Take Your Pick: Default or Hyperinflation

ClashDaily.com ^ | October 1, 2013 | G.C. Mandrake

[Kaslin]

Here’s a fairy tale for you. Like Dorothy and her friends, the American people have made the long, desperate trip and are counting on the Great and Powerful Oz to fix things for them. And like the Scarecrow, when we got there, we got screwed. If you remember, the Scarecrow wanted brains, and the man behind the curtain couldn’t deliver but instead said, “by virtue of the authority invested in me by the Universitas Committee E Pluribus Unum, I hereby confer upon you”… paper! He gave the poor guy a piece of paper. And just like the Fed, the wizard left them stranded as he flew off in a hot air balloon (think mortgage bubble) and couldn’t come back to save them because, “I can’t, I don’t know how it works.” And like the Great and Powerful Oz, Fed wizard Ben Bernanke is probably “a very good man…just a very bad wizard.” Or perhaps the problem is actually with our current monetary concept, “I’m afraid it’s true, there’s no other wizard except me.”

Luckily and with a little help, Dorothy realized that she didn’t need the balloon ride or a wizard to get things back to normal, “you don’t need to be helped any longer, you’ve always had the power…”

And for us, what is that power? That power is “We the People” as expressed through our Congress.

But that poses another problem. That assumes the Congress is willing to click their heels and get to work. I am worried that, given their history of avoiding making tough decisions so as to not look bad, we may be in trouble. According to a number of economists (the ones that don’t follow the hot air balloon philosophy) we may be too late. The perfect storm is already here. The economy is at its worst and another “war” looms. If you want to risk looking bad as a politician, just try tackling those issues – especially if it involves cutting anything.

Congress gave us a glimmer of hope after the House voted to audit the Fed, and the Senate increased the co-sponsors (34 at last count) for their version of the bill recently. On the other hand, were the results of a less publicized vote taken late at night on Friday September 21^st. Senator Rand Paul presented a bill to make any foreign aid to Libya, Egypt, and Pakistan contingent upon certain criteria (like protecting our embassies, releasing the doctor who gave us Bin Laden…). The idea was to at least show the world there would no longer be unlimited foreign aid to countries that were not clear allies. The original speech is full of detailed arguments, but this video provides a short synopsis.

Senator Paul knew the bill would fail because the Senate wasn’t willing to confront the two most controversial problems we face – unlimited spending and questionable military entanglements.

“I will probably lose this vote, but if you ask your friends. If you go home and ask your friends should we be sending money to countries that disrespect us, that burn our flag, I think you will find 80 percent to 90 percent of the American people wouldn’t send another penny…That may be why Congress has about a 10 percent approval rating.”

After John Kerry and John McCain teamed-up to argue for continued unlimited aid, the vote was taken and only Senators DeMint, Grassley, Shelby, Toomey, Moran, Lee, Roberts, Risch and Crapo joined with Paul. The vote failed 81 to 10.

Do we really believe Congress will tackle the difficult issues when it comes to debt and military spending?

If you listen to economists like Peter Schiff, Congress no longer has the luxury of kicking the can down the road. He recently delivered a chilling speech at the Mises Circle in Manhattan. “The Fiscal Cliff: How to Spot the Edge” is an easy-to-follow wake-up call about the severity of our economic crisis. His conclusion was that the Fed has become trapped and we are now faced with two options – default on our debt or hyperinflation (click here for the video). He also contends that the solution is to default on the debt before it gets worse. That means doing what had been needed all along – making dramatic cuts in everything. Because no politician wants to face that, then we are at the mercy of inevitable hyperinflation and a worse default. When that happens, that opens the door to incorrectly blame capitalism and invites more government control, regulation, and loss of freedom or worse.

So why is it that politicians from both sides have not addressed the devaluing of the dollar by the Central Bank system (Fed) over the years? In “Twin Demons,” Llewellyn H. Rockwell Jr. explains how this works. The answer is that the Central Bank system is government’s best friend and allows governments to spend money they don’t have, particularly for war. War and debt spending go hand in hand. And once the war is over, the spending continues for social programs. The Central Bank system is confusing to the average citizen and thus allows the government to expand.

“Creating money out of thin air… is preferable for governments, since the process by which the political class siphons resources from society via inflation is far less direct and obvious than in the cases of taxation and borrowing.”

He advocates for a “separation of money and state,” not unlike the pre-fed hard-money Jacksonian monetary theorists of the 1830s who coined the phrase “separation of bank and state.”

So if economists like Schiff and Rockwell are correct, what happens when the Congress actually audits the Fed and brings the Central Bank issues to the forefront of the public debate? How will they handle the decision to either dramatically balance the budget, default on the debt, or risk hyper-inflation? And why would they even tackle this problem openly? As it is now, the Fed is the mysterious man behind the curtain and all monetary evils can be blamed on him.

[Vermont Lt]

Gold retains its value either way.

Not worried here.

[Dr. Sivana]

Hyperinflation and default amount to the same thing, only the losers are somewhat different.

[bolobaby]

U.S. Default = WWIII

[Jim Noble]

Hyperinflation is out of the question, unless and until we are defeated and occupied by our creditors.

Renunciation of the debt is obviously going to happen, likely soon. When in history has a sovereign power, free to choose its course, not done this?

[GraceG]

Hmm, suicide pill or gun to the head.....

That is a toughie...

[Dr. Sivana]

Gold retains its value either way.

Gold retains a portion of its value. Anyone who bought about three years ago knows it is not a bullet-proof store. Anyone who bought at the end of the Carter admin got hosed.

[SaxxonWoods]

I pick neither since the writer is wrong.

[1rudeboy]

By extension, anyone buying gold now likely is to get hosed, also. (Full disclosure: I am not an expert in the gold market, just expressing an opinion).

[SaxxonWoods]

Gold retains its value either way.

The true believers in this fiction will be the hardest hit.

[Uncle Chip]

U.S. Default = WWIII

Hyperinflation = Civil Unrest

[Vermont Lt]

As long as we are talking value and not nominal price.

If we go into a deflationary spiral, the nominal price of everything declines. The value of the asset—how many widgets per dollar—will retain its value greater than any fiat based asset.

Hyperinflation is a no brainer.

Value is critical. Price is not.

[RC one]

Why not both? The recipe for disaster is already prepared. We are compelled to wage endless war to keep the house of cards standing but it won’t last. It can’t last. Our fate is sealed. It is only a matter of when.

[Daveinyork]

We will not be the ones making the choice.

[DannyTN]

I choose neither.

Raise the import tariffs, put Americans back to work, rebuild American industries.

[DannyTN]

I choose neither.

Raise the import tariffs, put Americans back to work, rebuild American industries.

[Vermont Lt]

Hyperinflation is possible with the collapse of the petro dollar. If the Kingdom decides it will accept gold for oil, the dollars will come screaming back to the US.

That would not be pretty.

[Obadiah]

So if economists like Schiff and Rockwell are correct, what happens when the Congress actually audits the Fed...

Are people hopeless FOOLS?

Ever hear of Benghazi? Ever hear of the report about Benghazi? The same school of people who wrote the Benghazi report will write the Fed audit report.

Absolutely asinine to think anything of substance or change would come out of this.

[willywill]

that is why they are trying so hard to take our guns

[DakotaGator]

This is a regularly occurring problem in the history of nations: (1) Government (”something for nothing” politicians) debasing currency and borrowing with no ability to repay. (2) Privileged class and institutions using the turmoil to secure real wealth for themselves. (3) Financial collapse. (4) And war to reset the social/national order.

As a nation we have completed phase (1) and have almost completed phase (2). Financial collapse and war are looming. I doubt the Republic will survive.