The Hyperinflation Hype: Why the U.S. Can Never Be Weimar
U.S. government finances might look Zimbabwe-esque, but a look back at some of history’s worst hyperinflation episodes show why goldbugs’ fears are completely unfounded now.
There is a specter haunting our economic debate — the specter of hyperinflation. A depressing number of arguments the past few months (and years) can be reduced to the following exchange: “We need more stimulus!” “If we keep spending, we’ll just end up like Greece!” “Greece is mostly in trouble because they can’t print their own money.” “Great, you want us to print money and end up like the Weimar Republic!”
Fears of hyperinflation in the United States are almost certainly unfounded. I don’t say that because I can see the future, but rather because we can all see the past. The countries that have suffered the pain of a worthless currency share very little with the United States. Here’s a financial disaster tour of recent history’s worst hyperinflation episodes — in descending order — that suggests we shouldn’t lose much sleep about the dollar becoming worthless.
HYPERINFLATION HISTORY 101
There was at least some kind of logic at work here. Even absent any printing, the large-scale destruction from the war meant that inflation was going to jump up. There were simply fewer goods for money to chase. If inflation was going to surge anyway, why not at least use it to repair the country’s bombed-out infrastructure? Short answer: because printing money to pay your bills quickly spirals out of control. In Hungary’s case, this happened to the tune of an annual inflation rate of 9.63×10^26 percent.
ZIMBABWE: 2007-09
Unlike most hyperinflations, Zimbabwe’s wasn’t the consequence of war or revolution. It was self-inflicted. In 2000, the Mugabe government broke up the mostly white-owned farms that formed the backbone of the nation’s agricultural sector into smaller ones. As a matter of social policy, trying to undo the enduring iniquities of the colonial era made sense. As a matter of economic policy, it was suicidal.
Foreign capital fled. The farms themselves were horrendously mismanaged. Years of drought didn’t help, either. Zimbabwe’s economy promptly collapsed, which, of course, worsened the government deficit. Mugabe turned to the printing presses. The world’s first $100 trillion bill was born.
WEIMAR GERMANY: 1922-23
The economic consequences of the Versailles Treaty were dreadful. The political consequences were worse. Even before you-know-who took power.
German reparations after World War I were both economically impossible and politically fantastical. The treaty’s unexpectedly savage terms shocked the Germans. They were determined to highlight just how absurd the treaty was by conspicuously failing to make their payments. And fail they did.
In 1923, the Allies decided to force payment at the end of a gun barrel. They occupied Germany’s industrial heartland, the Ruhr valley — setting the stage for Germany’s final descent into monetary madness. German workers responded to the occupation with a general strike. The economy ground to a halt. Just about the only people still working were the ones manning the printing presses.
The Weimar government had previously sent inflation to eye-popping levels by having its central bank foot its bills. But the combination of money-printing and the so-called “passive resistance” to the Ruhr occupation changed the nature of the inflation. It became virulent. As it turns out, printing money and pretending to have a real economy when you don’t actually have a real economy doesn’t work.
BOLIVIA: 1985-86
Too much foreign borrowing can be risky. Overseas lenders might abruptly decide that they’ve been irrationally exuberant. They’ll call in their loans overnight — leaving the borrower starved for cash. Economists call this a sudden stop. It’s what happened to Mexico, Thailand, and Korea in the 1990s. It’s what happened to Greece, Portugal, and Ireland after the Great Recession. And it’s what happened to Bolivia in the 1980s. Except instead of getting a bailout, Bolivia printed money. Lots of it.
Of course, we all know how this story ends. Much, much more money chasing much, much fewer goods sends prices into the stratosphere.
.
COULD IT HAPPEN HERE?
How are the United States’ historic budget deficits, money-printing and depressed economy any different from the country’s that have experienced hyper-inflation? The three-part answer is: (1) we don’t have any problems selling our debt; (2) we aren’t actually printing money; and (3) the United States is a highly productive economy that is nothing like bombed-out Budapest.
Let me unpack these one by one. Right now getting the markets to buy our debt isn’t the problem. Getting enough debt for the markets to buy is the problem. Investors are so crazy to load up on Treasuries that they’re actually paying us to borrow, taking inflation into account. But while we’re currently getting free money from investors, Hungary circa 1945 was getting no money. It was an investment pariah. If Hungary wanted to rebuild its economy, its only recourse was the printing press.
Second, the United States isn’t really printing money. At least not like post-war Hungary. Quantitative easing is usually described as “money-printing” but it’s not really. QE involves the Fed buying longer-term bonds from banks. It simply swaps one asset for another — in this case, cash for longer-term bonds. Unlike Hungary, the Fed isn’t directly paying the Treasury’s bills. This is a hugely important distinction.
Whatever money the Fed “prints” is stuck in the banks. That money isn’t inflationary as long as the banks don’t lend it out. What if the banks do start lending at a faster clip? The Fed can still effectively pay the banks not lend by, for example, raising the interest on excess reserves or require the banks to set aside more money. It would be shocking for the Fed not to pursue one of these options.
Third, the most important difference between us and post-war Hungary or Weimar is that our roads haven’t been razed to the ground and half the country isn’t striking. It’s very difficult to have hyperinflation when you still have a functioning economy. Almost all examples of hyperinflation result from huge economic shocks that devastate an economy so much that leaders think printing money is the only solution to growth. As bad as the Great Recession has been, our GDP is already back to and above its all-time pre-recession high. As bad as unemployment is, more than 80 percent of the labor force is working. In Zimbabwe, 80 percent of the population was unemployed.
Let’s conclude with a modest proposal for an economic corollary to Godwin’s Law. The first person to reference Weimar’s hyperinflation in an economic debate automatically loses.
LEARNING FROM THE PAST
The Cliff Notes version of how to avoid hyperinflation is not to print too much money. The more you print today, the more you’ll need to print tomorrow.
SOURCE: The Atlantic
THE END
I agree America is not Weimar Germany.
However, hyperinflation can still occur it just won’t be in the same ways as previous hyperinflation in other countries. Historically governments have triggered hyperinflationary events. The US economy being shut down and stimulus checks is helping to nudge it in the direction of hyperinflation. What they’re not accurately predicting is HOW it’ll happen in a digital economy that’s not printing physical money and is the world reserve currency.
My answer: the stock market.
Right now the put/call ratio is at a historic low and a bunch of tendies eating shit posters on Reddit nearly ran the hedge funds out of business. Wipe out the numerous hedge funds and the stock market will hyperinflate.
Analysists are picking up on Dr. Burry’s hyperinflation comparisons but they’re not connecting the dots with his follow up charts of the put/call ratio.
.
Wow, you learned a lot in the last 12 hours! Impressive, really.
Hyperinflation and depressions can always occur. What I meant is there’s no way to accurately predict when they’ll happen or what will trigger them. Each hyperinflation event is different which is why you really have to live through it to truly understand it.
Most academics who fear monger about hyperinflations and great depressions have never lived through one.
The above is just a prediction.
Dr. Burry posted about the Weimer Republic, the put/call ratio, and the Triffin dilemma; but the talking heads are only picking up on hyperinflation and not connecting the dots.
It was a nuanced comment and I got it. I’m right there with you.
It seems impossible for the US to undergo a hyperinflation. It also seems impossible for it not to.
Printing money has never worked. Ever. At least not for long. The US has a 50-year history of doing so unfettered (ie no gold standard). That is a LONG time, historically speaking. It seems we are in the very steep part of the curve on money printing…40% of all dollars ever printed were printed since Jan 1, 2020.
Now, of course, there are endless financial games to play and the Fed and all the major institutions are masters…but that doesn’t change the fact that genuine, organic growth ended nearly 50 years ago and no civilization in history has ever managed de-growth…collapse has always been the end game. The US doesn’t seem to be any different from a human nature standpoint. The hubris, corruption and greed of the elite class is on full display. All institutions are captured and bloated…ripe for collapse.
The scope of the thing is what I can’t wrap my head around. The math and history of hyperinflation is easy to understand, but it is primarily a psychological process. If people en masse lose confidence in systems and institutions they pull their capital out and sit on it (deflation) If people en masse lose confidence in the currency they spend it as fast as it comes in (hyperinflation). If, when and how that damn breaks no one can gauge. Economic models treat (necessarily for complexity issues) people as equal (to each other and through time) units of demand and consumption. But people are complex as individuals, plus they run in herds.
The whens and hows of our coming collapse are a complete mystery to me. That it is inevitable is clear. But hell, I could be wrong about that. Maybe its all unicorns and rainbows from here.
A black swan event such as an unexpected devaluation of a currency for whatever causal factor might produce a hyperinflationary scenario in the United States that would be catastrophic for those inhabiting the U.S. and damaging to the everyone else tied to the U.S. through the globalization scam of making each nation “inner dependent” upon one another. This is also why U.S. sanctions on Russia, China, Iran (The big boys of the BRICS) and trade war with China, and Russia’s alternative to SWIFT has insulated those countries and econonic allies from a rapid devaluation of thr U.S. currency.
Along with the Yuan being added to the IMF’s Special Drawing Rights SDRs which is a basket of currencies that include the U.S. FRNs aka Dollars, these steps have been clear to anyone paying attention.
What causes the rapid decline in the Dollar will be the Black Swan sold to the public for what is to come.
20 people have no fucken sense of playful humor. This place is turning into a butt-hurt snowflake Klown Show. You 20 jerkoffs can suck on diseased pigdik.
You ain’t kidding… over on the It’s Time To Build Our Own Economy thread ol’ Praise da Lawrd and pass da Ammo AOC has gone all soft and now is throwing crayons and is in want of a box of Kleenex.
RiNS
At this point he’s just attention seeking. The thread is dead but he’s still yammering on.
Yeah but I did find out one thing.
He hates being called a gaslighter.. it makes him frisky but in a bad way. He is probably still over there trying to get the last word in. Him being an old dog you’d think he’d know by now how he is getting played.
I already knew he didn’t know what he was getting into when I saw your Pepe avatar.
You speakum truth.
never mind the butane.
And you mention that… for attention?
And you interjected yourself in the conversation… for attention?
Why, did I call anyone attention-seeking?
You of all people should know about being an attention seeker. Gimme a sec…let me go to the Trusty Search and find the really good one!
Stephanie said,
Well, duh, haven’t you met Stucky? The local shit-stirrer extraordinaire?
From what I’ve seen, on this thread alone, you can handle your own.
Good shit!
Prick. LOL.
I’d sympathize but you had no problems with the massive downvotes I received from the butthurt retards on the previous thread.
The one where you went full retard? Poor baby.
I can stay retarded longer than anybody else. Bank on it.
Feel free to choose what you’re proud of.
Blue crayons taste the best.
m, just keepin’ it real. She’s something, lemme tell yas. Ain’t worth it!
But Llpoh as usual has her figured out.
Are you stalking me now? Dude, move on. This is some creepy shit.
Well, it looks like I’m gonna have to play match-maker here Steph.
On that dead thread, you mentioned above in this thread AOC revealed that he was carrying a cross for you. And seeing as he a follower of Christ is it no wonder he wants to be a martyr. He really wants you to like him. Who knew! I did suggest that calling you Clammy, now Clammorrhoid was not good form but what in the fuck do I know.
I’m just an ingrate.
RiNS, you really are an ingrate and a got dayum liar! I’d just as soon lop my own dick off at this point. I smoked the entire Peace Pipe myself. I tried my best and failed.
Appreciate the unkind words and all, but I’m steering faaaaar clear of that disaster. Perma Short List Ignore. I’ll still buy you a drink regardless…it was a valiant effort.
I suspect that at some point, she’ll call you an Incel…just sayin
Are you that poster from ZH always declaring Hail Satan? Her user id were two words both beginning with the letter S. Can’t recall her user id. Serious question btw
making a statement like that is saying somethin’ when it is referring to this joint.
I purposely did not fling shit in that thread. I was enjoying the show.
But, this morning I DID say that you were NOT against Christianity but against the church …. and that AoC misunderstood your stance. That ought to count for SOMETHING!
I didn’t downvote you. That ought to count for something.
You confuse me.
Just for clarification, how can anybody who states “I don’t believe in hell” be truly pro-Christianity?
To me that is a sign of freedom-uber-alles, a.k.a every limit such as morals is to be rejected.
“Capitalism without bankruptcy is like Christianity without hell.” — Frank Borman
Shoo-shoo… you’re boring me.
The unexpected compliment – likely a new form of your psychological warfare
I learned my lesson about butt hurting you last week.
Stucky, this is from that 45 year old book that I posted for FREE.
a small Hamburg businessman who ran a fish market, made the same point: ‘We used to say “The dollar is going up again”, while in reality the dollar remained stable but our mark was falling. But, you see, we could hardly say our mark was falling since in figures it was constantly going up -and so were the prices —and this was much more visible than the realisation that the value of our money was going down … It all seemed just madness,and it made the people mad.’ In other words, the causes of the mark’s depreciation, which certainly escaped Germany’s politicians and bankers as well, had little enough to do with how the people, individually or collectively, reacted to it. Most of them clung to the mark, the currency they knew and believed in, long after the eleventh hour had come round for the umpteenth time. Most had no choice; but all were encouraged or bemused by the Reichsbank’s creed of Mark gleich Mark —paper or gold, a mark is a mark is a mark. If prices went up, people demanded not a stable purchasing power for the marks they had, but more marks to buy what they needed. More marks were printed, and more, and more. Inflation, already in its fourth year when revolution overthrew the old regime, added a new, overwhelming uncertainty to the many uncertainties that attended the birth of the Weimar Republic.
Stucky
I just downvoted your statement so that you’ll have to edit it again…
Ok, that’s some funny shit right there.
Yeah, and I did edit it.
And I changed it to 20 just in case there are other smart asses out there who might follow your lead.
That’s what I call prepping.
You should start a prepper website and stock it with Kleenex. Lots of Kleenex.
You forgot the Vaseline
who is buying the debt? who is buying increasingly bigger parts of the debt?
@Anon
Ummm….i think the FED is buying up everything nobody wants to buy to keep the market mania going, but
the real scary question is who is liable for liquidation to pay off the debt? If you guessed every American Citizen you earned the gold star…oops maybe a different color might have been less controversial….
When this global game of Race to the Bottom accelerates forward, and the agreed upon time to dump the Dollar occurs, we will go from Closet-Banana Republic to full blown Mad Max style societal breakdown.
In the global game of hot potato, the potatoes being “worthless dollars” , U.S. citizens will be stuck holding them all at the end, thus the business term “liquidation”.
Yes, it is the FED buying our toxic Treasury Notes that nobody else wants.. It’s called monetizing the debt and it can only end badly. Because we are still the world’s reserve currency as a result of the Bretton Woods Agreement (here in NH) the world is awash in dollars.. Once the rest of the world realizes that they are depreciating faster than their own currencies, all of those dollars will come rushing home again … and voila; there will be so many dollars sloshing around that you WILL see wheelbarrows full of dollars to buy a loaf of bread – until they wind up blowing around in the street because they will be absolutely worthless.
Warning: Not On Topic.
Stephanie? Are you following the Jodi Shaw controversy?
I read the headline but haven’t been following the story. I did find it curious she was faculty at Smith College which Betty Friedan and Gloria Steinem’s alma mater.
This is actually quite interesting. Watching someone actually take the red pill is akin to watching someone tripping on acid. She’s convinced that there is a reality that simply does not exist outside of her own head-space.
No one is interested in having a conversation with her about this topic. Inclusion, equity, etc. are jargon, not reality. Some of the things she is addressing are things she should have long been aware of, especially in her position and with her qualifications, yet she is talking about it as if it’s all brand new. The woke lingo is hard to get around for a normie- the words don’t mean what the dictionary says they mean, they mean what they want them to mean- so a lot of it is just poopy-talk. Empty, shallow, vapid, meaningless.
I’m glad she got a taste of what she’s been dishing out for her entire adult life, that part is extremely satisfying, but I don’t think she’s got the frame to really appreciate what this has done for her. She still thinks she can language her way through this. Note how she keeps using their words progress, inclusive, diversity as if they will help bolster her position when they were used to get rid of anyone who ever could have made those kinds of things happen. And the fact that she thinks that this just started happening recently is indicative of how out of touch she is with the root problem.
Whatever. I hope she takes up a craft or goes back to the land because there is zero chance of her ever getting another job in academia.
Hasn’t this society declared that objective truth, evidence, and empiricism are simply manifestations of a certain disreputable demographic ? And that your truth isn’t the ‘truth’ of others of a different demographic?
1+1= ??
The article is nine years old. How many TRILLIONS of stimulus were being printed back then? How many businesses had been wiped out due to a ‘pandemic’ that left millions out of work?
Being sanguine about how a depression/hyperinflation can’t happen here is beyond naive and ultimately dangerous.
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”
“What brought it on?”
“Friends,” said Mike. “I had a lot of friends. False friends. Then I had creditors, too. Probably had more creditors than anybody in England.”
‘The Sun Also Rises’ E. Hemingway
Voltaire: “Paper money always returns to it’s intrinsic value.”
I have been alive long enough to see the decrease in the value of the dollar. I need not go back 15 years to another country (Zimbabwe). I can see the drop in the value of the US dollar since 2000. I have lost confidence. I care about no one else’s confidence. I use them as a means of (short term) exchange, not as a store of value. That is how confidence is lost, slowly at first, then all of the sudden. YMMV.
Article was from 2012.
Let’s review it again in 2030…
QE isn’t money printing? It’s just exchanging cash for bonds? Where the hell does the cash come from? It’s created out of nothing.
QE is a giant con game based on the illusion that unlimited wealth is as simple as pressing some buttons on a computer. The Fed buys government debt with counterfeited money. Whether the Fed or the mafia does it, counterfeiting ruins the currency. In fact, that’s a key intention of the policy–devalue the currency to make our manufacturers more competitive internationally; every government’s doing this and trying to ruin their currency the fastest. We may not get Weimar hyperinflation, but we’ll be very lucky if the dollar doesn’t lose most of its remaining value over the next few years.
The Fed’s balance sheet is increasing, meaning that they are gaining assets that they’ve had to purchase. Since the Fed doesn’t have a 9-5 job and pay taxes, they print money by entering zero’s on a computer. Lots of zeros.
Much of the money that the Feds have created has found its way into the stock market. You don’t think that Joe Sixpack or even Jenny Perrier has the kind of money to invest in stocks when they can’t pay rent and are having to decide between paying water and power or buying food, do you? All the folks on unemployment and SNAP aren’t investing either. All that Dow growth is from the Fed through the banks to Wall Street (borrow at zero interest), and if you’ve been listening to the background noise, the definition of a sound economy is a rising stock market. This is manipulation, not growth.
Oct 28, 1929, no one thought the DOW was in trouble.
No one thought that ‘everyone gets a home’ and NINJA loans would implode the housing market in 2007.
Very easy to see in hindsight.
Now we have QE, derivatives, a looming explosion in small business closings and an administration that thinks that BART projects need pandemic relief, that Pakistan needs money to improve women’s rights, but unemployed people can wait. There are any number of eggs out there; one of them may well produce a black swan.
I don’t remember where I read it recently, but in discussing the Weimar period, the author noted that by the time hyperinflation (based on its specific definition) finally kicked in, the Mark had already lost 99% of its purchasing power anyway, so the hyperinflation truly only destroyed the last 1%. Since 1913 the dollar has already lost 99% of its purchasing power and truly only the wealth and productivity of the nation, combined with the FRN’s reserve currency status, is giving us anything for our money. With the rate of inflation today, and the rapid erosion of the purchasing power, it will indeed make little difference if the situation reaches the definition of hyperinflation as the results will all still be the same.
Inflation = Velocity of money.
Hyperinflation = Let me wipe my ass with those dollars.
Look for that soon time when the Petrod0llar system and the buck as the world’s reserve currency ceases to be (both at the very same time, maybe.) Then whether it is hyperinflation or massive deflation, stagflation or some other iteration of completely fucked up economic/financial environment happens, most everyone, especially ‘Merkins, will be looking at the $10K box of spaghetti and asking what happened.
@Auntie K,
Damn! I posted my comments earlier then scrolled down to read everyone else’s and saw yours!
Pretty similar comments. I agree.
Well we’ve already got the jews and the degeneracy so… https://www.darkmoon.me/2013/the-sexual-decadence-of-weimar-germany/
https://www.memri.org/reports/al-jazeeras-midan-voice-internet-channel-jews-created-and-control-porn-industry-order
https://www.gold-eagle.com/article/inflation-super-cycle-here
“Matthew O’Brien is a former senior associate editor at The Atlantic.”
*mic drop
O’Brien graduated from Harvard in 2008 with a degree in history and a secondary concentration in government. In college he co-founded an online gaming startup and spent time in the tech incubator world of Silicon Valley before heading back east for journalism.
So what you’re sayin’ is he ain’t a particle physicist.
He’s a paradigmatic Progtard, therefore an adversary, in any case.
Probably correct but incomplete. Notice how Japan prints and has deflation? Once debt rises above 80% og GDP the multiplier no longer works. With fiat currencies all money is loaned into existance. When the Fed can no longer contral the rate and / or starts to withdraw currency, all hell breaks loose. Current strategy is print till it breaks. Plan B is undetermined.
Doc,
“Current strategy is print till it breaks. Plan B is undetermined”.
Do you think Plan B is a slow motion controlled demolotion of the Economy…while pushing the jab, cancle culture, Chemtrails, EO’s, etc. etc. etc., then spring the Great Reset/UBI sometime down the road when it looks like it will go over?
Car salesmen call it: THE GRIND.
TLPTB (L=Luciferian) are patient planners.
One aspect not addressed is the public lack of confidence in the currency. If the buying power of money is shrinking, then people will be inclined to exchange it for tangible goods. This will increase the velocity of money in circulation. This negative feedback further increases inflation, further decreases buying power, causing even more people to exchange their money faster, etc. etc. Yes…it can happen here…especially if foreign treasury/dollar holders start to lose confidence.
Not to worry! The government computed official inflation rate will always be 1.8-2.0%
I feel better after finding out that we can’t have hyper-inflation. We may even have deflation like Japan. I hope that Joe and Congress keep printing that free money. Damn we are all going to be rich. The only thing that could be better would be for De Tyrone and de Boyz to move next door.
It has to be or they could never afford the COLAs for SS, etc.
An actually intelligent article about hyperinflation.
It only leaves out why the Versailles treaty was so awful: because the United State broke all precedent by insisting its war loans to its allies be repaid in full.
That’s why broke the back of the British Commonwealth system and forced the Brits and French to stick it to Germany.
I thought so also. BUT …
— this is the 54th comment
— 34 of them have NOTHING to do with the article!!
That’s pretty funny. Only on TBP!
who is buyin the debt is a question the author missed or dont want the answer to..
For the most part, the Fed is buying the debt.
It’s so simple a 5th grader can understand: If you Double the Money, you Double the Prices (in 2020 the money doubled).
When I started reading the article I went back looking for the author’s byline and there was none. The only articles without author’s bylines in TBP are by the Admin. Oh man, did Admin start a coke habit, I thought?
But then I finished and saw that the article was from the Atlantic, one of the preeminent economic journals today. I’m now much relieved.
Correct. 100 years later and in a different hemisphere.
2021 is also an unprecedented year, just like every year.
America = Rome
We are in late stages of economic collapse but the money masters manipulate with their magical, mystical perception management strategies the Public consciousness to make it seem that everything is okay and that all this is “progress”.
Progress sure, but to what end?
Whether hyperinflation, deflation, stagflation or a combination of hyperinflationary and deflationary forces is irrelevant, the ENDS will be more pain and suffering to the average American through the intentional decrease in standard of living and decrease in meaningful work ooportunities.
Wow! Thanks, I was worried, but that was convincing.
Except that #1, our debt is being bought today, but less than in past and that could change quickly.
#2 the fed buys debt from banks that was issued days before bt the treasury. So yes we are printing money.
Third, we are lucky not to have had a devastating economic shock. You know, like shuttering the largest economy for 12 months.
The vast majority of comments on this thread are, well, I do not know what they are, but they are not educational, not on topic, and any time spent reading them is seconds of wasted time I will never, ever get back.
Re the idea that it cannot happen in the US – bullfuckingshit. The debt being created and the money being printed without backing of, you know, anything of actual value being created, can only end badly. And add to it shithead ideas like writing off $50,000 per each student loan, and the US is no longer going down the toilet, but is down the toilet, through the sewer pipe, and into the cesspool.
@llpoh
Wouldn’t the wiping out of $50,000 in student debt be a deflationary act?
No, because the holder of said debt will still get paid.
Only it will get paid with more, instantly, freshly printed fiat; instead of the debtor actually working to pay it off.
So that much more added to the already enormous national debt.
Freeing up trillions in discretionary spending while wiping trillions of dollars of assets off the balance sheet will be deflationary? Riiiiight. It is effectively printing money – trillions in fact – to pay off debt. And you think that is deflationary? Come on, PP, use your noodle.
If you had a business, and a customer owed you money and the govt stepped in and printed money, gave it to you, and said the customer no longer has to pay, because, here, we are paying you with newly minted fiat, so the customer does not actually have to pay anything for the goods and services received, you think that would actually drive prices down? Really?
Lollph,
Would the government come in and print more money to pay off the debt?
When they could just right it off like business do all the time. Fannie Mae and Freddie Mac got taken over by the government years ago….
A “Right off” would extinguish the debt , no need to print more money to pay it off , thus deflationary…Silly ol fart.
Now, would this piss off the rest of the planet, probably, maybe even encourage people to lose further faith and credibility in the U.S. gov’t and economy.
Right offs affect balance sheets, and income. Debt owed is an asset on the balance sheet. When you write a debt off, net assets fall. As far as tax implications, write offs are often treated as INCOME to the beneficiary. It is income to the debtor, and a loss of assets to the creditor.
So, what does added income do (ie money created out of thin air) when no value has been created?
This will add income to the nation in the trillions while simultaneously reducing its assets. And what do you think will be the result of that? Hmm. I wonder.
By the way, it is entirely possible based on my knowledge of tax law that the right offs could be considered taxable income to the students – they would be receiving a tangible asset/income. Now wouldn’t that be something – they go from owing $50k in loans payable over years to owing say $10k in tax payable today.
What the fuck is a “right offs”?
“Yeah, Bill, after I watched me some porn last night I had to jerk right off!”
This will explain everything.
From the book When money dies.
His warnings went as much to the Allies as to the Germans. The German budget barely balanced as it was, leaving nothing for war indemnities. To raise enough money to meet the level of reparations discussed in June would require almost twice the revenue which the latest tax proposals were expected to produce. ‘It is altogether impossible to conceive that twice the new rate of taxation could be imposed,’ wrote Lord D’Abernon, ‘without producing a revolution.’ Inflation provided the answer to the equation. If a budget did not balance, the deficit had to be made good somehow. In October 1920 Germany’s national debt stood at 287,800 million marks. At the old 1914 parities this sum equalled £14,400 million; but at the new it represented only £1,200 million.* (Great Britain’s national debt amounted then to £8,075 million.) A year before Germany’s great inflation is generally thought to have started, Germany’s national debt had all but been wiped out.
Good one ! Leave it to Seinfeld to explain it
Sticky,
You watch porn then jack right off to sleep?
WTF?! Most people usually jack off as they watch porn. And who the fuck is Bill? Let me guess, he likes watching you flog your dolphin eh?
Lloph,
Gotcha. Balance sheets and income within a system which every one of those dollars we used is attached with an IOU to the central bank . The poker chips we use as real money are debt instruments. So who’s balance sheet has them as an asset and who’s a liability?!
If student loan losses were absorbed or bought up, paid off, like the FED has done buying up the shit no one else wants to buy on the market, regardless of whether it would be a decrease in our gov’t’ s assets (like holding onto junk bonds) and an increase in individuals income,
who fucking cares!
The end result as you mention will be the same, hyperinflation. The trap was set along time ago, now we get to go along for the ride.
So “right offs” of student debt would only accelerate this process you’re saying?
What about debt repudiation?
Llpoh….agreed, anyone who honestly believes the nonsense about it not happening here has their head firmly planted up their ass. I remember the Savings and Loan crisis as well as 2007 and, faintly, I remember the 70’s and fuel crisis coupled with the economic crisis. Of course it can happen here and…..if Michael Burry is correct then we’re overdue for hyperinflation. Since we’re living Obama’s third term, expect the dollar to go sideways….
You are not just a pretty face.
All that and a bag of rattlesnakes.
My girl and llpoh,
I’m in agreement that the trends point to a hyperinflationary debacle, see my comment from near top of the thread. I was just pointing out my understanding of deflation with respect to cancelling student loan debt
Biden has already reneged on student loan bailouts….they’re too lucrative.
Shit…why is it always people who have no understanding of what actually causes hyperinflation that are chiming in…?
Hyperinflation is not the mass printing of money alone. It works on the concept of relative demand to total printing. This means that if significantly more dollars are printed than demanded then you begin to see price increases. Complexities arise due to what causes demand for the currency.
In Weimar, short-n-sweet, the country had no assets to sell abroad and yet payments were demanded as reparations. With no industry to tax and no commodities to trade there was no reason to take the currency. The only thing the govt could do was print money. But no one wanted the money so it got dumped back into the country. As more currency was printed, the ratio of currency to goods within the country skyrocketed…
Hyperinflation is most easily understood as a ratio of total money in an economy to total goods, relatively speaking… A similar situation could happen if… The US has no goods to trade, loses control of the force required to use the dollar abroad, us dollars get dumped into China as an alternative investment. If the dollars overseas begin to rush back into the US because the world no longer views an investment ripe environment in the US, then yes hyperinflation is possible.
Then why did the US have a serious bout of inflation circa 1978-1982? So much so that interest rates for mortgages reached into the high teens.
Nice little book here:
This Time Is Different: Eight Centuries of Financial Folly by Carmen Reinhart and Kenneth Rogoff
Famous last words “It can’t happen here”.
Until it does.
Your source is interesting. I don’t know many people who consider the Atlantic a legit news source. Still, the writer probably knows a lot more about economics than I do. This article is also nearly 10 years old, so it might be OBE -overtaken by events.
“Unlike most hyperinflations, Zimbabwe’s wasn’t the consequence of war or revolution. It was self-inflicted. In 2000, the Mugabe government broke up the mostly white-owned farms that formed the backbone of the nation’s agricultural sector into smaller ones. As a matter of social policy, trying to undo the enduring iniquities of the colonial era made sense. As a matter of economic policy, it was suicidal.”
Self-inflicted sounds kind of like where we are. The govt and academia right now are attacking whites and whiteness, too. The Usurper is attempting to get farmers not to grow food, too.
“Too much foreign borrowing can be risky. Overseas lenders might abruptly decide that they’ve been irrationally exuberant. They’ll call in their loans overnight — leaving the borrower starved for cash. “
Hmmm. Not the same thing, but I’m reminded of late 2019-early 2020’s quiet govt intervention to pump tons of money into the economy to shore up the overnight repo rates.
“Then, things changed. Bolivia’s slowing exports scared away its lenders. Suddenly, Bolivia had to start paying back its mountain of debt.Bolivia couldn’t afford to pay back its foreign creditors and spend on its own people. “
Interestingly, we have high debt, too, and our exports are flagging, too, thanks to Chinese Flu.
“Inflation spiked to 11,750 percent, on an annual basis. More currency chasing the same amount of stuff makes the money worth less. “
This seems to be happening now. Maybe not to disaster levels yet, but definitely seems to be happening. Appliances and useful items are drying up at precisely the time when retailers usually have a hard time selling stuff.
“The economic collapse begets a collapse in tax revenues. Perversely, this makes the government look like a terrible credit risk. Cut off from international lenders, the government is left with a gaping hole in its budget, and no way to fill it.”
I’m curious to see how the Chinese Flu will do to this year’s tax revenues. It’s like the “For want of a nail….” poem. Start with all the businesses who failed this year and the remaining ones who can’t make rent. Go from there to the land lords who can’t pay their mortgages. Take that to banks and foreclosures. And from that to the various investors sitting on bad loans. It’s like a repeat of 2008.
“The three-part answer is: (1) we don’t have any problems selling our debt; (2) we aren’t actually printing money; and (3) the United States is a highly productive economy that is nothing like bombed-out Budapest.”
I thought we had trouble selling our debt under Barry. Wasn’t it like the first time the Fed ever had an auction and nobody bought? Just because we don’t print the cash doesn’t mean it isn’t being created. https://netcoins.ca/blog/35-of-all-u-s-dollars-in-existence-have-been-printed-last-in-10-months/ According to the Fed itself, 35% of all US dollars were miracled into existence in the last year. Money machine go brrr.
Finally, we might not have lost a war, but our infrastructure is falling apart nation-wide.
Feel free to watch this brief Vice episode about it. America’s dying bridges, crumbling highways, failing locks, etc all create the same conditions as Budapest’s war damage.
“Whatever money the Fed “prints” is stuck in the banks. That money isn’t inflationary as long as the banks don’t lend it out.”
So in 2012, they had only been doing QE for a few years. Debt was around 12-14 Trillion. And he hadn’t seen the Chinese Flu insanity shut down the economy. And he hadn’t seen the debt balloon up to 27 Trillion. And we hadn’t seen the government straight up handing everyone free money. So I wonder how he would square the current situation with his 2012 analysis?
“Third, the most important difference between us and post-war Hungary or Wiemar is that our roads haven’t been razed to the ground and half the country isn’t striking. It’s very difficult to have hyperinflation when you still have a functioning economy. Almost all examples of hyperinflation result from huge economic shocks that devastate an economy so much that leaders think printing money is the only solution to growth.”
Like I said, our infrastructure IS in trouble. And we don’t have the functioning economy we used to. And they’re miracling up a metric shitton of cash to shore up the system. That money is not sitting in banks.
Maybe we won’t be Wiemar Germany. Or Zim. Or Bolivia. But there’s still the example of the USSR, Post-Soviet Ukraine, 90s Turkey, 2001 Argentina, post-Tito Yugoslavia, and many others to draw on. Ferfal’s stories about surviving the economic collapse of Argentina seem very apropos to where we’ll be once it hits.
Fine. Now where the fuck are our checks for $20,000 each?
Exactly like Weimar Germany? Probably not. But that doesn’t mean the
dollar….AND our whole economy….can’t totally collapse. Sooner or later
the rest of the world is going to decide they are tired of losing wealth
because greedy assclowns in power keep inflating the worlds benchmark
currency…the dollar. They will choose a NEW benchmark currency…..
probably the Chinese Yuan Renminbi. When that happens the house of cards
that is our economy comes crashing down.
Long story short, it will, but it’s not just the increase in money.
Apparently Stucky does not believe Greg Plast’s contention that he has seen internal memos from Wall Street declaring collection on the [$27 trillion] National Debt is the ‘ultimate goal.’ The financial structure is already in place.
The FRBNY has exclusive authority to redeem maturing Treasury securities. Ref. 31 CFR 375.3. Collection of maturing securities is primarily handled by the Primary Dealers and presented to FRBNY. The thought that the PD’s have
W no ownership of a corporate Federal Reserve Board of Governors [which has regulatory and administrative control of the 12 FR bank franchisees] is purely intentional. The concept that Treasury Department manages auctions of Treasury securities is a deliberate illusion.
Hyperinflation, already introduced as stimulus spending to save the economy from a bogus covid crisis, which will drive the nation into bankruptcy. Treasury security values will crash. PD’s will buy T-securities for pennies and demand face value redemption from their controlled FRBNY. This is what Michael Hudson has been expounding in Wall Street arranged lectures for decades—but he mentions only the IMF and WB—-never the Federal Reserve or Wall Street financiers. Hudson got his start handling lucrative bankrupt international loans for Citi Bank.
Ref. https://www.spartareport.com/2020/07/the-federal-reserve-for-dummies/. FEDERAL RESERVE for DUMMIES.
Or is putting too much reality into your humor ?
Whatever, it will undoubtedly be quickly deleted to prevent de-platform and loss of advertising revenue.