are spooking the stock market. Could there be more inflation coming than what most think?”

I can answer Detrick’s question in one word.

Yes.

Eventually, we are going to see inflation rise to levels that most people never dreamed would be possible in the United States.

Meanwhile, the real economy continues to rapidly deteriorate all around us.

One day after Fry’s Electronics announced that it would be going out of business, Best Buy revealed that it will be letting 5,000 workers go…

Best Buy said Thursday that it laid off 5,000 workers this month and is planning to close more stores this year as more consumers buy electronics online.

The news comes at a time when big chains face growing competition from Amazon and other sites that sell items like TVs and laptops. Fry’s Electronics said Wednesday that it would abruptly close all of its stores overnight, ending nearly four-decades in business.

I have always had a soft spot for Best Buy, and so this made me quite sad.

So many iconic businesses are crumbling, and America will never be the same.

Of course one of the primary reasons why so many traditional retailers are failing is because online shopping has surged during this pandemic. But as online shopping becomes increasingly dominant, it has created an epidemic of package thefts…

Forty-three percent of Americans shopping online experienced package theft last year, up from 36 percent in 2019, according to a recent market research study. Of that 43 percent, almost two-thirds reported packages having been stolen more than once. The New York Police Department does not keep data to that level of specificity, I was told, and the most recent figures available for the city estimated that 90,000 packages had disappeared every day in 2019.

90,000 packages a day?

The number really shocked me.

That means that on average at least 90,000 crimes are committed in just one of our major cities every single day.

If things are that bad in New York, what would the number for the entire nation be?

Everywhere you look, the social decay that is eating away at our society like cancer is getting worse and worse. At one time you could trust that most Americans were law abiding citizens that would consistently try to do the right thing, but those days are long gone.

And as economic conditions get even bleaker, that is just going to feed even more crime, civil unrest and social decay.

In the short-term, a very large proportion of the U.S. population is counting on the federal government to bail them out…

Almost one-third, or 29%, of U.S. adults are counting on another round of government relief to get by, and another 24% say they need it but doubt it will happen, a new CNBC + Acorns Invest in You survey conducted by SurveyMonkey found.

People of color are more likely to be relying on the relief, especially Black women. Half of Black Americans and 40% of Hispanics said they were counting on it, while 57% of Black women said the same. Additionally, 24% of Blacks and Hispanics need it but don’t think it will come to fruition.

All the way back when the first round of “stimulus payments” was being proposed, I warned that we were opening up Pandora’s Box.

I warned that the American people would be demanding more payments in the future, and they will reward politicians that are able to deliver those payments at the ballot box.

Of course by borrowing and spending trillions of dollars that we do not have, we are destroying the reserve currency of the world and we are setting the stage for horrific inflation in the future.

In fact, the inflation that is already here is now causing a tremendous amount of instability in the financial markets.

But the “great shaking” is not here quite yet. What we are experiencing now are early warning signs, and hopefully people are paying attention.

***Michael’s new book entitled “Lost Prophecies Of The Future Of America” is now available in paperback and for the Kindle on Amazon.***

The post Has The Great Shaking Of The Financial Markets Finally Begun? appeared first on The Economic Collapse.

Someone Please Tell Powell, Yellen And Biden That We Are Going To Need A Lot More “Weimar Money”…

Michael — Tue, 23 Feb 2021 02:36:56 +0000

Volatility has returned to Wall Street, and it appears that our absolutely epic stock market bubble may be in serious trouble. The S&P 500 closed down for the fifth trading session in a row on Monday, and that represents the longest losing streak that we have seen since last February. Investors are starting to get quite nervous, because for most of the past year stock prices have gone in just one direction. Even as the real economy has imploded all around us, there has been tremendous euphoria on Wall Street as stock prices have surged to dizzying heights. If stock prices were allowed to crash, that would definitely not be good for the national mood at all.

So what is the solution?

This stock market bubble was originally created by unprecedented intervention by the Federal Reserve and by extremely wild borrowing and spending by the U.S. government, and in order to keep the bubble going we are going to need a lot more of the same.

So someone needs to tell Federal Reserve Chair Jerome Powell that it is time to go “full Weimar” so that we can prop up this bubble for as long as humanly possible.

For a while there in 2020, the Fed’s balance sheet was increasing at a nearly vertical pace, but in recent months it has only been going up at an exponential rate…

If the Fed wants to keep stock prices at their current levels, Powell and his minions need to fire up the engines again.

Meanwhile, the federal government has work to do as well. If our politicians in Washington really want stock prices to remain ridiculously high, they need to send more checks to the American people as soon as possible.

The effects of the last round of checks is already starting to wear off, and retail investors need more “stimulus money” to fritter away in their Robinhood accounts.

The good news for Wall Street is that Treasury Secretary Janet Yellen has reiterated her call for a large stimulus package, and Joe Biden has said that he is ready to sign one into law.

Of course at this point poor old Joe signs anything that his handlers put on his desk.

We haven’t added another trillion dollars to the national debt in a few months, and investors are quite eager to see our grand total cross the 28 trillion dollar mark. Most of them believe that more stimulus money will mean higher stock prices, but more stimulus money will also cause our money supply to grow even larger.

Since the start of the pandemic, M1 has been growing at a rate that would put the Weimar Republic to shame…

When I look at that chart, I feel like I am going to throw up.

But the only way to “save Wall Street” is to throw more giant mountains of money on to the fire. If we don’t go “full Weimar”, stock prices might crash to reasonable levels, and investors would be absolutely horrified.

And we are already starting to see warning signs. Just look at what happened to Tesla on Monday…

Shares of Tesla closed down 8.55% on Monday, as investors betting on a pandemic comeback rotated out of Big Tech and piled into cyclical stocks.

It’s Tesla’s biggest drop since Sept. 23, 2020, when it closed down 10.34%.

Do you want to be responsible for Tesla investors losing hundreds of billions of dollars in paper profits?

If not, then you need to support more printing, more borrowing and more spending.

Of course I am being facetious in this article.

By going down the road of hyperinflation, we are systematically destroying the value of the reserve currency of the world, we are piling up trillions of dollars of debt that future generations would never possibly be able to repay, and we are setting the stage for the inevitable meltdown of our current financial system.

In other words, we are literally committing national suicide.

Following World War I, they did the exact same thing in Germany.

The Weimar Republic created money like there was no tomorrow, and at first it fueled a tremendous speculative boom. Just a couple days ago, Michael Burry posted about this on his Twitter account…

“Speculation alone, while adding nothing to Germany’s wealth, became one of its largest activities. The fever to join in turning a quick mark infected nearly all classes..Everyone from the elevator operator up was playing the market.”

But that bubble didn’t last, did it?

Germany plunged into a horrific economic depression that shocked the entire world. Eventually, people were running around with wheelbarrows full of cash to pay for things, but nobody wanted the money because it was so worthless.

And of course the collapse of the Weimar Republic set the stage for World War II.

So why do we refuse to learn from history?

Sadly, it isn’t just the U.S. that is going down a hyperinflationary path. Governments all over the globe have been printing, borrowing and spending money at unprecedented levels, and now the ratio of the world’s debt to GDP has reached a staggering 356 percent…

The world’s debt-to-GDP ratio rose to 356% in 2020, a new report from the Institute of International Finance finds, up 35 percentage points from where it stood in 2019, as countries saw their economies shrink and issued an ocean of debt to stay afloat.

We all know how this story ends.

It ends with an absolutely nightmarish global economic collapse.

I have been sounding the alarm for years, and many others have as well.

Unfortunately, those warnings have gone unheeded.

Even though our forefathers handed us the keys to the greatest economic machine the world had ever seen, in our insatiable greed we always had to have more.

We just kept borrowing and spending, and many of us assumed that our self-destructive behavior would never actually catch up with us.

Disaster didn’t strike when our national debt hit 10 trillion dollars, and it didn’t strike when it hit 20 trillion dollars either.

To a lot of Americans, it seemed like we could keep this charade going indefinitely.

But now we are facing a day of reckoning, and the price for going “full Weimar” is going to be very bitter indeed.

***Michael’s new book entitled “Lost Prophecies Of The Future Of America” is now available in paperback and for the Kindle on Amazon.***

The post Someone Please Tell Powell, Yellen And Biden That We Are Going To Need A Lot More “Weimar Money”… appeared first on The Economic Collapse.

Even The Director Of Biden’s National Economic Council Has Been Forced To Admit The Economy Is “Spiraling Downward”

Michael — Tue, 19 Jan 2021 02:42:53 +0000

If your economy is “spiraling downward”, is that a good sign or a bad sign? To me, that doesn’t sound good at all, but if I am mistaken please tell me. I just want to make sure that I am not “misinterpreting” anything. Brian Deese, the man who will shortly be serving as the head of the National Economic Council, has publicly stated that our economy is “spiraling downward” at this moment. When I hear that, I picture a passenger airplane that completely loses control just before it crashes. But according to Deese, there is a solution. All we need to do is to pass the 1.9 trillion dollar stimulus package that Joe Biden is proposing…

A top economic adviser to President-elect Joe Biden warned the US economy is “spiraling downward” and called for swift action to address vulnerabilities that the global pandemic has drawn into focus.

Brian Deese, who will serve as director of Biden’s National Economic Council, said Sunday that the incoming administration’s $1.9 trillion spending plan would generate “the kind of robust recovery we need.”

That sounds so good.

All we have to do is press a button and we will be on our way to a “robust recovery”.

But what about all of the trillions of dollars that we already spent on all of the previous “stimulus packages”.

If they didn’t fix the economy, why will this one do it?

Perhaps they weren’t big enough, and so why don’t we make this next one 19 trillion dollars instead of just 1.9 trillion dollars?

If printing, borrowing and spending 1.9 trillion dollars is good, surely 19 trillion dollars would be so much better.

Of course I am being facetious.

The truth is that over the past year we have literally been committing national financial suicide.

Just look at what our leaders have done to our money supply…

We used to talk about “hyperinflation” in the United States in theoretical terms, but this is not a theoretical exercise any longer.

I cannot even begin to express how horrifying this is, and now our politicians in Washington plan to add another 1.9 trillion dollars to the fire.

As a part of his “stimulus package”, Joe Biden also wants the federal minimum wage to be raised to 15 dollars an hour…

It also calls for a $15 federal minimum wage, from $7.25, higher taxes and more regulations. Those initiatives have already alienated some Republicans and drawn criticism that the proposals are far removed from an emergency effort to shake off the coronavirus-related slowdown.

But at the rate we are inflating our currency, that certainly won’t be a “livable wage” for long.

So I have an idea.

Let’s make the minimum wage 150 dollars an hour.

Surely that is a proposal that our socialist friends can really get behind.

And when I use the term “socialist”, I am referring to most of the politicians in Washington.

If we force all of the “greedy” small businesses in America to pay their employees $150 an hour, then all of those workers will finally be able to live the lifestyles that they have always dreamed of living.

But of course many of them also wouldn’t have their jobs for much longer, because most of their employers would shortly go out of business.

Unfortunately, the socialists in Washington don’t understand how businesses actually operate. In fact, the vast majority of our politicians have never actually run a successful business.

What they are good at is spending other people’s money, and members of “the Squad” are publicly calling for even larger “survival checks” that Biden is proposing…

–AOC: “$2,000 means $2,000. $2,000 does not mean $1,400”

–Ayanna Pressley: “The people deserve, demand and require $2,000 recurring monthly survival checks.”

–Ilhan Omar: “The American people are struggling to make ends meet and need relief. We must immediately pass $2,000 survival checks.”

–Rashida Tlaib: “$1400 < $2000 Math teachers know this. That $600 is already in the clutches of landlords and bill collectors. Stop compromising the working class, and our most vulnerable neighbors.”

As I discussed yesterday, the cost of issuing $2,000 “survival checks” a single time would be approximately 600 billion dollars.

If we do it on a continual basis, the cost per year will be more than 7 trillion dollars.

So where does Ayanna Pressley suggest that we get an extra 7 trillion dollars?

Should we just print it into existence and make our transition to a “banana republic” complete?

Sadly, now that we have opened Pandora’s Box the American people are going to be demanding more government checks on a regular basis from now on.

As I detail in my new book, Shane Warren once warned that we would get to a point where people would be in the streets demanding their “entitlements”, and if you doubt that we have arrived at that time just look at what radical leftists did to Nancy Pelosi’s house.

When people try to convince me that the United States is in danger of becoming a socialist country “someday”, I just smile.

The truth is that we already are a socialist country, and we have been for a long time.

Even the stock market has become a rigged socialist game. Every time it starts to slip, the Federal Reserve steps in to bail out investors.

According to one recent survey, the vast majority of millionaires believe that we are either in a “stock market bubble” or that we are heading into one…

16% think we’re “fully in a bubble”
46% in “somewhat of a bubble”
29% think the market is approaching one

But most of them continue to pour more money into the market, because they know that the game has been rigged in their favor.

However, what happens if things get so crazy that the Federal Reserve eventually loses all control?

Many are convinced that this can never happen, and we shall see if they are correct.

Meanwhile, the real economy continues to get even worse, our politicians continue to spend even more money, and social unrest continues to grow.

America has entered a long national nightmare, and what most people don’t realize is that this nightmare is still only in the very early stages.

***Michael’s new book entitled “Lost Prophecies Of The Future Of America” is now available in paperback and for the Kindle on Amazon.***

The post Even The Director Of Biden’s National Economic Council Has Been Forced To Admit The Economy Is “Spiraling Downward” appeared first on The Economic Collapse.

The United States Has Become A Banana Republic

Michael — Mon, 04 Jan 2021 03:50:27 +0000

If we continue destroying the U.S. dollar at our current pace, toilet paper will eventually be more valuable than U.S. dollars. I know that sounds absolutely crazy, but it is true. Once the COVID pandemic hit the United States, those that control the levers of power in this country decided to go “full Weimar” and they never looked back. As a result, the size of our money supply is rising at a rate that would have been unimaginable just a few short years ago. To illustrate what I am talking about, I would like for you to check out this chart that was posted on Twitter by James Turk. As you can see, M1 was up by more than 50 percent in 2020.

This chart is not from a 3rd world banana republic. It’s #USD M1 money supply. Prices are already rising in soybeans, stock indices, crude oil, copper #BTC & many more items. Money printing by the #federalreserve means #inflation in 2021 is baked into the cake. Own physical #gold pic.twitter.com/OhhlnDx8tN

— James Turk (@FGMR) December 30, 2020

We’ve never had a year like that in all of U.S. history. What we are doing is literally insane, but most Americans aren’t even aware of what is happening because the mainstream media isn’t talking about it.

If you are not familiar with “M1”, here is a definition that comes from Investopedia…

M1 is the money supply that is composed of physical currency and coin, demand deposits, travelers’ checks, other checkable deposits, and negotiable order of withdrawal (NOW) accounts. M1 includes the most liquid portions of the money supply because it contains currency and assets that either are or can be quickly converted to cash. However, “near money” and “near, near money,” which fall under M2 and M3, cannot be converted to currency as quickly.

When new money enters the system, every dollar that you are currently holding becomes less valuable.

And if your paycheck does not rise at the same rate that the money supply is rising, that means that your paycheck becomes less valuable as well.

It is helpful to think of our money system as a pie. When more dollars are added to the pie, your share of the pie steadily becomes smaller.

So who does benefit when the pie is expanded?

The ultra-wealthy do, and I will discuss that more below.

But first, I wanted to share another chart with you. The first chart from James Turk showed how M1 has been rising on a percentage basis, and this next chart which comes directly from the Federal Reserve shows how M1 has been rising on an absolute basis…

Just look at that for a moment.

It truly is breathtaking. M1 has literally been rising at almost a vertical rate, and it makes all of the inflation that has come before look almost meaningless.

This is why the stock market keeps hitting record high after record high. Stocks started to crash when COVID first started to spread in the United States, and the Federal Reserve decided to do whatever was necessary to rescue the markets. The “unprecedented” response that we witnessed ended up being “a key driver of billionaire wealth” in 2020…

A key driver of billionaire wealth concentration was the unprecedented monetary policy response to stabilize financial markets in the early days of the pandemic, which spurred the stock market’s gravity-defying rise. When Wall Street was on the verge of panic in March, the Federal Reserve intervened with the promise of low rates and an open-ended liquidity spigot.

In addition, Congress just kept passing “stimulus package” after “stimulus package” in a desperate attempt to “rescue” the economy.

But in the process they borrowed and spent trillions of dollars that we did not have, and that also helped to fuel our transition into hyperinflation.

The good news is that hyperinflation is not showing up at the grocery store or at Walmart yet. Eventually it will happen, but so far consumer prices are just rising at a pace that is quite a bit brisker than usual. Where we are seeing hyperinflation is in stock prices, high end real estate in rural and suburban areas, and in other areas of the economy that the ultra-wealthy have been pouring their money into.

Despite the fact that we just endured one of the worst economic years in U.S. history, 2020 was actually a banner year for billionaires…

Between roughly mid-March and Dec. 22, the United States gained 56 new billionaires, according to the Institute for Policy Studies, bringing the total to 659. The wealth held by that small cadre of Americans has jumped by more than $1 trillion in the months since the pandemic began.

According to a December report issued jointly by Americans for Tax Fairness and the Institute for Policy Studies using data compiled by Forbes, America’s billionaires hold roughly $4 trillion in wealth — a figure roughly double what the 165 million poorest Americans are collectively worth. The 10 richest billionaires have a combined net worth of more than $1 trillion.

Last year the rich got a whole lot richer, and the poor got a whole lot poorer.

As I discussed the other day, 2020 was a “personal financial disaster” for 55 percent of all Americans. The year ended with close to 20 million Americans still receiving government unemployment benefits, and poverty and homelessness have been exploding all around us.

In some cases, people were waiting in lines that were up to 12 hours long just to get a couple of bags of groceries at food banks around the nation. We haven’t seen anything like this since the Great Depression of the 1930s, and many are expecting things to get even worse in 2021.

And with each passing day, more businesses are closing and more Americans are being laid off.

The retail sector has been hit particularly hard. The following comes from Axios…

Malls are going belly up. Familiar names like J.C. Penney, Neiman Marcus and J. Crew have filed for bankruptcy. Increasingly, Americans’ shopping choices will boil down to a handful of internet Everything Stores and survival-of-the-fittest national chains.

And what we have experienced so far is just the tip of the iceberg. One recent report projected that “100,000 brick-and-mortar U.S. retail stores will close by 2025”…

A research report from UBS predicts that 100,000 brick-and-mortar U.S. retail stores will close by 2025, in a trend that started before the pandemic and has accelerated amid coronavirus-related shutdowns.

Our national landscape is already littered with abandoned stores and restaurants, and they are telling us that it is only going to get worse.

What is our country going to look like as this process plays out?

Of course our authorities will just respond to every new crisis by printing even more money.

That is what they did down in Venezuela, and now just about everyone in Venezuela is a millionaire.

But most of those “millionaires” are living in crushing poverty because the money is absolutely worthless.

Sadly, many other countries are doing the same thing that the U.S. is doing, and so this hyperinflationary spiral is not likely to end any time soon.

But let there be no doubt that we are also in a global economic depression. Global GDP is about 8 percent lower than it was before the pandemic started, and the outlook for 2021 does not look promising at all.

If you think that there is a way for this economic story to end well, just go back and look at the M1 chart from the Federal Reserve one more time.

Every other time this has been tried in human history, the story has ended badly.

Our story is going to end badly too, and every American needs to get prepared to survive in a very painful hyperinflationary environment.

***Michael’s new book entitled “Lost Prophecies Of The Future Of America” is now available in paperback and for the Kindle on Amazon.***

The post The United States Has Become A Banana Republic appeared first on The Economic Collapse.

We’re On A Highway To Hyperinflation

Michael — Tue, 22 Dec 2020 03:51:04 +0000

Well, here we go again. The U.S. House of Representatives just passed a $900 billion stimulus package, and we are being promised that it will provide a real “boost” to the economy. Of course we were told the exact same thing about all of the other “stimulus packages” that have been passed since the beginning of the pandemic. Most importantly to many Americans, $600 stimulus payments will soon be sent out directly to the American people. If you are married and have three kids, you will get a total of $3,000, because each member of your family is counted equally for this round of stimulus payments.

But it won’t just be U.S. citizens that will be receiving free money. According to Michelle Hackman of the Wall Street Journal, families of illegal immigrants will now be eligible as well…

Family members of unauthorized immigrants are now eligible to get stimulus checks under the $900 billion deal reached last night. That eligibility is retroactive, so adults excluded last time could get up to $1800 now

In addition, there is a tremendous amount of pork in the spending package that the House just authorized. The following comes from Zero Hedge…

And now, on to the pork… which includes billions to foreign countries, US military weapons purchases which go above and beyond their budgets, $40 million for the Kennedy Center, and nearly $200 million so that federal HIV/AIDS workers overseas can buy cars and car insurance, among other things.

Not surprisingly, the bill passed the House by a vote of 359 to 53.

I would like to applaud the 53 members of the House that tried to stand up and do the right thing, because this bill should have never been passed.

It is being reported that the bill was 5,593 pages long, and our representatives were only given a few hours to read it…

Several members of Congress are taking to social media to complain about the handful of hours they have to read the 5,593-page spending bill.

Early Monday afternoon, the behemoth piece of legislation was uploaded, and House Speaker Nancy Pelosi scheduled a vote for the evening.

It is going to take weeks before we learn all of the insidious things that were snuck into this bill, because that is how long it is going to take for ordinary citizens to read it.

As for members of Congress, I doubt that any of them will ever end up reading the entire thing.

Our system of government is so broken, but most of the population doesn’t seem to care.

And most Americans also don’t seem to care that all of this ridiculous spending is literally destroying the bright future that our children and our grandchildren were supposed to have.

You see, the truth is that we don’t have 900 billion dollars to spend on a stimulus package.

Instead, the federal government will have to borrow 900 billion new dollars that the Federal Reserve creates out of thin air.

Needless to say, injecting 900 billion more dollars into the economy is going to be yet another massive shock for the money supply. Even without this new stimulus package, M2 has been rising at an exponential rate since the start of the pandemic due to all of the previous stimulus packages that Congress approved and all of the “quantitative easing” that the Federal Reserve has been doing.

Prior to 2020, we had “inflation”, but now we have definitely entered a “hyperinflationary” phase.

In the short-term, $600 payments will help ease the economic suffering of tens of millions of Americans.

But in the long run, we are going down the exact same path that Venezuela, Zimbabwe and the Weimar Republic went down.

As I have explained to my regular readers repeatedly, just about everyone in Venezuela is a millionaire today, but just about everyone is also living in poverty because their money is almost absolutely worthless.

Unfortunately, most Americans are not interested in discussing the inflationary impact that all of this reckless spending is having. Instead, social media is full of angry comments about how these $600 stimulus payments are not nearly large enough.

Just check out what some of the people on Twitter are saying…

Eli Yudin: Members of Congress got paid $130,000 to spend 9 months arguing about whether we deserve $600

Robert Reich: People are starving and the GOP has the nerve to hand over a one-time $600 check, as the Pentagon spends $2 billion a day. The cruelty is staggering.

VeBee: You and I : $600 … No thank you! Sudan : $700,000,000…HELL NO !

@BlessUSA45: Leader of both party’s celebrating while laughing their asses off at us because they actually believe we are delighted to get our 600 dollar check from them.

@marie32318459: “i am very proud of this deal, because we came together, BI partisan” this is unacceptable. 9 MONTHS, getting paycheck after paycheck with American tax dollars and then come up with this “spit-in-the face” 600$ and they actually congratulating each other on this?
#eattherich

Allegedly Legendary: @SpeakerPelosi Americans need monthly cash assistance for all, #Med4All and a real plan to get people back to work. Not a $600 dollar one-time check. You’ve given tax cuts in the billions and bailouts but don’t help the American people. #StimulusChecksOrStrike

This is one of the big problems that happens once you start cruising down the road to socialism.

People always want more.

And actually Joe Biden is promising much more “stimulus” once he gets into the White House.

Giving people free money is a fast way to win votes, but it is also going to destroy the value of our currency.

If M2 continues to rise at an exponential rate, what do you think that is going to do to the cost of living in this country?

We all know the answer to that question, and if our paychecks do not keep pace that means that our standard of living will be going way down.

I have been warning that our financial system is headed for an epic meltdown, and now it is starting to become a reality right in front of our eyes.

Throughout human history, once currency devaluation reaches an exponential phase things always have ended badly.

And now it is our turn.

We’re on a highway to hyperinflation, and our maniacal free spending politicians are behind the wheel.

***Michael’s new book entitled “Lost Prophecies Of The Future Of America” is now available in paperback and for the Kindle on Amazon.***

The post We’re On A Highway To Hyperinflation appeared first on The Economic Collapse.

Quantitative Easing Worked For The Weimar Republic For A Little While Too

Michael — Mon, 23 Sep 2013 02:10:32 +0000

There is a reason why every fiat currency in the history of the world has eventually failed. At some point, those issuing fiat currencies always find themselves giving in to the temptation to wildly print more money. Sometimes, the motivation for doing this is good. When an economy is really struggling, those that have been entrusted with the management of that economy can easily fall for the lie that things would be better if people just had “more money”. Today, the Federal Reserve finds itself faced with a scenario that is very similar to what the Weimar Republic was facing nearly 100 years ago. Like the Weimar Republic, the U.S. economy is also struggling and like the Weimar Republic, the U.S. government is absolutely drowning in debt. Unfortunately, the Federal Reserve has decided to adopt the same solution that the Weimar Republic chose. The Federal Reserve is recklessly printing money out of thin air, and in the short-term some positive things have come out of it. But quantitative easing worked for the Weimar Republic for a little while too. At first, more money caused economic activity to increase and unemployment was low. But all of that money printing destroyed faith in German currency and in the German financial system and ultimately Germany experienced an economic meltdown that the world is still talking about today. This is the path that the Federal Reserve is taking America down, but most Americans have absolutely no idea what is happening.

It is really easy to start printing money, but it is incredibly hard to stop. Like any addict, the Fed is promising that they can quit at any time, but this month they refused to even start tapering their money printing a little bit. The behavior of the Fed is so shameful that even CNBC is comparing it to a drug addict at this point…

The danger with addictions is they tend to become increasingly compulsive. That might be one moral of this week’s events.

A few days ago, expectations were sky-high that the Federal Reserve was about to reduce its current $85 billion monthly bond purchases. But then the Fed blinked, partly because it is worried that markets have already over-reacted to the mere thought of a policy shift.

Faced with a choice of curbing the addiction or providing more hits of the QE drug, in other words, it chose the latter.

So why won’t the Fed cut back on the reckless money printing?

Well, as Peter Schiff recently noted, Fed officials seem to be convinced that any “tapering” could result in the bursting of the massive financial bubbles that they have created…

The Fed understands, as the market seems not to, that the current “recovery” could not survive without continuation of massive monetary stimulus. Mainstream economists have mistaken the symptoms of the Fed’s monetary expansion, most notably rising stock and real estate prices, as signs of real and sustainable growth. But the current asset price bubbles have nothing to do with the real economy. To the contrary, they are setting up for a painful correction that will likely be worse than the one we experienced five years ago.

As I have written about previously, the Federal Reserve is usually very careful not to do anything which will hurt the short-term interests of the financial markets and the big banks.

But at this point the Fed is caught in a trap. If it continues to pump, the financial bubbles that it has created will get even worse. If it stops, those bubbles will burst. But as Doug Kass noted recently, it is inevitable that these financial bubbles will burst at some point one way or another…

“Getting in was easy. Getting out—not so much. The Fed is trapped and can’t end tapering or else the bond and stock markets will blow up. The longer this continues the bigger the inevitable burst.”

In essence, we can have disaster now or disaster later.

But most Americans don’t care much about what is happening on Wall Street. They just want economic conditions to get better for them and for those around them. And to this day, the mainstream media continues to sell quantitative easing to the American people as an “economic stimulus” program by the Federal Reserve.

So has quantitative easing actually been good for the U.S. economy?

Not really.

For example, while the Fed has been recklessly printing money out of thin air, household incomes have actually been going down for five years in a row…

What about employment?

Don’t more Americans have jobs now?

Actually, that is not the case at all. Posted below is a chart that shows how the percentage of working age Americans with a job has changed since the year 2000. As you can see, the employment to population ratio fell from about 63 percent before the last recession down to underneath 59 percent at the end of 2009 and it has stayed there ever since…

So where is the “employment recovery”?

Can you point it out to me? Because I have been staring at this chart for a long time and I still can’t find it.

So if quantitative easing has not been good for average Americans, who has it been good for?

The wealthy, of course.

Just check out what billionaire hedge fund manager Stanley Druckenmiller told CNBC about quantitative easing the other day…

“This is fantastic for every rich person,” he said Thursday, a day after the Fed’s stunning decision to delay tightening its monetary policy. “This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.”

“Who owns assets—the rich, the billionaires. You think Warren Buffett hates this stuff? You think I hate this stuff? I had a very good day yesterday.”

Druckenmiller, whose net worth is estimated at more than $2 billion, said that the implication of the Fed’s policy is that the rich will spend their wealth and create jobs—essentially betting on “trickle-down economics.”

“I mean, maybe this trickle-down monetary policy that gives money to billionaires and hopefully we go spend it is going to work,” he said. “But it hasn’t worked for five years.”

Sadly, Druckenmiller is exactly correct.

Since the end of the last recession, the Dow has been on an unprecedented tear…

Of course these stock prices have nothing to do with economic reality at this point, but for the moment those that are making giant piles of cash on Wall Street don’t really care.

Sadly, what very few people seem to understand is that what the Fed is doing is going to absolutely destroy confidence in our currency and in our financial system in the long-term. Yeah, many investors have been raking in huge gobs of cash right now, but in the long run this is going to be bad for everybody.

We have now entered a money printing spiral from which there is no easy exit. According to Graham Summers, the Fed has “crossed the Rubicon” and we are now “in the End Game”…

If tapering even $10-15 billion per month from $85 billion month QE programs would damage the economy, then we’re all up you know what creek without a paddle.

Put it this way… here we are, five years after 2008, and the Fed is stating point blank that the economy would absolutely collapse if it spent any less than $85 billion per month. This admission has proven just how long ago we crossed the Rubicon. We’re already in the End Game. Period.

Most Americans don’t really understand what quantitative easing is, and most don’t really try to understand it because “quantitative easing” sounds very complicated.

But it really isn’t that complicated.

The Federal Reserve is creating gigantic mountains of money out of thin air every month, and the Fed is using all of that newly created money to buy government debt and mortgage-backed securities. Over the past several years, the value of the financial securities that the Fed has accumulated is greater than the total amount of publicly held debt that the U.S. government accumulated from the presidency of George Washington though the end of the presidency of Bill Clinton…

The same day that the Federal Reserve’s Federal Open Market Committee announced last week that the Fed would continue to buy $40 billion in mortgage-backed securities (MBS) and $45 billion in U.S. Treasury securities per month, the Fed also released its latest weekly accounting sheet indicating that it had already accumulated more Treasuries and MBS than the total value of the publicly held U.S. government debt amassed by all U.S. presidents from George Washington though Bill Clinton.

To say that this is a desperate move by the Fed would be a massive understatement. We have never seen anything like this before in U.S. history.

And look at what all of this wild money printing has done to our money supply…

In many ways, the chart above is reminiscent of what the Weimar Republic did during the early years of their hyperinflationary spiral…

Just like the Weimar Republic, our money supply is beginning to grow at an exponential pace.

So far, complete and total disaster has not struck, so most people think that everything must be okay.

But it is not.

In a previous article, I included an outstanding illustration from Simon Black that I think would be extremely helpful here as well…

Let’s say you’re at a party in a small apartment that’s about 500 square feet in size. Then suddenly, at 11pm, a pipe bursts, starting a trickle into the living room.

Aside from the petty annoyance, would you feel like you were in danger? Probably not. This is a linear problem– the rate at which the water is leaking is more or less constant, so the guests can keep partying through the night without worry.

But let’s assume that it’s an exponential leak.

At first, there’s just one drop of water. But each minute, the rate doubles. So by 11:01pm, there’s 2 drops. By 11:02, 4 drops. And so forth.

By 11:27pm, there’s only six inches of standing water. Yet by 11:31pm, just four minutes later, the entire room is under nearly 8 feet of water. And the party’s over.

For nearly half an hour, it all seemed safe and manageable. People had all the time in the world to leave, right up until the bitter end. 11:27, 11:28, 11:29. Then it all went from benign to deadly in a matter of minutes.

Are you starting to get the picture?

What the Federal Reserve is doing is systematically destroying the U.S. dollar, and the rest of the world is starting to take notice.

Why should they continue to lend us trillions of dollars at super low interest rates when we are exploding the size of our money supply?

It is simply not rational for other nations to continue to lend us money at less than 3 percent a year when the real rate of inflation is somewhere around 8 to 10 percent and reckless money printing by the Fed threatens to greatly accelerate the devaluation of our currency.

When QE first started, the added demand for U.S. government debt by the Federal Reserve helped drive long-term interest rates down to record low levels.

But in the long-term, the only rational response by all other buyers of U.S. government debt will be to demand a much higher rate of return because of the rapid devaluation of U.S. currency.

So QE drives down long-term interest rates in the short-term, but in the long-term the only rational direction for long-term interest rates to go is much, much higher and in recent months we have already started to see this.

The only way that the Fed can stop this is by increasing the amount of quantitative easing.

Right now, the Fed is buying roughly half a trillion dollars worth of U.S. Treasuries a year, but the U.S. government issues close to a trillion dollars of new debt and must roll over about 3 trillion dollars of existing debt each year.

If the Federal Reserve eventually decides to buy all of the debt, then interest rates won’t be a major problem. But if the Fed goes that far our financial system would be regarded as a total joke by the remainder of the globe and we would reach hyperinflation much more rapidly.

If the Federal Reserve stops buying debt completely, the financial bubbles that they have created will burst and we will rapidly be facing a financial crisis even worse than what we experienced back in 2008.

But almost whatever the Fed does at this point, the rest of the world will probably continue to start to move away from the U.S. dollar as the de facto reserve currency of the planet. This move is just beginning, but it is going to have major implications for us in the years ahead. This is a topic that I will be addressing extensively in future articles.

Most of the debate about quantitative easing has focused on the impact that it will have on the U.S. economy in the short-term.

That is a huge mistake.

Of much greatest importance is what quantitative easing means for the long-term.

The rest of the world is losing confidence in the U.S. dollar and in U.S. debt because of the reckless money printing that the Fed has been doing.

But we desperately need the rest of the world to use “the petrodollar” and to lend us the money that we need to pay our bills.

As the rest of the planet starts to reject the U.S. dollar and starts to demand a much higher rate of return to lend us money, the U.S. economy is going to experience a tremendous amount of pain.

It is hard to put into words how foolish the Federal Reserve has been. The Fed is systematically destroying what was once the strongest financial system in the world, and in the end we are all going to pay the price.

The post Quantitative Easing Worked For The Weimar Republic For A Little While Too appeared first on The Economic Collapse.

Will It Be Inflation Or Deflation? The Answer May Surprise You

Michael — Wed, 22 May 2013 21:37:35 +0000

Is the coming financial collapse going to be inflationary or deflationary? Are we headed for rampant inflation or crippling deflation? This is a subject that is hotly debated by economists all over the country. Some insist that the wild money printing that the Federal Reserve is doing combined with out of control government spending will eventually result in hyperinflation. Others point to all of the deflationary factors in our economy and argue that we will experience tremendous deflation when the bubble economy that we are currently living in bursts. So what is the truth? Well, for the reasons listed below, I believe that we will see both. The next major financial panic will cause a substantial deflationary wave first, and after that we will see unprecedented inflation as the central bankers and our politicians respond to the financial crisis. This will happen so quickly that many will get “financial whiplash” as they try to figure out what to do with their money. We are moving toward a time of extreme financial instability, and different strategies will be called for at different times.

So why will we see deflation first? The following are some of the major deflationary forces that are affecting our economy right now…

The Velocity Of Money Is At A 50 Year Low

The rate at which money circulates in our economy is the lowest that it has been in more than 50 years. It has been steadily falling since the late 1990s, and this is a clear sign that economic activity is slowing down. The shaded areas in the chart represent recessions, and as you can see, the velocity of money always slows down during a recession. But even though the government is telling us that we are not in a recession right now, the velocity of money continues to drop like a rock. This is one of the factors that is putting a tremendous amount of deflationary pressure on our economy…

The Trade Deficit

Even single month, far more money leaves this country than comes into it. In fact, the amount going out exceeds the amount coming in by about half a trillion dollars each year. This is extremely deflationary. Our system is constantly bleeding cash, and this is one of the reasons why the federal government has felt a need to run such huge budget deficits and why the Federal Reserve has felt a need to print so much money. They are trying to pump money back into a system that is constantly bleeding massive amounts of cash. Since 1975, the amount of money leaving the United States has exceeded the amount of money coming into the country by more than 8 trillion dollars. The trade deficit is one of our biggest economic problems, and yet most Americans do not even understand what it is. As you can see below, our trade deficit really started getting bad in the late 1990s…

Wages And Salaries As A Percentage Of GDP

One of the primary drivers of inflation is consumer spending. But consumers cannot spend money if they do not have it. And right now, wages and salaries as a percentage of GDP are near a record low. This is a very deflationary state of affairs. The percentage of low paying jobs in the U.S. economy continues to increase, and we have witnessed an explosion in the ranks of the “working poor” in recent years. For consumer prices to rise significantly, more money is going to have to get into the hands of average American consumers first…

When The Debt Bubble Bursts

Right now, we are living in the greatest debt bubble in the history of the world. When a debt bubble bursts, fear and panic typically cause the flow of money and the flow of credit to really tighten up. We saw that happen at the beginning of the Great Depression of the 1930s, we saw that happen back in 2008, and we will see it happen again. Deleveraging is deflationary by nature, and it can cause economic activity to grind to a standstill very rapidly.

During the next major wave of the economic collapse, there will be times when it will seem like hardly anyone has any money. The “easy credit” of the past will be long gone, and large numbers of individuals and small businesses will find it very difficult to get loans.

When the debt bubble bursts, cash will be king – at least for a short period of time. Those that do not have any savings at all will really be hurting.

And some of the financial elite seem to be positioning themselves for what is coming. For example, even though he has been making public statements about how great stocks are right now, the truth is that Warren Buffett is currently sitting on $49 billion in cash. That is the most that he has ever had sitting in cash.

Does he know something?

Of course there will be a tremendous amount of pressure on the U.S. government and the Federal Reserve to do something once a financial crash happens. The response by the federal government and the Federal Reserve will likely be extremely inflationary as they try to resuscitate the system. It will probably be far more dramatic than anything we have seen so far.

So cash will not be king for long. In fact, eventually cash will be trash. The actions of the U.S. government and the Federal Reserve in response to the coming financial crisis will greatly upset much of the rest of the world and cause the death of the U.S. dollar.

That is why gold, silver and other hard assets are going to be so good to have in the long-term. In the short-term they will experience wild swings in price, but if you can handle the ride you will be smiling in the end.

In the coming years, we are going to experience both inflation and deflation, and neither one will be pleasant at all.

Get prepared while you still can, because time is running out.

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