Thursday, December 30, 2010

Hyperinflation Can't Happen in the USA...right?

Hungarian Street Sweeper Cleaning up Discarded Paper Money - 1946

Many Americans when they think about hyperinflation (inflation of more than 50% per month), invariably see it as a foreign problem that could never happen in the USA. History, of course, contradicts this false assumption with very real examples of hyperinflation that occurred right here during the American Revolutionary War and in the Southern Confederacy during the American Civil War. Indeed, history further tells us that anytime a nation introduces unbacked paper "fiat" currency inflation, hyperinflation, and complete economic collapse is only a matter of time. Other examples of hyperinflation from around the world and time include Ancient Rome (when they lowered the silver content in their coins), China (the first country to introduce paper money), Russia, Hungary, Weimar Germany, Iceland, Argentina, and Zimbabwe to name a few.

The root of the next faulty conceit I've encountered is the belief that "Big Brother" or the government will somehow prevent the worst from happening and pass some laws to protect US citizens and our wealth. Certainly, it seems the US government is doing nothing nowadays to disabuse any citizen of this childlike trust and dependency. More and more we're being seduced by governmental promises that assure us that medical care, retirement, health, food and housing costs will be taken care of by our good 'ole Uncle Sam if worse ever comes to worse. If we make a mistake by buying a house we can't afford or invest stupidly (Madoff scam), the government will rush to our rescue and have our back. Finally, the blind belief in the power of the government to "make it all better" extends to the terrible threat of hyperinflation.

A typical governmental reaction to fast rising prices in hyperinflation is to implement wage and price controls. Nixon did as much in the early 70's to control inflation with dismal results. The basic theory behind the pricing controls is that the government can stop rising prices in a market economy merely by mandate. Of course, as always theory never works as well in practice. History tells us that if the price controls are not rigidly enforced with real penalties they are soon ignored by both seller and consumer. However, when the laws are rigidly policed, product scarcity quickly results and thriving black markets are created. Scarcity of commodities results as sellers become reluctant to sell their products at the low governmental prices as they would lose money in the transaction. Factories often curtail production or close down altogether rather than manufacture and sell their items at a loss. Black markets and even worse price gouging then begins to thrive as a means to fill the gaping demand for goods created by the ill-considered governmental attempts to control the free market.

In the final analysis we see that the US with its busy money printing presses and skyrocketing multi-trillion dollar debt can and quite possibly will experience hyperinflation within the next few years. Further, if and when that economic catastrophe befalls us the average American will NOT be able to rely upon their Uncle Sam to ride to their rescue and feed their families with laws and dictates.

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.



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