Monday, January 12. 2009
On "Hyperinflation"
Let's put this to rest right here and now.
"Hyperinflation", or even "Serious Inflation" (similar to what we had in the 1970s) is impossible without a means to transmit the rise in prices into wages.
In today's United States that simply cannot happen for two reasons:
- The union representation of workers has been eviscerated due to their own idiocy over the previous thirty years. In effect, they have no power to impact economic or labor policy - no matter what Gettlefinger thinks.
- Outsourcing of work to China, India, Mexico and other nations makes wage demands impossible for American workers to enforce. Such demands simply result in the loss of the job to overseas workers.
As a consequence a hyper-inflationary or even seriously-inflationary spiral is impossible to sustain.
Think about your associates, people who you know in the middle class.
Now consider that a 10% inflation rate (moderately bad "serious inflation" ala 1970s) goes on for four years.
This raises the cost of living for everyone by 46%.
How many people who you know are saving 46% of their income? How many will survive a 46% increase in their cost of living?
Such an outcome will result in half or more of America becoming immediately homeless, hungry, and as a consequence out of work. It will as a consequence crash GDP by 50% or more immediately which in turn will crash income tax receipts by a like amount at both state and federal levels.
This will in turn crash prices, but at that point it's too late as now the price crash in turn destroys what remains of the business community and further crashes tax receipts, while at the same time foreign bond investors throw up their hands and say "screw you!", cutting off all foreign capital inflows to the government.
Down that road lies immediate insurrection - that is, the violent overthrow of the government. You are delusional if you think the military could stop such a thing - 150 million Americans, maybe even 200 million of the 300 million in our population? Not a prayer in hell, even if all the Americans had was pitchforks, torches and a gallon of gasoline, and they don't - they have firearms, and lots of them. Even the Chinese, who are (by demonstrated act) willing to roll tanks over their own people would have no chance against 100 million of their citizens if hunger ever trumps fear.
This didn't happen in the 1970s because we had vastly more union work representation and they were able to force wages to keep pace for the average working man. While the pinch was bad (I grew up in it and remember it vividly) society never degenerated because the self-reinforcing crash of production, jobs and tax income never happened, and as a consequence the sort of mass-unemployment, disenfranchisement and loss of essential human needs did not come about.
Today the average working man works for WalMart or some other non-union shop and has no wage pricing power; ergo, there is absolutely no way to prevent the implosion from initiating.
The government must not engage in any sort of policy that could lead to this outcome. Absolute protection at the top levels of government must be put in place to prevent it, because if this occurs then everything - absolutely everything - that we know and love about America disappears.
This is where the Peter Schiffs and McHughs are wrong in their hyperinflation thesis and their "defensive" measures to try to do something about it (or worse, McHugh's belief that not only is this inevitable but that the government should intentionally cause it through something like a "money drop" to households.)
They are wrong because if this outcome occurs there will be no United States of America, your gold will be confiscated and/or rendered worthless by executive fiat, and at approximately the same time an angry marauding mob consisting of half the population of the country will literally loot and burn everything to the ground.
Vengence inevitably follows when justice is denied for a long enough or in an egregious enough fashion. We have seen this with Rodney King and now with the apparent BART assasination of a suspect in Oakland, and that was one man who was abused at the hands of government. Make the abuse half the population and there is a zero chance that civil and political order is maintained.
Pray that our nation's leaders aren't stupid enough to set in motion such a course of action either by accident or under the foolish belief that they can "keep the outcome under control".
Time is running out to demand and obtain justice folks. America's clock is literally ticking towards zero.
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