HYPERINFLATION SPECIAL REPORT

[Agamemnon]

HYPERINFLATION SPECIAL REPORT



Issue Number 41

April 8, 2008

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Inflationary Recession Is in Place

Banking Solvency Crisis Has Opened First Phase of Monetary Inflation

Hyperinflationary Depression Remains Likely As Early As 2010

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Overview

The U.S. economy is in an intensifying inflationary recession that eventually will evolve into a hyperinflationary great depression. Hyperinflation could be experienced as early as 2010, if not before, and likely no more than a decade down the road. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, and gross mismanagement.

The U.S. has no way of avoiding a financial Armageddon. Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to cover their obligations. The alternative would be for the U.S. to renege on its existing debt and obligations, a solution for modern sovereign states rarely seen outside of governments overthrown in revolution, and a solution with no happier ending than simply printing the needed money. With the creation of massive amounts of new fiat (not backed by gold) dollars will come the eventual complete collapse of the value of the U.S. dollar and related dollar-denominated paper assets.

What lies ahead will be extremely difficult and unhappy times for many. Ralph T. Foster, in his "Fiat Paper Money" (see recommended further reading at the end of this issue), closes his book’s preface with a particularly poignant quote from a 1993 interview of Friedrich Kessler, a law professor at Harvard and University of California Berkeley, who experienced the Weimar Republic hyperinflation:

"It was horrible. Horrible! Like lightning it struck. No one was prepared. You cannot imagine the rapidity with which the whole thing happened. The shelves in the grocery stores were empty. You could buy nothing with your paper money."

This Special Report updates and expands upon the three-part Hyperinflation Series that began with the December 2006 SGS Newsletter, exploring: (1) the causes and background of the evolving hyperinflation and great depression; (2) why circumstances will differ from the deflationary Great Depression of the 1930s; (3) implications for politics and the financial markets; (4) considerations for individuals and businesses.

The broad outlook has not changed during the last year. More generally, though, developments in the economy and the financial markets have been in line with projections and have tended to confirm the unfolding disaster. Specifically, the current inflationary recession has gained much broader recognition, while the still-unfolding banking solvency crisis has confirmed the Fed’s and the U.S. government’s willingness to spend whatever money they have to create in order to keep the financial system from imploding. While the dollar has taken a heavy hit — down roughly 20% against key currencies from last year — selling of the U.S. currency still has been far short of the outright dollar dumping that eventually will lead to flight to safety outside of the U.S. dollar. That event is important to the shorter-term timing of the pending hyperinflation.

Regular readers may recognize text from last year’s Series, as well as material from various SGS newsletters, but such is the nature of revisions to prior material. Points that may be repeated from earlier newsletters are done so in sequence to help build the arguments explaining the unfolding crisis. Great thanks are extended to the numerous subscribers who offered ideas, questions and materials that have been incorporated in this report.




GO HERE ---> http://www.shadowstats.com/article/292

[Carl]

Generating digits representing debt on a computer screen is not the same as "printing money". There is absolutely no historical precedence that can be used to determine the outcome of inflating digits on a computer screen, even if those digits are called money and are assigned a value, especially when those digits are being created well over our economic heads.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p>
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The only way new digits enters our system is if we borrow them into existence and we need credit for that. How do you hyperinflate credit or a person's ability to borrow? And haven't we been there, done that already and isn't that the reason we're where we're at today?

The irony of all this hyperinflation talk is that what the Fed and Treasury are trying to save us from is the inflationary excesses of our financial system that spun a $10 Trillion housing boom into a $1,500 Trillion derivatives mess, all within a span of about 6 years. Say, wouldn't that qualify as Hyperinflation?



.

[Hypertiger]

The morons don't know how the economic system operates.

ARTICLE 235 The Versailles Treaty June 28, 1919

In order to enable the Allied and Associated Powers to proceed at once to the restoration of their industrial and economic life, pending the full determination of their claims, Germany shall pay in such installments and in such manner (whether in gold, commodities, ships, securities or otherwise) as the Reparation Commission may fix, during 1919, 1920 and the first four months Of 1921 , the equivalent of 20,000,000,000 gold marks."

2790 Gold marks equalled 2.2 Lb of pure gold.

15,770,609 Lb of Gold or 7885 short tons of gold or 229,935,483 oz of Gold...

Quite a bit of GOLD...Especially when the total above ground stock around that time was 50,000 tons with around 25,000 tons monetary Gold world wide...

And Germany certainly did not have 7885 short tons of gold in 1919 1920 or 1921...

What to do then?

The British (Bank of England) basically told Germany to print marks to buy GOLD...From? The winning powers...

The Looting of Germany carry trade...Germany printed marks and then bought Gold then the amount of GOLD they owed dropped and the winning Powers still had GOLD and loads of marks...what to do with all those marks? send them home to roost buying raw materials and finished goods...the excess flowed into German issued bonds...

The marks flooded into the German commercial banking system allowing it to inflate the debt supply in Germany...The more GOLD Germany bought the more marks they had to print...Which caused the purchasing power to drop...It was quickly losing it's value...

But outside of Germany all the currencies were quickly gaining value...Basically German exports were getting constantly cheaper and cheaper...A free give away of German raw material and finished products basically...

This fueled the Roaring 20's until the mark was losing value so fast that it basically caused prices inside Germay to hyperinflate until it was impossible to account...The looting of Germany carry trade collpased in 1924 after about 14 months of Hyperinflation of prices or a hyperdeflation of the value of the mark...

The Hyperdeflationary shockwave spread out into the Global system...It hit in the USA late 1926 causing a collapse of the booming real estate sector which rapidly sold off and poured into the stock markets causing a massive mainia that reached maximum potential in late 1929...the USA and the rest of the world then collapsed from 1929-1933...

The Geneva conventions were held to work out the rules of the 1933-1945 bankruptcy reorganization of the world following the 1929-1933 collapse of the crown system...WW2 was the climax of the reorganization.

In 1944 Bretton Woods made the US Dollar the Global trade medium of exchange taking over from the British pound sterling and by default the US consumer became the demand of the global system taking over from the British.

The Bretton Woods global trade system has now inflated to maximum potential and the roaring 6 decades are coming to an end.

This not Germany 1919...

from q1 2008 until now the growth rate of the US money supply is 1 trillion behind where it needs to be...The drying up of the money supply is why the banks and mortgage industry are deflating...

The US Government has not issued money outside of the commercial banking system since the Greenbacks of the civil war 150 years ago.

The current so called bailout is not even close to the required amount needed to catch up with just the required amount of inflation the system needs to significantly postpone the implosion.

they are saying approval by friday and beginings of implementation 10 days from now...

In that time the system will fall another 50 billion dollars of inflation behind.

[Hypertiger]

The banks basically suck the consumers future income to the present...

You can either save up 100 dollars a month for 1000 months or request a commercial bank to suck $100,000 of your income from the future forward...

Not really but that's one way to imagine the accounting trick.

Now onto the banks ability to lend...It exists right now...Just unfortunately consumers are maxed out and can no longer request the required amount of monetary inflation needed to sustain the continued inflation of the system.

It doesn't matter...this bailout is not designed to save the banking system...It's just to postpone the implosion for a few more months...like until elections are over...

All the banks are bankrupt right now...toast...Just the massive pile of braindead drones watching the soap opera have not got to that episode yet.

[mouse]

take all your money out. cease support

[Carl]

I WOULD THINK PART OF THE PLAN IS TO TAKE THE BAD PAPER OFF THE HANDS OF THE BANKS THEREBY IMPROVING THEIR BALANCE SHEETS AND INCREASING THEIR ABILITY TO LEND. FURTHER I WOULD THINK IT WOULD BE INFLATIONARY IN THE SENSE THAT THEY'RE CREATING DIGITS THAT REPRESENT CREDITS THAT CAN BE SPENT OR LOANED OUT. IT SEEMS THAT THE SOMEONE THAT IS "BORROWING IT INTO EXISTANCE" IS THE BANKS THEMSELVES.

Compartmentalization: isolation or splitting off of part of the personality or mind with lack of communication and consistency between the parts.

..................................

Creating digits to save the top does little good when the reason the top is in trouble is due to the economy's inability to generate enough digits to service its existing debt, which means the top can't service their existing debt. And the longer the economy goes without the digits it needs to service its debt the further behind it will get, which means that the top will need ever increasing amounts of digits just to survive.

The top's ability to survive is dependant upon our economy's ability to survive and our economy's ability to survive is dependant upon its ability to generate and inflate asset prices.

The economy has failed in its ability to generate and inflate asset prices. The economy has failed so badly that asset prices are declining and with that decline goes the economy's ability to generate new assets to inflate along with its ability to service its existing debt. Which brings us back to the reason why the top is failing.

And the Fed and Treasury's solution to save the top is to pile even more new debt upon the economy's already growing inability to service its existing debt in the hopes that the top will regain the ability to generate new loans into an economy that is already saturated with its own bad debt and now being saddled with the obligation to pay for the top's bad debt so they will be free to loan again.

................................................

Compartmentalization: isolation or splitting off of part of the personality or mind with lack of communication and consistency between the parts.




.

[Spectrism]

Compartmentalization: isolation or splitting off of part of the personality or mind with lack of communication and consistency between the parts.

..................................

Creating digits to save the top does little good when the reason the top is in trouble is due to the economy's inability to generate enough digits to service its existing debt, which means the top can't service their existing debt. And the longer the economy goes without the digits it needs to service its debt the further behind it will get, which means that the top will need ever increasing amounts of digits just to survive.

The top's ability to survive is dependant upon our economy's ability to survive and our economy's ability to survive is dependant upon its ability to generate and inflate asset prices.

The economy has failed in its ability to generate and inflate asset prices. The economy has failed so badly that asset prices are declining and with that decline goes the economy's ability to generate new assets to inflate along with its ability to service its existing debt. Which brings us back to the reason why the top is failing.

And the Fed and Treasury's solution to save the top is to pile even more new debt upon the economy's already growing inability to service its existing debt in the hopes that the top will regain the ability to generate new loans into an economy that is already saturated with its own bad debt and now being saddled with the obligation to pay for the top's bad debt so they will be free to loan again.

.

Well... when you put it that way Carl.... it is rather humorous, isn't it?

I guess it is kind of like saying: We need to burn our existing money in hopes that we can create more.

[Ag Age]

The banks basically suck the consumers future income to the present...

You can either save up 100 dollars a month for 1000 months or request a commercial bank to suck $100,000 of your income from the future forward...

Not really but that's one way to imagine the accounting trick.

Now onto the banks ability to lend...It exists right now...Just unfortunately consumers are maxed out and can no longer request the required amount of monetary inflation needed to sustain the continued inflation of the system.

It doesn't matter...this bailout is not designed to save the banking system...It's just to postpone the implosion for a few more months...like until elections are over...

All the banks are bankrupt right now...toast...Just the massive pile of braindead drones watching the soap opera have not got to that episode yet.

So what is the outcome of the implosion? Massive deflation, hyperinflation, or something else??

[Sparky]

...
How do you hyperinflate credit or a person's ability to borrow? And haven't we been there, done that already and isn't that the reason we're where we're at today?
...
You take over all the bad debt, cleaning if off the banks' books, and then restart the process. That's what's going on right now.

[Green Mountain Boy]

You take over all the bad debt, cleaning if off the banks' books, and then restart the process. That's what's going on right now.

How do you restart the process if consumers are spent? Put a gun to peoples' heads and tell them to take out that car loan or mortgage their house?

[Merc]

So what is the outcome of the implosion? Massive deflation, hyperinflation, or something else??

Exponential Growth turns into Exponential Decay.

[RichG]

How do you restart the process if consumers are spent? Put a gun to peoples' heads and tell them to take out that car loan or mortgage their house?

War my friend. Blow it up....no red tape. A bomb dropped from the sky doesn't care about endangered species, or regulations, or city ordnances...its just gone. Destroy the old, to rebuild the new. What would be the red tape to bring down and rebuild a decaying bridge in the USA? One bomb....done deal. War is efficient in destruction, and culling useless eaters. That is what we have become to this world. We are tapped out, sucked dry...useless. For those who do not think that war will come to these shores as the world 'demands' payback for what we have done has another thing coming.

$+
:smokin:

[Carl]

You take over all the bad debt, cleaning if off the banks' books, and then restart the process. That's what's going on right now.

And you're not paying attention.

The taxpayer is taking over the banks' bad debt, which was created by the taxpayer's inability to service its existing debt, so the banks will be free to make new loans to the taxpayer.

Can you see the flaw in the plan?

Macroeconomic Compartmentalization will screw them every time.




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[graspAU]

And you're not paying attention.

The taxpayer is taking over the banks' bad debt, which was created by the taxpayer's inability to service its existing debt, so the banks will be free to make new loans to the taxpayer.

Can you see the flaw in the plan?

Macroeconomic Compartmentalization will screw them every time.

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Absolutley. They are freeing up one bottleneck and not all. Consumers can't borrow more from the banks even if the banks get rid of the possession of the bad debt.

Consumer debt would have to be wiped out (forgiven) for the consumer to be able to borrow more from these banks that have had their bad debt holdings cleansed.

What a crock!

How do they think they can restart the system, without helping the consumer that is the basis of the debt requesting mechanism?

[<SLV>]

So what is the outcome of the implosion? Massive deflation, hyperinflation, or something else??

If I may answer for HT, he is going to say that inflation (hyper or otherwise) is no longer possible. It is time for "inflation less than previous inflation", or "deflation"... until the deflation reaches "maximum potential". This is the cycle. Unfortunately this last cycle has been inflating for a Looooooooong time compared to other historical examples of fiat.

WHAT does this mean for gold/silver? Well, chances are the the "price" of both will fall (measured in "dollars"), but the value will actually increase. Gold is better than silver as an investment -- silver is better than gold for barter.

[Sapiens]

How do they think they can restart the system, without helping the consumer that is the basis of the debt requesting mechanism?

Thank you. Now, how can we tell this to people in words that they are able to understand?

[Sapiens]

BTW, all these shenanigans by Treasury's Paulson is nothing but a giant wealth transfer, from the assets of the Taxpayer to the pockets of all the Toxic paper holders.

[Sparky]

...
How do they think they can restart the system, without helping the consumer that is the basis of the debt requesting mechanism?
Who said they won't help the consumer? We just had two hurricanes in the south and a flood in the midwest. How about a massive reconstruction aid bill? Who can be against that?

Let's double up on the stimulus package.

They are offering a $7500 tax credit for new home buyers. No payment back for two years; then $500/year for 15 years. Just like an adjustable loan with a teaser rate. Let's restart the process.

How about a foreclosure rescue bill? Gov't will pay the difference between your house's equity and the amount you owe on it.

The average oil heating bill will be $3500 this winter, up from $1500 a few years ago. Why not a $2000 rebate from the gov't?

Did you not see that they are trying to add on to the $700B bailout bill by providing money to the taxpayers in addition to the banks? They don't want to piss of the taxpayer/consumer. So they will be given more money to pay their bills, so that they can go out and borrow again.

[silverblood]

That's disgusting. I hope that doesn't come to pass.

[graspAU]

Who said they won't help the consumer?

They are throwing peanuts at the consumer, even with some of the things that you mentioned. Consumers need their monthly payments reduced or forgiven for any big take on of new debt to sustain the system. We may be hearing about moratoriums on loan payments soon enough.

Our creditor's won't buy bonds to have it handed out as free money for too long. The currency will be destoryed. I don't think there is a way out of this downward cycle without some real pain for a long time.

[<SLV>]

I was wondering if it would cost less than $1T to pay of the top 1/3 of EVERYONE's mortgages... wouldn't that set the real estate market straight and make sure that most people have equity?

[Twisted Avatar]

That's disgusting. I hope that doesn't come to pass.

wishing wont make it so.........

Were are in a for a most wild ride the only safey that can be sought is in tangibles.

Period end of story.

T

[Carl]

Who said they won't help the consumer? We just had two hurricanes in the south and a flood in the midwest. How about a massive reconstruction aid bill? Who can be against that?

Let's double up on the stimulus package.

They are offering a $7500 tax credit for new home buyers. No payment back for two years; then $500/year for 15 years. Just like an adjustable loan with a teaser rate. Let's restart the process.

How about a foreclosure rescue bill? Gov't will pay the difference between your house's equity and the amount you owe on it.

The average oil heating bill will be $3500 this winter, up from $1500 a few years ago. Why not a $2000 rebate from the gov't?

Did you not see that they are trying to add on to the $700B bailout bill by providing money to the taxpayers in addition to the banks? They don't want to piss of the taxpayer/consumer. So they will be given more money to pay their bills, so that they can go out and borrow again.

Yep, that will fix it.

Never mind being saddled with $12 to $18 Trillion in taxpayer debt, not to mention the hundreds of billions in entitlement and government retirement plans. Oh yes, and we're supposed to pay all that and feed, cloth and house ourselves on the "money" we earn in a service and retail sales economy that is dependant upon imports.

Yep, sounds like a plan to me..............



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[Sapiens]

Yep, sounds like a plan to me..............



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Until it doesn't... Makes it easy to understand how the American, French, -insert revolution here-, came to pass...

I wonder when all the serfs may call it enough this time around...

[Sparky]

They are throwing peanuts at the consumer, even with some of the things that you mentioned. Consumers need their monthly payments reduced or forgiven for any big take on of new debt to sustain the system. We may be hearing about moratoriums on loan payments soon enough.

They have already said they are going to try to "restructure" as many of the Fannie/Freddie loans as possible, since the banks wouldn't do it. They government now holds HALF the residential mortgages in the entire country.

This bailout bill would give them unreviewable discretion on mortgage-related transactions. They could re-write every loan such that NONE of them are underwater, and lower associated monthly payment accordingly. Think that would help consumer sentiment? As owners of Freddie/Fannie, they can establish lending standards as loose as necessary. They have already received authority to expand F/F's mortgage holdings through December 2009. They are now clearly positioned to begin the re-inflation on a massive scale.

[Zilver]

Just posting this guy's theory for you guy's to chew on:


from a wallstreetexaminer.com blogger:

Massive Bailout? Hardly, a Massive Tar Pit Instead

Saturday, September 20th, 2008 at 11:17 AM

Winterisms - Primer and Definitions
Winter Watch Home Page
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http://wallstreetexaminer.com/blogs/winter/


Naturally I need to weigh on what is being called the biggest “bailout in history”. I do not believe that is what is going down at all. Instead the US Government is facilitating the greatest asset grab of securities since Alexander Hamilton’s agents and cronies picked off the Continentals from the Rubes back in 1790. Hamilton’s associates (friends of Hamilton) did not pay anything close to par either, instead these Continentals went for enormous discounts. And Paulson’s new Leviathan hedge fund (the US Treasury) will end up paying deeply distressed prices as well. Therefore it is most important to follow the real bouncing ball on this, and not be fooled. This post is going to be my primary framework over the next several months, so any discussion with me or use of my ideas is meaningless unless you are aware of my thinking.

Tucked away in the hyperbole of this story is the following key element. These are competitive capitulations, and will hardly result in higher security prices, at least not yet. Initially they will simply reinforce low prices. Because these are government transactions there will be higher public transparency to them for all to see, and I doubt if the early response will be necessarily bullish either, but just more conformation as to how much fictitious capital has already evaporated. The use of the word “request” is poor confusing writing style, as I think the operative word is “offer”.

The Treasury would hold several rounds of buying, first purchasing securities from the banks that request the lowest prices, in order to limit the cost to taxpayers. The plan could be broadened to include securities based on other kinds of loans, such as student loans and commercial real estate.

Instead it suggests that the first rounds of Government bids will be mostly stinky or low ball bids. I am convinced this will be done in tandem with a series of bank closures and seizures accompanied by fresh rounds of panic and crisis. This will have the effect of forcing liquidations into the Tar Pit where the stinky bid awaits. Here are the bullet points of how this plays out.

-The friends of Hank (FOH) have already been hard at work picking up the modern day Continentals right and left, and this will continue, but there has to be a mechanism to force the sale, otherwise the carrion hold out. If I had to hazard a guess, securities that might be worth 60-70 of par at the end of the day are being scarfed at 20-40. When these are marked up later, you are left with well capitalized financial institutions, even new ones. As for the losers, well they deserved it anyway will be the refrain. It will not even matter what is fair either. If you want to know who the winners are from all this, FOH is it, and who they are really should be included as the basis of any investment decision.

-Also keep in mind that this process will go on in the productive or non-financial side of the US economy too, and that might be the safer option to play. The elimination of shorting on financials may have the “unintended consequence” (?) of pushing the Berserkers and other short selling criminal rackets into looking for non-financial squeeze targets instead.

-A list of carrion has been drawn up. There is also another list of FOH (visualize Saber-toothed Tigers). A very high percentage of FOH will be the new foreign masters and their front men, who will need to redeploy Dollars into distressed US assets. I have read people making remarks such as, “where does this money come from?”, to which I say, “are you serious? Take a look at Treasury prices, the last great Bubble. That is your answer. Treasuries will sold and utilized to buy these distressed, bargain US assets. Creditor status gets converted into equity status as part of a large scale defacto foreclosure and wealth transfer. And to ensure that Treasury yields don’t back up too much, the Fed is there to do occasional monetizations. Just how much is an open question, but if this operation goes as quickly as I think (the last four months of the Bush administration) it might not be that much.

The operational concept, repeated for clarity.


-The operational plan therefore is to work closely with the FOH on the Tar Pit scarfs, and also pressure and push the carrion off the cliff into the Tar Pit. What you have to remember about this, is that when a carrion go to the Pit, that institution absorbs (officially takes the loss) on a portion of the fictitious capital (FC) that had been on the books. FC goes to money heaven, is wiped out or cleaned (nao existe).

-Questions have been raised about all the derivative exposure out there. This was covered superbly in our last podcast starting at 12:30 by “Trader Joe” (you can hear the lead in to this starting at 6:30 of the free preview portion of the cast). Derivatives (mostly fictitious anyway just like the AAA ratings were) will be subject to novation, effectively renegotiated or even eliminated. Therefore billions in derivatives will go to money heaven also, and of course that will push more uninsured financial institutions into the Tar Pit. This will be conducted at run rate that can be effectively devoured by FOH, with Leviathan controlling the bleed rate.

-The Government already has Paulsenstein usury creditor loan hooks into a number of these carrion. These institutions may just as well have gone to see Vito and Guito’s “pawn shop” to cover their gambling debts. This is not a bailout at all, this is THE Tar Pit. Indeed, Leviathan (Hank’s hedge fund) already controls a couple king mastodons out right such as Fannie and Freddie. AIG is the prime example right now of another. AIG has given up control, and is about to be liquidated quickly in a “national emergency”. Of course this will be allowed to pass because no one wants to see a situation where Aunt Millie’s annuity or insurance policy has little backing.

-Finally for this operation to have legs the monster Leviathan hedge fund has to show positive returns for taxpayers. So the the initial results will imply favorable outcomes. The MSM media well suddenly herald how Leviathan got a big loan paid back with a nice return. Watch for this to happen within weeks, and then the Tar Pit machine can really get turned loose.



"During times of universal deceit, telling the truth becomes a revolutionary act." - George Orwell

[Agamemnon]

"Creditor status gets converted into equity status as part of a large scale defacto foreclosure and wealth transfer."


As I wrote two days ago, "presto chanego, creditor becomes debtor on Wall Street." Your shares become collateral for the bailout in case of loan default.

The AIG offer is about 12% interest on the 700 billion.

If the Fed doesn't get performance from AIG, then they get it from your shares.

The bailout will pump up Wall Street and your shares will fund the new bubble !



Its the old pea and shell game ...


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