America is “printing” money—so much that it now seems certain that on one future day—maybe tomorrow—the U.S. dollar will hyperinflate. That means a Hershey bar that now costs about $1.29 will rise in price to $100 then $1,000 then a million. In other words, the U.S. dollar will be worthless.
You don’t think it can happen here?
Many readers may think that is preposterous, impossible.
During the Revolutionary War, the American colonies printed their own money. To fund the war, they printed too many. That currency was called a “Continental.” My wife’s last job was at the Federal Reserve Bank of San Francisco near the foot of Market Street.
U.S. currency museum
In their first floor, they have a U.S. currency museum. You can see it by appointment which is not hard to arrange. Student groups often go there. My wife sometimes had the duty of acting as a tour guide there. It has U.S. currency from the entire history of the countries.
Because they printed too many Continentals, they suffered hyperinflation. A phrase arose then: “not worth a Continental.” It was used to describe something that was worthless. Sort of like “That and a dime will get you a cup of coffee” in the World War II era. They have actual Continentals in the San Francisco Federal Reserve Bank museum.
We had hyperinflation again in America during the Civil War. They printed too many of a currency called a “Greenback Dollar.” There was a Kingston Trio folk song about them with that name in 1962. It’s key lyric is “I don’t give a damn about a Greenback Dollar. Spend it fast as I can.”
Spending a currency as fast as you can is what happens when a currency hyperinflates. In one Latin American hyperinflation, an American was waiting for his flight and sitting in the bar having a drink. When he ordered a second, the waitress made sure he knew that the price had increased since the first one. He was paying in the local currency and it was hyperinflating.
In Germany during their wheelbarrows full of cash hyperinflation in the early 1920s, factories had to pay their employees twice a day, AND LET THEM LEAVE WORK TO GO SPEND THE MONEY BEFORE IT LOST MORE VALUE!
The Day the Dollar Dies
I wrote a web article called The Day the Dollar Dies which describes what Americans will do when they realize that the U.S. dollar is hyperinflating. They frantically spend their dollars to thereby convert them into hard goods so they will stop losing purchasing power.
Size does not matter. Ratios do.
The key statistic that tells you hyperinflation is coming is the national-debt-to-GDP ratio. Here is a graph of that stat for the U.S. dollar in the 20th and 21st century.
Here are some key US debt-to-GDP ratios to give you perspective on how bad the ratio now is.
• 1930 17.7%
• 1946 121.2%
• 1981 30.6%
• 2001 54.0%
• 2008 64.1%
• 2016 103.2%
• 2021 130.5%
And here are some debt-to-GDP ratios from other nations.
• Max allowed to join the Eurozone 60%
• Japan today 230% (worst in the world)
• Venezuela 214.4% currently suffering from hyperinflation
• Sudan 177.9%
• Greece 174.1% one of the PIIGS countries
• Lebanon 157.8 currently suffering from hyperinflation
• Italy 133.4% another PIIGS country
• Portugal 119.5% another PIIGS country
One of the big lessons I learned in the Harvard Business School MBA program was that size does not matter. But ratios do. Many readers here no doubt think America cannot be in financially trouble because it has the biggest GDP in the world.
That is size. Size does not matter. Ratios do matter. America was a strong country in 1930 because we had a low debt-to-GDP ratio. The federal government launched unprecedented spending programs to help people financially in the Great Depression. They were able to do that because of that low debt-to-GDP ratio.
Democrat spending plans
Given all that, what do Biden and the Democrats now plan to do in terms of the U.S. debt-to-GDP ratio. First, they would not appreciate your even mentioning it.
They plan to dramatically increase spending and thereby the debt-to-GDP ratio. They also plan to increase regulation and taxation which will lower the GDP or at least retard its growth, which in conjunction with unlimited deficit spending. (spending that exceeds America’s tax revenue)
Will increased marginal income tax rates—tax the rich—lower the deficit spending? No. See Hauser’s Law. It says tax revenue in the US is around 19.5% of GDP year in and year out no matter what the top tax rate is. So the only way to increase U.S. income tax revenues is to increase the GDP.
What are Biden and the Democrats spending plans?
• Medicare for All $32.6 T in first 10 years
• Green New Deal $51 to $93 T in first 10 years
• cancel all college debt $1.5 T
• covid 19 relief $2.2 T
• free college tuition for people making up to $125,000 a year
• lower the age for Medicare from 65 to 60
• mandatory 12 weeks of paid family or medical leave for all employees
• free medical care to illegals
• 500 million new solar panels and 60,000 made-in-America wind turbines.
Republicans were driving us off the financial cliff at 100 miles an hour. Democrats are driving us off the same financial cliff at 300 miles an hour.
I believe my book How To Protect Your Life Savings From Hyperinflation & Depression, 2nd edition is the only book that tells you hw to protect yourself from all this. It uses an insurance mindset—low-cost, low-risk hedges—not the usual gambling approach—buying gold. Buying gold is a very bad idea. See my web article on its disadvantages.
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