Prepare for Hyperinflation

September 26, 2010

by Linda Brady Traynham

The trouble with fiat currency is that it starts out “worth” what the government that prints it sets as face value, and ends up with the value everyday citizens and the market place put on it. Over time all fiat currencies come to an end, and the average life span of a major one is thirty-seven years. In the ninety-seven years since the institution of the Federal Reserve U. S. currency has lost 95% of its value. The value of most objects diminishes with their availability, and Bernanke and Geithner have created $1.4 Trillion dollars that is now parked in banks who know better than to lend it. For two reasons: first, that they may not get their capital back at all, and if they do, it will be worth far less than it is now. Second, that unleashing all that junk paper cannot fail to lead to inflation so high that even the rigged rules for calculating the CPI won’t be able to disguise how little a hundred dollars is worth.

The current claim is that “there is no inflation,” countered by, “Well, there is, but it is only 2.1%.” Those are derived by two feats of accounting legerdemain. First, if you exclude food and energy from the computations, yes, things have been pretty flat. Trouble is, most of us spend large portions of our income on food and energy of assorted kinds, and we certainly know how much less our set incomes buy. Second, the figures are generated by playing with numbers in what one group calls “hedonics.” If the price of a new car goes up 10% but that is offset by claims of 10% better mileage or more safety, then there is held to have been no increase in cost. Huh? No, the product may (or may not) live up to its claims, but it still cost more.

We hear a lot about “inflating our way out of our debts,” which is sheer hogwash. Yes, in theory if I owe you $100 and Mr. Geithner begins dropping hundred dollar bills out of helicopters, all I have to do is pick one up and hand it to you, debt discharged. In real life it doesn’t work that way. The government creates “money” out of paper and ink. It has more “money.” You and I are dependent upon pensions or salaries and we aren’t getting any raises; consequently, we don’t have any more of those “cheaper dollars,” we have the same number that are worth less. Worse, the lessened value of those dollars mean that prices must rise to receive the same relative amount for a loaf of bread, a gallon of gas, or a cell phone. Zimbabwe is right over there.

We live in a world where the best-paying jobs are in government,banking and related fields. The average salary for government workers is twice that of a similar job in private industry, and none of the $45 Billion the top boys handed each other as bonuses ever got to our side of the street. This is the year of rapid expansion in government hiring and enormous raises for the top 10%, although we aren’t quite to Zimbabwe yet, where the soldiers and police got 300% raises…and then 700% raises…but give ‘em time.

All in all, I don’t see how we can avoid inflation even the government can’t deny – laughter; dear Charles and I stopped briefly to discuss feetball. For those of you who do not know the rules:

1. “Success” for the Dallas Cowboys is making the playoffs. They don’t have to win the Super Bowl. They don’t have to get to the semi-finals. All they have to do is get to the first round of the playoffs to feel they have done splendidly.
2. Success for Texas A&M is beating the University of Texas. So long as they do that, we’re satisfied. Rip-roaring success is beating TU and OU.
3. All Navy has to do to have a glorious season is beat Army. And vice versa. Beating Air Force as well is even better.

Now, back to inflation, which I expect to really start ramping up early next year as a result of higher and more taxes, more strangulation by regulation, and increased “immigration.” NOW is when we had better finish up our emergency preparations, and don’t forget plenty of trade goods: coffee, tea, alcohol, tobacco, .22 shells, sugar, and chocolate. After two generations of “if you want it, buy it,” Americans in general won’t show any more sense about handling their financial affairs when they are desperate than they have during the preceding thirty years. If you still have any of the expensive, unnecessary time and money wasters, get rid of them: more than one telephone, cable TV, drive-through and pick up food, movies, memberships to rent DVDs, gym memberships, and everything subsumed under “Mommy! ALL the other girls have…” To use a religious analogy, this is at least the first year of famine in the land of Egypt, and unless you played Joseph for your family nobody did.

Take about an hour and a half and browse the Videos on this site:

It takes a lot to get me to spend that much of my time glued to videos, but those folks have a lot to say. Their report on the broken water main “flood” in Boston is particularly impressive. When that much chaos and bafflement results from a simple lack of water…be very glad you have your Berkley or equivalent. There was water all over the place, but none of it was safe to drink. Such times are coming.

Be sure and check out TheMeshReport where I’m writing now. We’re experimenting and adjusting with a test audience of just 20,000 right now, but when it goes public the immediate distribution will be 170,000! Even if you aren’t interested in technical analysis of the stock market (and several of us are), you will find a good selection of economic news, and, of course, my featured section! These things just happen to me…

Linda Brady Traynham
for The Texas Ring