Posted on 10/03/2013 3:17:32 AM PDT by Mozilla
David Buckner, the founder and CEO of Bottom Line Training and Consulting, an adjunct professor at Columbia University, and the author of Permission to Think, explained on the Glenn Beck Program Wednesday why America hasnt yet seen hyperinflation but why it could be just around the corner.
Buckner said that in discussing hyperinflation, people often refer to the Weimar Republic, Zimbabwe, and Bolivia, but say it could never happen here because a certain kind of layering has to occur that America hasnt seen.
That layering, he said, or the recipe for hyperinflation, is:
1) Economic Implosion
2) Collapse in tax revenues
3) Raise taxes
4) Lenders unwilling
5) Austerity or print
Beck seemed shocked by the list, saying all five have occurred.
But Buckner said some still squabble about certain points in the list and regardless of whether we satisfy the recipe, people still say three things in America are different, and set us apart from the standard formula.
First, it is said that everyone wants to buy our debt, and no one will ever stop wanting to do so. But Buckner countered that China is already quickly shifting our debt quickly to gold, and analogized the situation to a restaurant where China, the chef, lends the United States money to eat at its establishment. Pretty soon, he said, there will be other customers, like India, who can pay outright.
Second, some also claim that were not printing money because were exchanging an asset a bond for cash.
What theyre not saying is where that bonds coming from treasuries. As soon as the government puts it out there, the Fed comes and takes it, Buckner said. Its circular, its absolutely circular. So we are printing money.
The third factor that many say differentiates America is that we are a productive country, but Buckner said he disagrees there, as well.
What exactly does America produce these days, he asked? We have Apple, but the products are primarily manufactured overseas. We have a good financial sector, but can we depend on that in tough times? Others cite the countrys many innovators as something we produce, but Buckner noted that innovators are produced elsewhere, also.
And everybody says, well youre not seeing hyperinflation, Buckner said, but thats because, the interest rates are so low, nobodys putting that cash back into investments in the United States. But they are putting it into desperate countries in Europe. Theyre putting it into other investments. And the moneys going out there, so the second Bernanke raises the interest rates, all of the sudden the money sucks back into the United States and we have hyperinflation.
Beck asked Buckner if we need an event of some sort to trigger such a meltdown.
Weve had an event, but weve become comfortably numb, Buckner said. So theres been a lot of hidden stuff thats going on. The treasuries continue to go out, and Bernanke continues to buy debt. [But] anytime he starts to back off the markets freak out, because they know. The markets know. But we dont, the people dont. People who are retired, pensioners, elderly, people who are holding money are going to be devastated.
When Beck asked for a timeline, Buckner said that by January of 2015, if not by October in 2014, we are likely to see an increase in interest rates which will start the domino.
When Bernanke announced that there would be a tapering, the markets just dropped because they knew that even if the interest rates changed one infinitesimal amount, it was the beginning of the domino, he said.
How fast do the dominoes go down? Beck asked.
Three months, Buckner replied without hesitation. You listen to many of the economists within three months. And its going to be perception more than real price. Youre going to see hoarding, youre going to see fear. Its not the actuality. So if they can put a glaze over everybody
its may slow it down. Thats the problem, is were dealing with an illusion. Its an illusion of what is real. We dont have the money. So the interest rates go up, youre going to see a domino.
“Deflation due to technological advances is still the global macroeconomic trend in place, despite price increases in some categories due to political meddling and wacky environmental policies. “
The global destruction of money, via the destruction of debt (sovereign debt default, derivatives default, etc.) will lead to accelerated deflation in my opinion, and lead to a severe contraction of the global economy.
What I believe will happen is outside the experience of anyone alive today and their experience bias won’t allow them to consider the possibility. They are too busy thinking hyperinflation always results from creation of money by a government. Not so. Most money the US government has created is not in circulation. It is a computer entry on computer balance sheets.
What is coming is far, far, far worse than inflation. Again, my opinion, based on what is unfolding now, what we saw in 2008 and what has happened historically.
Choose to believe what you will.
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