What are the chances of hyperinflation – a common sense viewpoint?
Disclaimer: In no way, shape, or form is this financial advice. Invest and/or trade at your own risk.
If you are wondering whether the U.S. dollar, the world’s reserve currency, could go into hyperinflation, then I would say, yes, it is surely possible and likely unless things change. Just because the United States has been the superpower of the world for a long-time now doesn’t mean that it will stay this way. Any type of belief in American Exceptionalism in which people believe that America is somehow inherently different than other nations is overall not true, in my opinion. I do believe the nation became what it is today because God allowed it to, but like other empires, it can fall as well if we aren’t already seeing that right now.
Even before the outbreak of COVID-19, the signs were there. Now today, they are more apparent than ever. There is a Great Resignation in the job market — Click Here for a link to the article — and the Federal Reserve is printing unlimited amounts of money – as depicted in the money supply chart — Click Here for a link to the article (Davidson; M2 (M2SL)). Inflation is becoming obvious and there really is no way out except to continue printing money which just makes its value worth less and less.
On top of that, there is clear moral decay in society, lack of leadership, political turmoil, a supply chain crisis, ongoing variants of COVID-19, and just an overall feeling that all is not well in America. The news headlines these days are, well, nuts compared to even a decade ago and it seems that people are turning on each other at an increasing rate.
As the Federal Reserve continues to print money because raising rates will collapse the house of cards via explosion in the debt and lack of cheap money to borrow to keep the gig going, it seems that we are living in a “skeleton” economy.
Quite frankly, the Fed is cornered as previously alluded to. They cannot raise rates much without crashing the entire economy and they have little room to lower rates as the Federal Funds Rate is near zero.
In essence, if they raise rates the debt blows up and people won’t be able to borrow as easily to avoid drowning in debt. If they lower rates, which they have little room to do so otherwise the interest rates will be negative, it won’t do much to stimulate an already fragile economy. If the rates go negative, primarily hypothetically speaking, why would one want to have their money in a bank account? There could even be a run on the banks if they ever did go negative.
As you can see, the Fed is running out of options and this is how the system is really designed to work anyways. Those at the top control the money printers and gain wealth off of an increasing stock market and become richer and richer, while those at the bottom end up working longer hours to make up for the difference in inflation. The credit-based system goes deeper and deeper into debt as it’s designed to do so. It’s basically a rigged game which is just one reason why I’m a fan of physical gold and silver; both of which are nearly impossible to artificially manipulate (unless you are talking about fool’s gold).
As Voltaire said, every “[p]aper money always eventually returns to its intrinsic value – zero” (“Voltaire Quote: ‘Paper Money Eventually Returns to Its Intrinsic Value – Zero.’”). With regards to the U.S. dollar, it is the world’s reserve currency which makes a collapse in value all that more interesting; many, if not most, other currencies around the world are tied to the U.S. dollar and therefore so are their economies.
While the saying that money is the root of all evil may not always be true (it’s the love of money), it certainly does affect many aspects of one’s life and is clearly important in the livelihood of many.
The United States of America is not excluded from Voltaire’s famous quote and there is basically a perfect storm out there that could lead to hyperinflation, unless things drastically change – but, it could already be too late.
Davidson, Paul. “Great Resignation: The Number of People Quitting Jobs Hit an All-Time High in November as Openings Stayed near Record.” USA Today, Gannett Satellite Information Network, 4 Jan. 2022, https://www.usatoday.com/story/money/2022/01/04/great-resignation-number-people-quitting-jobs-hit-record/9083256002/.
“M2 (M2SL).” FRED, 26 July 2022, https://fred.stlouisfed.org/series/M2SL.
“Voltaire Quote: ‘Paper Money Eventually Returns to Its Intrinsic Value – Zero.”.” Quotefancy, https://quotefancy.com/quote/929781/Voltaire-Paper-money-eventually-returns-to-its-intrinsic-value-zero.