One of the root causes of hyperinflation is the rapid expansion of the money supply
. 39 countries have faced it in the past. See: http://en.wikipedia.org/wiki/Hyperinflation The government doubled the money supply overnight by simply printing
money out of thin air, taking us from $800 billion in mid-2008 to $1.7
trillion by December 2008. And now in 2011 we're at $2.5 trillion.
Inflation usually lags monetary increases by about 2-3 years. We are
sitting right at 2.5 years from the doubling of the money supply.
There have been 30 cases of hyperinflation in the last 100 years - In Germany's Weimar Republic in the early 1920s and most recently in the Zimbabwe in 2008. A lifetime of saving was wiped out overnight. That's why it's so important to have food storage.
Many economists predict hyperinflation by 2015, and some say as early as 2012. It's unpredictable but everyone agrees it's inevitable. Increased inflation is already showing its ugly head in commodity prices with a 46-percent increase in the average commodity price in 2010.
Just as there are five stages to a hurricane, there are five stages that a country goes through before hitting hyperinflation.
1. The Gold Standard - The government starts out using fiat money (paper money) that is backed by gold.
2. Social programs increase; military spending soars - As a country develops economically and socially, it begins to take on more and more economic burdens adding layer upon layer of public works projects and social programs, like food stamps. Currently in the United States there 44 million people are on food stamps. When Medicare was created the projected annual cost was only $40 billion a year, now it costs over $400 billion a year.
The military starts to expand and exercise its influence in the world. Then spending dramatically increases to fund wars (WWI, WWII, Cold War, Korean, Vietnam, Desert Storm, war on terrorism). The U.S. spends twice as much on military than every other country combined.
3. Gold Standard abolished - In order to fund military spending and social programs the currency President Nixon took the U.S. off the Gold Standard in 1971 so the government can print money.
4. Steady inflation - This has occurred since the creation of the Federal Reserve in 1913. However, the expansion of the currency supply by the printing of money to fund military, social programs and deficit spending starts to be felt by the population as severe consumer price inflation triggering a loss of faith in the currency.
5. Hyperinflation - The final stage is a massive movement out of the currency into precious metals and commodities and other tangible assets and the currency collapses.
The U.S. is sitting right between stages four and five but there are sign everywhere that we are approaching stage five quickly. What are those signs? Consider the following:
Also understand Fiat money and how it affects our savings:
A brief great video to easily understand fiat money and how it affects us: http://www.youtube.com/watch?v=hx16a72j__8
Also see for 39 countries which faced hyperinflation: http://drkhalid.blogspot.in/2012/11/what-has-caused-non-gold-linked.html
There have been 30 cases of hyperinflation in the last 100 years - In Germany's Weimar Republic in the early 1920s and most recently in the Zimbabwe in 2008. A lifetime of saving was wiped out overnight. That's why it's so important to have food storage.
Many economists predict hyperinflation by 2015, and some say as early as 2012. It's unpredictable but everyone agrees it's inevitable. Increased inflation is already showing its ugly head in commodity prices with a 46-percent increase in the average commodity price in 2010.
Just as there are five stages to a hurricane, there are five stages that a country goes through before hitting hyperinflation.
1. The Gold Standard - The government starts out using fiat money (paper money) that is backed by gold.
2. Social programs increase; military spending soars - As a country develops economically and socially, it begins to take on more and more economic burdens adding layer upon layer of public works projects and social programs, like food stamps. Currently in the United States there 44 million people are on food stamps. When Medicare was created the projected annual cost was only $40 billion a year, now it costs over $400 billion a year.
The military starts to expand and exercise its influence in the world. Then spending dramatically increases to fund wars (WWI, WWII, Cold War, Korean, Vietnam, Desert Storm, war on terrorism). The U.S. spends twice as much on military than every other country combined.
3. Gold Standard abolished - In order to fund military spending and social programs the currency President Nixon took the U.S. off the Gold Standard in 1971 so the government can print money.
4. Steady inflation - This has occurred since the creation of the Federal Reserve in 1913. However, the expansion of the currency supply by the printing of money to fund military, social programs and deficit spending starts to be felt by the population as severe consumer price inflation triggering a loss of faith in the currency.
5. Hyperinflation - The final stage is a massive movement out of the currency into precious metals and commodities and other tangible assets and the currency collapses.
The U.S. is sitting right between stages four and five but there are sign everywhere that we are approaching stage five quickly. What are those signs? Consider the following:
- Government printing money - In 2008 and 2009 the money supply doubled because the government printed $1.6 trillion (and we pay 6 percent interest to the Federal Reserve on all printed money). In June 2009, The Wall Street Journal reported, "Get ready for inflation and higher interest rates. The unprecedented expansion of the money supply could make the 70s look benign." The 70s saw 14 percent inflation and 20 percent interest rates).
- Deficit spending - The U.S. currently holds over $14 trillion in debt and an annual $4.3 trillion budget deficit. Combine this with the unfunded liabilities of Medicare, Social Security and Medicaid, total U.S. debt obligations total $76 trillion, which is five times greater than Gross Domestic Product. In February, the U.S. had a $228 billion budget deficit, which was more in that one month than the entire budget deficit of 2007.
- Reaching the tipping point - Every paper currency in the world has collapsed when government spending reaches the tipping point. That's when the government borrows 40 percent to fund spending. The U.S. is now at 41 percent.
- Average life span of fiat currencies - Every fiat currency (paper money not backed by gold) has collapsed in an average of 31 years. The U.S. dollar fiat currency is now 41 years old.
- Major suppliers announce price increases - Colgate-Palmolive, Proctor & Gamble, General Mills, Kellogg, and Supervalu say they're feeling the crunch of higher ingredient costs and are raising prices in 2011 to cope - upwards of 15 percent. Wal-Mart announced in March they would increase prices to cope with higher costs. Major providers of food storage commodities have already increased prices by an average 25 percent
- China - In March China announced that by the end of 2011 it wills no longer transaction international trade in U.S. Dollars, thereby competing against the dollar as the world's reserve currency. This drives down the value of the dollar.
- The U.S. passed peak consumer spending in 2010 - In 1990, Japan's deflationary lost decade was caused by Japan passing peak consumer spending. Age 48 is the year in which consumers peak in spending and the last baby boomer just turned 48 in 2010. The U.S. government is printing money (called Quantitative Easing) to prevent another 1930s Great Depression
Also understand Fiat money and how it affects our savings:
A brief great video to easily understand fiat money and how it affects us: http://www.youtube.com/watch?v=hx16a72j__8
Also see for 39 countries which faced hyperinflation: http://drkhalid.blogspot.in/2012/11/what-has-caused-non-gold-linked.html
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