Signs Hyperinflation Is Arriving

This post is gonna be short and sweet—and scary: 
  
Back in late August, I argued that hyperinflation would be triggered by a run on Treasury bonds. I described how such a run might happen, and argued that if Treasuries were no longer considered safe, then commodities would become the store of value. 

  

See, how come I don’t look as cool
when I make my predictions?

Such a run on commodities, I further argued, would inevitably lead to price increases and a rise in the Consumer Price Index, which would initially be interpreted by the Federal Reserve, the Federal government, as well as the commentariat, as a good thing: A sign that “the economy is recovering”, a sign that “normalcy” was returning. 

  

I argued that—far from being “a sign of recovery”—rising CPI would be the sign that things were about to get ugly. 

  

I concluded that, like the stagflation of ‘79, inflation would rise to the double digits relatively quickly. However, unlike in 1980, when Paul Volcker raised interest rates severely in order to halt inflation, in today’s weakened macro-economic environment, that remedy is simply not available to Ben Bernanke. 
  
Therefore, I predicted that inflation would spiral out of control, and turn into hyperinflation of the U.S. dollar. 
  
A lot of people claimed I was on drugs when I wrote this. 
  
Now? Not so much. 

  

In my initial argument, I was sure that there would come a moment when Treasury bond holders would realize that they are the New & Improved Toxic Asset—as everyone knows, there is no way the U.S. Federal government can pay the outstanding debt it has: It’s simply too big. 
  
So I assumed that, when the market collectively realized this, there would be a panic in Treasuries. This panic, of course, would lead to the spike in commodities. 

Was Stagflation in ‘79 Really Hyperinflation?

If my best friend is the truth, then my next best friend is history. 

I’ve been writing about the possibility of hyperinflation, if there is ever a run on Treasury bonds. My argument has been, Treasuries are the New & Improved Toxic Assets, a termite-riddled house waiting to collapse. If and when there is a run on them, money will flow to a safe haven, which I am predicting will be commodities. As a byproduct of this sell off in Treasuries and buy up of commodities, consumer prices will rise catastrophically in a hyperinflationary event—and the dollar will be left dead on the highway like roadkill. 

  

This scenario got me thinking about the last time there was a panicked run-up in commodities: The stagflation of the 1970’s in the United States, specifically the period 1979–1983. Oil nearly doubled in price, gold and silver went hyperbolic. Gas shortages were rampant—the situation almost got to the point where the government considered rationing gasoline. In fact, ration cards were printed—that’s how bad things got. 
  
Because of the Oil Shock, the inflation index rose to a peak of 15%—yet unemployment also exploded, reaching almost 11%. This combination of unemployment and inflation was what gave the period its name—stagflation: “Stagnant inflation”. 

  

Thinking about this period, I asked myself a simple question: Could the ‘79 Oil Shock, and subsequent bout of stagflation, be better understood as a period of incipient hyperinflation? And if so, what lessons could it teach us about today? 

WikiLeaks promises to reveal Swiss banking secrets

(BBS NEWS) -- A Swiss whistle-blower Monday handed over what he said were secret Swiss banking records to WikiLeaks, the website dedicated to revealing secrets.
Swiss banker Rudolf Elmer handed two discs to WikiLeaks founder Julian Assange at a news conference in London.

Tunisia unrest: Renewed anti-government protests

New protests have broken out on the streets of Tunisia's capital, Tunis, hours before the expected announcement of a new national unity government.

Police used water cannon, teargas and occasional gunshots to disperse several hundred demonstrators calling for the party of ousted President Zine al-Abidine Ben Ali to relinquish power.
The country has been in a state of emergency since he fled on Friday.
PM Mohammed Ghannouchi says a deal between parties will be unveiled later.
Mr Ben Ali, who had been in power for 23 years, fled to Saudi Arabia on Friday after a month of mounting protests across the country over unemployment, food price rises and corruption.

Major winter storm wallops Northeast

NEW YORK (Reuters) – The second major snow storm of the winter season blanketed the Northeast on Wednesday, canceling thousands of flights and frustrating commuters but it was not enough to keep New York school children from going to class.

The National Weather Service reported snow on the ground in 49 of the 50 states -- only Florida was spared -- and much of the South was still battling icy conditions that made roads dangerous and led to several traffic deaths.

Floods pour into Brisbane; 20,000 homes in danger

BRISBANE, Australia – Floodwaters poured into the empty downtown of Australia's third-largest city Wednesday after tearing a deadly path across the northeast, swamping neighborhoods in what could be Brisbane's most devastating floods in a century.

The surging, muddy waters reached the tops of traffic lights in some parts of Brisbane, and the city's mayor said at least 20,000 homes were in danger of being inundated.
At least 22 people have died and more than 40 are missing across Australia's northeastern state of Queensland since drenching rains that began in November sent swollen rivers spilling over their banks, flooding an area larger than France and Germany combined. Brisbane, the state capital with a population of 2 million, is the latest city to face down the waters, and officials expect the death toll to rise.

Dad pursued Ariz. massacre suspect before shooting

Hours after Randy Loughner's confrontation with his 22-year-old son Saturday morning, six people were shot dead and more than a dozen others wounded — and Jared Loughner was in custody.

The sheriff's deputies who swarmed the Loughners' house removed what they describe as evidence Jared Loughner was targeting Rep. Gabrielle Giffords, who doctors said Tuesday was breathing on her own for the first time after taking a bullet to the forehead. Among the handwritten notes was one with the words "Die, bitch," which authorities told The Associated Press they believe was a reference to Giffords.

In Arizona case, experts say planning undermines insanity plea

 

How Giffords survived brain shot

 

Senator urges ban on large gun clips

 

Hart: 'Tone it down!'

 

How do you defend a shooting suspect?

STORY HIGHLIGHTS

• Reports: A neighbor says the suspect's parents are devastated
• "Right now it is important as a community to pull together," a bishop says
• Nine-year-old victim's mother: "I hope people will look for hope, for change, for peace"
• Rep. Gabrielle Giffords' remains in critical condition, doctors say

For more information, visit CNN affiliates KGUN, KOLD, KVOA, KPHO and KMSB. Read the federal charges against Jared Lee Loughner (PDF).

Tucson, Arizona  The alleged shooter in Saturday's deadly Tucson massacre may have difficulty making the case for a successful insanity plea, experts said Tuesday.

Weight of words in focus after Arizona shooting

A crowd, including members of Congress and staff, pauses for a moment of silence to honor the Arizona shooting victims.

 

 

STORY HIGHLIGHTS

• Militant-themed messages and speeches laced with fear mark political dialogue
• Lawmakers on both sides of aisle call on colleagues to tone it down
• The notion that rhetoric caused the violence is "fallacious," professor says
• Health care debate looms again in House; it could be volatile

For more information, visit CNN affiliates KGUN, KOLD, KVOA, KPHO and KMSB. Read the federal charges against Jared Lee Loughner (PDF).

There's no evidence the heated political environment played any role in the shooting spree that left Rep. Gabrielle Giffords in critical condition and killed six others, but observers say if nothing else, the tragedy will force politicians to re-evaluate their rhetoric.