Monday, October 26, 2009

Hyperinflation Part IV

Bearish News has an interesting piece on hyperinflation worth reading. The report is based on a newsletter from Hayman Advisors, who summarizes a thesis by Peter Bernholz (Professor Emeritus of Economics in the Center for Economics and Business (WWZ) at the University of Basel, Switzerland).

Hayman Advisors writes, "There have been 28 episodes of hyperinflation of national economies in the 20th century, with 20 occurring after 1980. Peter Bernholz (Professor Emeritus of Economics in the Center for Economics and Business (WWZ) at the University of Basel, Switzerland) has spent his career examining the intertwined worlds of politics and economics with special attention given to money. In his most recent book, Monetary Regimes and Inflation: History, Economic and Political Relationships, Bernholz analyzes the 12 largest episodes of hyperinflations – all of which were caused by financing huge public budget deficits through money creation. His conclusion: the tipping point for hyperinflation occurs when the government’s deficit exceed 40% of its expenditures."


So, one may wonder what the status of American deficit spending is. The answer is that we're currently projected to reach 40% this year. But as Bearish News writes, "the dollar does have some built-in protection as the world’s current reserve currency. That lets us get away with a higher debt-load than we should be able to. The question is, how much protection does that offer?"

I suggest you read the rest of the brief article. Hyperinflation is a very real, and perhaps even inevitable result of U.S. monetary policy. Prepare yourself. Prepare your family.

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