Letter from the women of Cologne, Germany addressed to the ‘Women of the British Empire’ November 12, 1914
“During the times of passive resistance we existed, not by industry, but through the paper money doles sent from unoccupied country. Now these have ceased and we face starvation. Industry cannot recover, and there are millions, literally out of work…tens of thousands of our leading citizens have been banished or imprisoned…our newspapers have been suppressed…armed hordes of adventurers have now been let loose on our disarmed and helpless population in the name of separatism and Republicanism…Winter is before us, and we have no coal.”
What will it take for hyper-inflation to occur? Why hasn’t it already occurred? and What would the real value of gold be in this scenario?
Americans today have never experienced the severe inflation that German citizens experienced after World War 1, but as we are bombarded with images of hip-hop artists throwing up limitless amounts of paper bills ‘in da club’ and the Federal Reserve printing trillions of dollars in financial stimulus money, known academically as Quantitative Easy, one gets the sense that there may soon come a time where we too are sweeping paper bills into the fireplace to heat our homes. Currently, there are 47 million Americans on food-stamps and 91 million people not in the labor force. These numbers are similar to the economic stagnation experience in the late 70’s when inflation was running consistently over 10%, but today we have difficulty reaching the Fed target of 2%. So what is going on?
Well, truth is, if we were to calculate inflation the way we did in 1980, then the inflation rate would actually be 10%. So inflation is running much higher than what is officially being reported.
The Fed is under-reporting inflation because they do not want to be politically responsible for causing the economic disparity and income inequality between the 1% and the 99%. This is being commented on and reported widely, but for the most part the fingers are not being pointed at the Fed so their plan is working.
So with inflation at 10% why isn’t the price of gold skyrocketing?
Turns out inflation numbers aren’t the only thing the Fed is manipulating. Even the price of gold is being manipulated.
From Zerohedge
The price of gold is being actively managed by central planners and their proxies. The main culprit here appears to be the US authorities, as the manipulation is most apparent in the US open gold market. For the most part, this ‘management’ has resulted in letting the price of gold rise, but not too much, or too quickly.
The price of gold has always been an object of interest for governments and central bankers. The reason is simple enough to understand: Gold is an objective measure of the degree to which fiat money is being managed well or managed poorly.
As such, whenever paper money is being governed poorly, the price of gold becomes an important barometer. And this is why the actual price of gold is a strong candidate to be ‘managed.’ Or ‘influenced’. Or ‘manipulated’. Whichever word you prefer, they all convey the same intent.
Without gold price suppression, the average consumer would also realize that the officially reported inflation numbers would have to be incorrect. So it makes sense that the fed is manipulating both simultaneously.
Author James Rickards comes to the same conclusion this in his book “The Death Of Money.“
Central banks, principally the Federal Reserve, do want inflation, but they want it to be orderly rather than disorderly. They want the inflation to come in small doses so that it goes unnoticed. Gold is highly volatile, and when it spikes up sharply, it raises inflationary expectations. The Federal Reserve and the BIS suppress gold prices, not to keep them down forever, but rather to keep the increases orderly so that savers do not notice the inflation.
Can gold suppression last forever? When does it all end?
Gold suppression can only be temporary. Intelligent investors aware that gold prices are being artificially devalued invest heavily in tangible gold. Most of this supply comes from US Mint as small investors retain their holdings because they are also aware of the price suppression. In 2004, 28% of all gold investments were held in securities, or paper, and 72% physical. In 2014, 94% of all gold investments are physical and only 6% are securities. As tangible investment decreases the physical supply available, price suppression would begin to unravel on itself and would inevitably have to end.
Author James Rickards believes that the Feds escape plan has been in the works for some time. He believes that the world’s Central Banks have colluded to suppress gold until all countries can rebalance their gold holdings evenly, so that when the time comes to shift to a world currency backed by gold all nations will agree and the transition can occur smoothly.
The price must be kept low until gold holdings are rebalanced among the major economic powers and the rebalancing must be completed before the collapse of the international monetary system. When the world returns to a gold standard either by choice to create inflation, or of necessity to restore confidence it will be crucial to have support from all the world’s major economic centers…Once the rebalancing is complete, probably in 2015, there will be less reason to suppress gold’s price because China will not be disadvantaged in the event of a price spike.
What can we expect the value of gold to reach?
Unfortunately this is where my analysis becomes largely speculative because the price of anything, by nature, is largely speculative. I do not have any incentive sell you gold or push gold on you so I will not make any outrageous claims. But there are some reference points that could yield some insight and improve the accuracy of my predictions.
Bubble Scenario:
This scenario offers gold investors the best opportunity to make the most money. With the emotional euphoria of bubble psychology gold has the ability to reach its peak investing potential.
Imagine gold becomes extremely popular overnight: Television shows, famous actresses and actors, musicians and politicians praise it for its beauty and worth. It becomes idolized and the masses perceive it as culturally and socially significant. The government stops price suppression and the floodgates open. First its value jumps to $2,000 an ounce overnight, and those who already held it in their possession become wealthier. They sell some of their gold to buy other items of worth, BMWs, Jet-skis, Yachts . Their neighbors take notice and begin to see gold for its speculative investment potential. They buy gold and soon the price jumps to $3,000 dollars and ounce. The cycle continues to feed off of itself and grows out of control. More people begin to buy and demand gold, taking out loans, selling other items to raise cash to buy gold at any cost. Within three years gold hits $10,000 an ounce. People who at first laughed at the price increases begin to panic that they missed out on the greatest investment opportunity of a lifetime. They were ridiculed in the media for criticizing the price increases as irrational, and now capitulate in defeat. Everyone is buying. No one is against the exuberant joy of gold possession and ownership. After five years the price hits $20,000 dollars an ounce. After ten years the price of gold hits $50,000 dollars an ounce.
Then the unthinkable happens, some of the largest gold holders in the world begin to see gold as overpriced and begin to sell. They see gold for what it is, a rare commodity, with some industrial purposes but beyond that they see no further reason to continue to hold as the bubble has reached its peak. There are no buyers left to continue the cycle of exuberance.
This is the standard model of a bubble and it is mostly psychological in nature. This happened in the Housing bubble (08′), the Dot Com bubble (00′).
Hyper-Inflation Scenario:
In this scenario we do not see gold drive up to bubble euphoria levels, but something like $5,000 – $10,000 dollars an ounce is well within the realm of possibility. Gold becomes a wealth preservation tool, more than a tool for wealth creation.
Imagine the US gets caught in an open war with Russia over Ukraine’s independence. The conflict escalates quickly, with ground troops and even tactical nuclear strikes. The conflict drags other nations into war. To come to Russia’s aid, the Chinese government dumps $1 trillion in US Currency Reserves to depreciate the value of the dollar as a financial weapon. Overnight, one Yuan is worth $5 dollars, one Euro is worth $10 dollars, one Canadian dollar is worth $8 US dollars. Foreign investors exchange their currencies for cheap dollars and flood the United States with hot money investing in housing and US goods and services. Within months the money supply in circulation has multiplied by a factor of ten. Dollars are everywhere chasing a limited supply of goods, so the end result is inflation.
This is where the government steps in with price controls. First they implement martial law and make transactions with gold and silver illegal. They even begin to confiscate privately held gold in local banks. Next they mandate that grocery stores artificially suppress prices keeping bread, milk and eggs at reasonable prices. They decide a gallon of milk is $50, a loaf of bread is $20, and a dozen eggs are $40. The grocery stores refuse to sell at these prices because the money supply increases every day, so they begin to empty their shelves and sell their goods on a “black market” for twice the amount of the price mandates.The mandates last for sometime, but they inevitably fail. Hyper-inflation is in full effect.
In this scenario the price of gold is much harder to determine because it becomes illegal to buy and hold. Its value becomes immediately obvious to citizens in the United States experiencing hyper-inflation, but internationally they are not experiencing this so the price has not appreciated significantly on a global scale. Economic uncertainty and fear will be the main force that drives the price of gold up, but for the common man who has already lost his life savings through inflation, guns and butter take precedent.
Return to International Gold Standard Scenario:
It is is likely that this scenario only occurs after the hyper-inflation scenario happens. After a global international conflict, the world leaders decide to sit down and establish a peace treaty with a fresh new unified global currency system in the fine-print. This offers gold investors an even better potential for wealth creation. In this scenario the world currency becomes backed by a ‘basket’ of precious metals, which was an idea originated by John Keynes, known as the ‘bancor.’ Governments freshly loaded up on a new wave of public debt from the international conflict opt for the gold backed ‘bancor’ to resume economic stability.
Since the currency is 100% backed, there is an immediate inflation adjustment worldwide as countries come down from decades of fiat delusion.
James Rickards notes:
The gold standard will certainly not be a matter of choice but may be pursued as a matter of necessity when confidence collapses. A first approximation of an equilibrium, nondeflationary gold price is $9,000 dollars per ounce, although higher and lower values are feasible depending on the gold standard’s design specifications. The circulating currency will not be gold coins but rather dollars or SDRs.
Conclusion
Protect your member.
I guess I will just stick to silver. Hell ,it’s all I can afford.I still got a couple OZ of gold .It is pretty .
1 loaf of bread.
Free pass to not get shot by someone with a gun.
Honestly it depends on your bargaining skills and what you need badly.
Who cares in dollar terms as you’d be better off with fire wood than dollars so why would you even care. It’ll last you longer.
Hyper-inflation will not happen in US in your lifetime. No reserve currency in history has ever gone through hyper-inflation. They always go through severe deflation at best some stagflation. There is not one example in history otherwise.
Only a moron would want a gold standard if they believe in peak oil, water and think generally there will be less people in the future.
In other words, Kevin, your headline was a come-on because no one can really answer the question. Keep stacking, my friends!
Everything is in a market.
I still think gold has lower to go before I expect to buy some.
No one knows the future.
For the time being, bondholders are willing to accept that they’ll be paid either less than they loaned Uncle Sam and his Crony Capitalist Corporate Sponsors for their IOU’s (if you believe inflation is really running 10%) or about the same as they loaned Uncle and his buddies (if you believe the BLS’ inflation numbers.)
When the time does arrive to cash in some of the Casino’s chips (the galaxy of IOU’s out there) then we’re going to discover that the cashiers don’t actually have the dough to exchange out.
That’s when the chips (IOU’s) suddenly lose value….this is synonymous with a rising interest rate.
Rates are the KEY.
The Fed has gotten away with monetizing a vast amount of debt because rates are low. They are looking over the shoulder of Japan’s rulers, who have set the Olympic Standard for monetizing debt in a period of unimaginably low interest rates.
You’d be forgiven for thinking that those lending money to all these deadbeat borrowers don’t care if they ever get their money back, so cavalier are they regarding the risks both known and unknown. Heck, the known risks alone render a verdict of “CRIMINALLY INSANE” against everyone who lends money to the plethora of subprime corporate borrowers, who used the $$$$ to rush out and buy back their firms’ common stocks, to which all those executives’ compensation was attached.
Rates are everything.
We’ll know the game is up when rates rise (they began a slow ascent two years ago, but have yet to break out to new highs.)
When rates go up, the money supply will crash.
DEflation should sweep away the value of most of what the 1% now counts as “wealth.” They are the ones who own it all, and thus they are the ones who have something to lose…and they will.
As Gerald Celente says, the 99% (or better, the 80th-99th percentile who played by the rules and paid all the taxes for this crap) will lose what they have, and then with nothing left to lose, will LOSE IT.
Stay out of public places once that happens.
Might I suggest that the scenarios suggested by Kevin are a bit of a straw man. They’re inconclusive. There is a vast array of actions that gov might take that could alter his conclusions. What the future holds is a crap shoot although there are trends in motion that can be extrapolated upon. In fact, there are probably more than a few scenarios.
The futures is always easier to predict from hindsight.
What people need to understand is that fiat money, whether dollars, SDRs, Amero or whatever needs redemptive qualities in something tangible. That could be goods or gold or silver or services. If not redemptive, it loses confidence and becomes the ‘old maid’. That is where we are today.
The problem is that the increase in money printing has exceeded the increase in material production of goods that we all need. For there to be stability in the economy, there need to be a balance between Inflation and an increase in goods. A balance between Inflation and Price Deflation, so to speak. We as a nation are not producing, therefore we are out of balance and prices are going up: Price Inflation. OR…as they say, more dollars chasing fewer goods.
For years the Inflation target was 2% of GDP, which happens to be the same percentage as the economy grew. It’s called skimming the profits. Prices should have declined with increased production, but, instead, have increased yoy since 1913 except for the deflation in the 30s.
The beneficiaries of this skimming was first the gov and then the financial sectors of the economy.
The consequences of this imbalance is destructive and cumulative. We have painted ourselves into a corner with no easy out. The problem is basically un-backed paper money.
What’s going to happen? Hell if I or anybody else knows. Well, maybe Lamont Cranston knows, but he’s not talkin’.
Kevin–It doesn’t matter what the price of gold will be in terms of fial currency. The key is what can you get in exchange for it. Dollars don’t measure the value of gold–gold measures the value of the dollar, just like anything tangible.
Central Fund of Canada is at a 52wk low and selling at a minus 8.8% discount.
People have a penchant to think of dollars as the constant and the goods a variable. This is incorrect thinking, part of the brainwashing today. It comes from a period of time when the dollar was backed by 1/20 of an ounce of gold. 1/20 of an ounce of gold weighed the same and had the same dimensions, today as 1000 years ago. It is unchangeable. The dollar assumed the characteristic of its backing-gold.
Let’s measure the dollar in terms of some tangible goods, which is the way you should think of the value of the dollar.
Sirloin Stake 4 lb. in 1913=$1——-Sirloin Stake 1.25 oz in 2014=$1
Movie Tickets Qty 4 in 1941=$1——1/4 of a Movie Theater water bottle in 2014=$1
For more comparisons see Mac Slavo.
What has changed in these examples is the dollar. That is not much of a yard stick for measuring tangible good. So re-orient your thinking to get a better understanding of reality what ever that is. .
Thanks for the feedback guys. Interesting stuff. This discussion could obviously go on for days, since there are so many variables and possibilities, but I tried to encapsulate the majority into a brief, palatable summary.
Some interesting questions I have that I didn’t dive into are:
Is this even a relevant issue if the globalists main concern is depopulation and destruction of the global economy?
On what should the average citizen place priority, survival or wealth preservation?
Thoughts?
I should have said;
Sirloin Stake 4 lb. in 1913=$1——-Sirloin Stake 4 lb in 2014=$51.20 Holy Sh*t!
@Kevin,
Job #1: Wealth preservation.
Why? Poor people are stuck where they are, those with means can go on an extended vacation somewhere else. As I read history, the key to survival is most often GOOD (Getting Out Of Dodge.) Only rarely do we see times where having a year’s worth of food would make much of a difference.
The possible mines in the path our future takes are too numerous to count and being well-prepared for some kinds of problems leaves one especially vulnerable to others, mitigating the value of preparing for TEOTWAWKI to me.
Wealth preservation ultimately boils down to acquiring today what people selling what you need in the future will desire. Figuring that riddle is challenging, as I see it, but a component of it is, “what do people really NOT want today?”
When gold was at $1900/oz Geissele Bunchen (spelling?) the model publicly demanded gold instead of dollars for payment. Gold vending machines showed up in London, then Miami. These were pretty good illustrations of a mature rally, a top.
When gold was $253/oz in 1999 and 2001, even the gold miners hated it so much they were selling forward their future production and CENTRAL BANKS were selling like crazy (they are not known for being savvy timers.) It was obviously a major low, from this hindsight view.
What “asset class” is equally reviled today (and has been hated for quite some time)? What does everyone seek to divest himself of, the moment he comes into possession of it?
Perhaps THAT is the asset class to hold, somewhere, somehow. But what the heck do I know?
We are AWASH in IOU-dollars. The world is DROWNING in IOU’s for dollars. Many of those IOU’s cannot possibly be turned into dollars, because the issuers of all those IOU’s have issued more than one dollar of IOU for every dollar that actually can be acquired to back it.
The Fed has enabled the issue of trillions of IOU-dollars, which while interest rates are low, SPEND just like real 100% dollars. If interest rates rise, however, the dollar value of the IOU-dollars drops…i.e., they actually become IOU-fewer-dollars-than-you-thought. At maturity they are 100% but in the meantime they lose capital value… deflation in action, exactly what the 1930’s were all about.
@Homer, one thing we know for sure: we may have electronic gadgets of which our great-grandparents couldn’t dream, but they had much better food, at lower prices, that we can imagine.
Good stuff dc sunset. I agree.
dc.sunsets—Yes the food supply is not very nourishing today. Much of the soil is depleted of minerals and as a consequence we are not getting the trace minerals from the vegetables that we eat like your parents did. Minerals are more important than vitamins although they’re important, too.
I drink a tablespoon of Tropical Oasis ionic trace minerals everyday for that reason. It literally saved my life. I was never a great vegetable eater so I was lacking many of the trace minerals that you get by eating them. I thought I was a goner, but as fate would have it, I can now see the emergence of the NWO. Yippie!
tbessi writes :”Hyper-inflation will not happen in US in your lifetime. No reserve currency in history has ever gone through hyper-inflation. They always go through severe deflation at best some stagflation. There is not one example in history otherwise.”
i think martin armstrong says something like this. no doubt he is correct strictly speaking. but what if the dollar loses its world reserve status? is this not happening right now in real time? every week it seems like there is another country setting up trade in their respective currencies. the dollar is fading in world trade.
besides, and i suppose i am addressing dc sunsets here, what prevents the fed from buying up debt, those ious. that’s what the printing press is for no? should we not have seen a massive deflationary scenario during the 2008 crash? the fed bought everything up, and they continue to do so. why would they stop this when the next round of defaults happens? a deflationary crash at this point would cripple the economy for many years, maybe decades. if the dollar were inflated away via hyperinflation, the results would be brutal but wouldn’t last that long.
if there is a way to avoid a deflationary collapse, even if it meant hyperinflation, surely those with means to do so, would do it. can you imagine the cry “do something!” as assets collapse in price? the preference will be to save the economy and sacrifice the currency not the other way around i would hope. in addition, during a deflationary collapse, wouldn’t this make it damn near impossible for ordinary people to pay off their mortgages? would the banks prefer to have a large percentage of borrowers default and thus have all that devalued property on their books?
i am not as knowledgeable as dc sunsets when it comes to these things, so what do i know. but i myself see hyperinflation in our future.
@kevin, if i were rich i’d buy paintings and farmland and precious gems and french wine. this is what the mega rich are doing presently. they are also hoarding cash and buying gold apparently. perhaps we can learn from them.
@Homer,
Agreed, the factory farm model is worrisome. I’m doing proof-of-concept level gardening right now, and am left with the notion that actually denting my food bill (or denting my need for food, perhaps) would require me to basically plant most of my 1/4 acre typical suburban lot.
Yikes!
I don’t know what the answer is. As I said, I figure that avoiding poverty is the most important thing I can do. For example, to get “organic” ground turkey (12 oz) for chili (I prefer turkey to beef in that application) is a whopping $7 each (and I use 3 of them in a large crock pot of chili.)
Getting food of the quality our parents grew up on is now several times more expensive than buying the bulk purchase, standard value stuff.
Worrisome indeed as my kids have kids and we question the quality of the food my daughter-in-laws are consuming while pregnant….
First, I know it is steak not stake, must have been a senior moment. haha
archie—Reserve currencies don’t hyper inflate because they transfer their inflation onto other countries they trade with. You’re right, a loss of reserve status would change things. It would mean that other countries no longer need to keep a store of dollars to facilitate trade and they would want to get rid of them and hold the new currency. These dollars would repatriate back to their source. The US would then create a two tier system of dollar value. Foreign dollars taking a back seat to domestic dollars or out right repudiation of foreign dollars.
What keeps the FED from buying up all those bonds? You can’t buy up all those dollars flooding back with more dollars, it doesn’t make sense. Cashing in the bonds would be redeemable in dollars which the FED could print, however, those newly printed dollars would come flooding back to the US, buying everything that’s not nailed down. That is where you get your hyper-inflation. Not good. These countries want tangibles not depreciating paper. Paper money’s value lies in what it can be traded for as it is not wealth in its own sake.
archie, you didn’t see a deflationary crash in 2008 because the FED created over 16 trillion dollars out of thin air. That put a damper on the deflationary fires. The FED and other central banks have bought over 29 trillion of stock, real-estate and commodities. This serves two purposes, one, to keep bubbles elevated giving the sense of prosperity and to get out of dollars into real tangibles (wealth).
They know damn well that dollars are not wealth but merely coupons to buy wealth.
A deflationary depression is you’re salvation as it was in the ’30s’ because the prices of good declined with the unemployment. Can you imagine high unemployment and rising prices (like now)?
It would be disastrous, no work and an inability to buy the good you needed to live.
Hyper inflationary depressions don’t last long but the after effects linger on much longer and are more disruptive to the economy as a whole. Hyper inflation effect everybody and threatens the nation survival. In a deflationary depression there is money in which to transact business. In a hyper inflation the money is worthless=no money to transact business.
I expect that mortgages would be indexed in a hyper inflation as the bank would not want to be stiffed. In a deflationary depression they just take your property back. win win In a deflationary depression you would have a better chance of keeping what]s yours and surviving.
Both hyper inflation and deflation eliminate debt. it’s just whose debt get wiped out.
I think I got this right.
Yearly Average wage in 1913 $800
Yearly Average wage in 2012 $44,000
55 times
Its all relative. Workers need the illusion of raises.
tbessi
Average wage is $25,000.
A lot of great comments and scenarios. One thing is for sure. All the other nations are doing bilateral agreements excluding the US dollar and exchanging their currencies. HR Bill 2847 and the hidden provision known as “FATCA” which stands for Foreign Account Tax Compliance Act makes it extremely difficult, for the average American to get some of his money out of US dollars, and into more stable currencies via foreign banks. The writing is on the wall. Anyone with any sense or basic understanding of economics can tell the US dollar is doomed. We are over 200 TRILLION dollars in debt and our government CAN NOT stop printing and borrowing money.
China, Russia and Central Banks are accumulating Gold. Common sense tells me we better be accumulating gold. I have found through Karatbars International I can exchange my fiat paper money into grams, 2.5 grams and 5 gram bars and get free gold while I’m doing it. One of my past agents shared it with me three months ago and I’m glad he did. I have four daughters and that s what concerns me. Good luck to everyone regardless how you prepare for the coming global economic challenges.
To be exact 2012 $44,321.67
http://www.ssa.gov/oact/cola/AWI.html
Of course that’s if you believe them.
They claimed gold price suppression back in 2000. Didn’t buy then either.
My buddy Ray had a gold coin, he still died of cancer, though.