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Approaching a hyperinflation cliff

Posted by John Reed on

Copyright 2013 John T. Reed

We are so screwed.

My view of what might trigger hyperinflation has changed radically in the last three years—for the worse.

First, I thought the markets including the bond market and the foreign exchange markets would essentially become so unhappy with U.S. fiscal and monetary policy that they would start to shun buying U.S. bonds.

They did. There has been no net increase in the holdings of foreign U.S. bonds buyers for several years. But that message from the free markets was nullified by the Fed. The Fed bought up all the U.S. bonds issued and many of the FNMA and FHLMC bonds. They now buy $85 billion a month which is $1T per year which is more than the U.S. budget deficit. The U.S. budget deficit is the amount of new U.S. bonds that need to be sold.

I never dreamed that the Fed would behave so recklessly or that the American people and the world would be okay with it.

By the way, the Fed cannot “buy” anything. It has no money. It “buys”  U.S. bonds and FNMA/FHLMC bonds by “printing”  the money to do so. That causes inflation, not one-on-one in immediate lockstep, but more like the caboose of a train moving after the locomotive starts moving and all the various cars in between start moving one-by-one. Or like an avalanche building up as more and more snow falls on the mountaintop, then exploding down hill all at once when the snowflake that “breaks the camel’s back” lands.

Obama wants hyperinflation ASAP

Then there is the president. He wants hyperinflation, or some other type of financial crisis—he’s not picky—to happen ASAP.

Really. I am not exaggerating one bit.

You will recall that Obama’s first chief of staff was Rahm Emanuel, a Chicago street punk with a master’s degree, who famously said, “You never want a serious crisis to go to waste.” [November 2008 speech to Wall Street Journal conference of corporate executives]

The corollary to that is serious crises are great things to have because they allow you to got your political agenda enacted into law when you cannot get it through during normal times.

The president of the United States and his strict-party-line voting Congress have decided that their best shot at taking the House and retaining the Senate in 2014 is a financial crisis like a stock or bond market crash or a run on the dollar or a recession or depression or hyperinflation, Like I said, he’s not particular.

I have often defined a politician as someone who takes credit for any good thing that happens and blames his political opponents for any bad thing that happens.

‘We are so good at blaming Republicans that we can get away with anything’

It is a shibboleth in Washington and in the media that Republicans always get blamed for all government shutdowns. Examination of the actual polls and election results do not bear that out. The 1995 shutdown was followed by the 1996 election in which Republicans retained their majority in the House and gained seats in the Senate.

Recent polls do, indeed, show the Republicans getting more blame for the current “shutdown” than Democrats, but they also show a mixed bag.

Overplaying their hand

And the Democrats seem to be so eager to count their chickens before they are hatched that they appear to be snatching defeat from the jaws of victory by astonishing arrogance with regard to using the shutdown gratuitously to inflict maximum pain on Republican and other voters: closing granite monuments that have no moving parts or indoor areas; closing 11,000 square miles of open ocean; denying death benefits to recently murdered service persons’ families, shutting down hotel/restaurant concessionaires on public highways who lease their property from the federal government for a percentage of their gross sales thereby diminishing federal revenue further; all while engaging in the now standard Obama practice of giving exceptions to federal law to Democrat voters—like letting amnesty demonstrators hold a mass meeting on the otherwise “shutdown” National Mall or exempting unions from Obamacare.

I refuse to negotiate over my train wreck er, Affordable Care Act

Although it has been much overshadowed by the “shutdown” story, Obamacare opened for business on October 1st and it was the “train wreck” predicted by author and supporter of Obamacare, Senate Finance Committee Chairman Max Baucus (D–MT). However, Obamacare nightmare stories are increasingly finding their way into the media. With each new story, the Republicans’ defund-Obamacare position looks more reasonable and even crucial.

Chamber and CEOs say raise the debt ceiling

The US Chamber of Commerce and Wall Street CEOs said the Republicans must raise the debt ceiling. Are they objective pro-free-market guys? Nope. One-time Fed Chairman William McChesney Martin said the job of the Fed is to take away the punch bowl just when the party is getting going. Not only should the Chamber and CEOs be ignored because they are attendees at the Quantitative Easing parties, they have now become alcoholics who are now addicted to the easy-money punch. Asking the Chamber and CEOs whether they want to raise the federal debt ceiling is like asking the town drunk if he wants the bar to stay open past closing time.

International socialist politicians association say raise the debt ceiling

Foreign leaders are also clamoring for the U.S. to raise the debt ceiling—for the same reason. They are also “at the party” and also addicted to the easy money “punch.” And they are all a bunch of socialists who want America to be the same to prevent America from attracting away talent and capital from their countries.

So what does Obama’s pushing as hard as possible by inaction and flaming rhetoric to bring down the U.S. government, dollar, and economy mean about when we will get hyperinflation? It makes sure it will happen sooner.


No one knows, but sooner that it would have if the President behaved like previous presidents and tried to prevent meltdown and discourage people from thinking there would be a meltdown.

Obama and his party are so sure they will gain political power from a meltdown by persuading the public that it’s the Republicans’ fault that they are no longer showing even the slightest restraint in either inflicting as much actual financial and other pain on as many people as possible and in saying the most inflammatory, scary things they can think of to encourage the American people and the world to believe the U.S. is going down.

The combination of inaction and inflammatory doomsday rhetoric may well be the self-fulfilling prophecy that triggers the hyperinflation or another type of financial crash.

Normal people might have been chastened by trying this same stunt unsuccessfully in March with regard to the Sequester. It revealed Obama to be a crier of wolf and a Chicken Little. But Obama’s reaction to being revealed to be an alarmist and liar in March is “If at first you don’t succeed in panicking the nation and the world, try, try again.” “If you can’t bring down the country by furloughing air traffic controllers and ending White House Tours, furlough hundreds of thousands more federal and close far more tourist attractions.” The only lesson Obama learned from his exaggerated pre-Sequester rhetoric and subsequent failure of the sky to fall was that he did not make sure enough pain was suffered by enough Americans.

Obama, in other words, is going to keep hurting as many Americans as possible as much as possible until he gets his way.

Such behavior, by the President of the United States, is treason.

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