Hyperinflation on the horizon

Hyperinflation is monetary inflation occurring at a very high rate and the result is much higher prices for food, shelter, energy, and clothing.  When a country has a very large debt load as is the case of the U.S., there are three ways to deal with this burden:

1.  Grow your way out which would reduce the debt as a percentage of Gross Domestic Product (GDP).  Thus additional tax revenue from the growth would help pay off debt.  The U.S. is not in a position to grow its way out of a paper sack.

2.  Default on the outstanding debt thus causing a crisis in the bond market which would spread globally and cause the global economy to crash.

3.  You can print your way out of this debt with the monetary printing presses.  Historically, this has been the preferred option for many countries.

Politicians know these three options and have chosen #3.  Unless they pull a rabbit out of the hat, hyperinflation is on its way.  Believe me, they are looking for that rabbit.

The voters do not want their benefits touched but the politicians have schemed throughout the decades to bankrupt programs like social security by replacing the cash with IOU’s.  In the private sector these actions would come under the heading of fraud and theft, both felonies.  The current system shields politicians from accountability for their actions.  Only blatant, reported crimes put the politicians’ future at risk.

What is needed is a group of statesmen who are willing to be “one term” politicians and would be willing to do what’s right for the people.  The media wouldl attack those politicians who are willing to sacrifice themselves and do the right thing thus self interest prevails.

The 600 lb. gorilla in the room is our foreign creditors, they own half of our total debt.  Do you think that they will allow their holdings to be eaten up by the Fed  hyper-inflating those dollars they are holding?  The continued issuance of U.S. Debt requires someone to buy it.  In walks the Fed.  They are buying U.S. Treasury debt with newly created dollars that have absolutely no backing of any kind other than the future promise to pay.  The Fed is the lender of last resort.  The foreign creditors hold our future in their hands.  That’s not good.

Where are the baby boomers putting their money now?  In the bond market.  This is the current bubble that is expanding and will burst soon only to leave many baby boomers with even less wealth to sustain them through the retirement years.  Their house value is down, the lost money in the tech bubble, and soon they will suffer more losses in the bond market.  It is ugly out there.

The current “official” inflation rate is around 3.2%.  If the investor is buying a 10 year Treasury at 3.05% and pays a 30% tax rate on the interest and nets a little over 2%, how much money would the investor need to live on to receive an annual cashflow of $75,000?  He would need to have $3,750,000.  Most of us will suffer in the foreseeable future.

How can we respond?  Reduce complexity.  The less we have to manage, the less money we have to spend to support the complexity.  Improve energy efficiency on a personal basis.  Most of all, seek the Face of Our Heavenly Father!

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