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At the end of major economic cycles, shortages develop in all areas of the economy. And this is what the world is experiencing today on a global basis. There is a general lack of labour, whether it is restaurant staff, truck drivers or medical personnel.

There are also shortages of raw materials, lithium (electric car batteries), semi-conductors, food, a great deal of consumer products, cardboard boxes, energy and etc, etc. The list is endless.

SHORTAGES EVERYWHERE

Everything is of course blamed on Covid but most of these shortages are due to structural problems. We have today a global system which cannot cope with the tiniest imbalances in the supply chain.

Just one small component missing could change history as the nursery rhyme below explains:

For want of a nail, the shoe was lost.
For want of a shoe, the horse was lost.
For want of a horse, the rider was lost.
For want of a rider, the battle was lost.
For want of a battle, the kingdom was lost.
And all for the want of a horseshoe nail.

Cavalry battles are lost if there is a shortage of horseshoe nails.

The world is not just vulnerable to shortages of goods and services.

BOMBSHELLS

Bombshells could appear from anywhere. Let’s just list a few like:

Dollar collapse (and other currencies)
Stock market crash
Debt defaults, bond collapse (e.g. Evergrande)
Liquidity crisis (if money printing stops or has no effect)
Inflation leading to hyperinflation

There is a high likelihood that not just one of the above will happen in the next few years but all of them.

Because this is how empires and economic bubbles end.

The Roman Empire needed 500,000 troops to control its vast empire.

Emperor Septimius Severus (200 AD) advised his sons to “Enrich the troops with gold but no one else”.

…click on the above link to read the rest of the article…

Michael Pento: First Disinflation, Then Deflation, Then Big-Time Inflation

July 29, 2021

Michael Pento: First Disinflation, Then Deflation, Then Big-Time Inflation

Suddenly investors are panicked that (hyper)inflation is taking over.

But what if they’re mistaken? That could be a costly mistake if they’re betting their portfolio’s future on it. Because there’s a strong case to be made that we’re now actually entering a period of dis-inflation, one that has a high risk of tipping into outright deflation by next year.

To argue this, investment manager Michael Pento, who pulls no punches, joins Wealthion for this video explaining why the Fed and Congress don’t currently have sufficient air cover to continue the same magnitude of stimulus the market is now addicted to — and thus won’t be able to resume it until after the next painful market correction arrives.

Michael then proceeds to explain why the bond market is such a ticking time bomb right now for investors.

And, of course, he shares his views on his favored asset classes for each stage of the upcoming progression he sees:

1. first disinflation, then…

2. outright deflation, and then…

3. a hugely inflationary response from our central planners

Watch the full interview below:

Is the United States on The Same Calamitous Path as Yugoslavia?

June 6, 2021

Is the United States on The Same Calamitous Path as Yugoslavia?

“Tito, go and make them happy and bring order to the Balkans.” Pic from Propagandopolis

Of all the inflationary disasters in modern economic history, Yugoslavia’s is the one most ignored by the mainstream. To be sure, the collapse of the Eastern European nation was a slow burn, but with a big explosion at the end. Most people are familiar with the Serbian/Croatian war and the genocide that followed, but few people are familiar with the economic crisis that led to the conflict.

I am not here to present an in-depth analysis of the eventual breakup of Yugoslavia, only to examine the conditions that triggered it. I believe there are some interesting similarities to burgeoning conditions within the U.S., along with some distinct differences.

The first stage: inflation

President Josip Broz Tito led the nation in various capacities from 1953 to 1980. He used two powerful tools to clamp down on unrest in the ethnically-diverse nation: large-scale repression of dissenting voices using both police and military forces, and allowing regional foreign borrowing. The latter might not sound particularly important. According to the CIA’s 1983 national intelligence document Yugoslavia: An Approaching Crisis?:

Although self-management in theory permits workers to own and manage their enterprises, in fact the leaders in the six republics and two provinces… became the dominant economic decision makers. They grew increasingly protectionist and isolated from each other in pursuing local interests. Ignoring national economies of scale and ultimate profitability, they built redundant enterprises, blocked competition on the “unified market,” and granted unrealistic price increases and subsidies to favored industries. Thus, by the early 1980s inflation in the 30- to 40-percent range became chronic…

…click on the above link to read the rest of the article…

Confronted with a Nightmare Scenario – John Rubino 5.8.2021

May 11, 2021

Financial writer John Rubino says there is no easy way out for the financial and political mess the United States has created for itself. Rubino starts with the economic problems and explains, “Now, inflation is starting to spread. . . . Look at lumber. If you are trying to build a house, it’s $35,000 more now than it was two years ago just because of lumber. Iron ore, house prices, grains, food and you name it, we’ve got inflation going on. At the same time, we have an apparent labor shortage. All these companies are coming out and saying we would love to take on all the business we are being offered to us, but we don’t have enough people. Even Uber and Lyft cannot find enough drivers. It’s weird it is happening this soon, but we should not be surprised since we dumped tens of trillions of dollars into the economy over the past year. This is what you would expect if you get the money supply going up 30% or 40%, which it did. This is what you get. The economy overheats. Now, we are confronted with the nightmare scenario in a fiat currency system. Inflation starts to pick up, which it is. That sends interest rates higher, which is happening. That threatens all the heavily indebted people out there because as rates go up, their costs rise. Then they go bankrupt in increasing numbers, and the system collapses. We are in the early stages in that kind of a process, and I don’t think anybody knows what to do about it.”

…click on the above link to read the rest of the article…

BofA: “Transitory Hyperinflation Ahead”

May 4, 2021

BofA: “Transitory Hyperinflation Ahead”

Last week, when discussing the latest earnings call commentary, Bank of America said “Buckle up! Inflation is here”, and showed a chart of the number of mentions of “inflation” during earnings calls which exploded, more than tripling YoY per company so far, the and the biggest jump in history since BofA started keeping records in 2004.

Who knew that just one week later BofA would need a bigger chart… a much bigger chart.

As BofA’s Savita Subramanian writes, after the third week of earnings. mentions of “inflation” have now quadrupled YoY; and after last week, mentions have jumped nearly 800% YoY!

While the implications are obvious, we leave it to Bank of America to explain what this means:

On an absolute basis, [inflation] mentions skyrocketed to near record highs from 2011, pointing to at the very least, “transitory” hyper-inflation ahead.

Yes… really:

Because if there is one thing hyperinflation is, it’s “transitory.”

Getting Hyperinflation Right

March 15, 2021

Getting Hyperinflation Right

Profligate money printing by the US Federal Reserve and by other Western central banks has amounted to around $10 trillion over just the last year. The amount of currency in circulation has grown to $2 trillion, breaking a record set in 1945 and showing an almost 12% increase over 2019. The US federal budget deficit stands at just about $3.5 trillion, which is over 16% of GDP—the highest it’s been since World War II. Meanwhile, the US federal debt has just topped $28 trillion. Over the past year the US has overspent its revenues by a staggering 194%.

Prices are going up everywhere even as the underlying economy remains in coronavirus-inspired doldrums, specifically because consumption has been repressed, with the coronavirus as an excuse, to delay the onset of hyperinflation. And then the Chairman of the Federal Reserve steps in and calms the troubled waters by publicly claiming that “There is no reason to be afraid of hyperinflation.” This sounds a lot like denial, which is the first of the five stages of grief, after which come anger, bargaining, depression and acceptance. Powell said “hyperinflation”; therefore, there shall be hyperinflation.

What happens to the value of money when a government prints lots of it—to spend or to simply hand out to people—is that the money becomes less valuable because there is more money per unit things to buy with it. The expectation that this trend will continue then triggers a continuous process of increasing prices, called inflation, while the resulting expectation that the rate of inflation will continue to increase triggers hyperinflation.

My view is that hyperinflation is hardly a problem at all and that, quite the opposite, it is a solution to a great many pressing problems. Here we will look at hyperinflation as nature’s gentle way of solving the problems of a society that has forgotten how to live within its means…

…click on the above link to read the rest of the article…

hyperinflation, inflation, dmitry orlov, money printing, club orlov, fed, us federal reserve

Michael Burry Warns Weimar Hyperinflation Is Coming

February 21, 2021

Michael Burry Warns Weimar Hyperinflation Is Coming

Update (1815 ET): one day after the Weimar tweetstorm below, and shortly after our article came out, Burry tweeted the following:

People say I didn’t warn last time. I did, but no one listened. So I warn this time. And still, no one listens. But I will have proof I warned.

Indeed he will.

* * *

One week ago, Bank of America hinted at the unthinkable: the tsunami of monetary and fiscal stimulus, coupled with the upcoming surge in monetary velocity as the world’s economy emerges from lockdowns, would lead to unprecedented economic overheating… or rather precedented as BofA’s CIO Michael Hartnett reflected back on the post-WW1 Germany which he said was the “most epic, extreme analog of surging velocity and inflation following end of war psychology, pent-up savings, lost confidence in currency & authorities” and specifically the Reichsbank’s monetization of debt, and extrapolated that this is similar to what is going on now.

There is, of course, another name for that period: Weimar Germany, and because we all know what happened then, it is understandable why BofA does not want to mention that particular name.

Of course, others have been less shy – in 1974, Jens Parsson wrote a fascinating, in-depth historical analysis of the hyperinflationary collapse of Weimar Germany under the original money printer, Rudy von Havenstein, “Dying of Money: Lessons of the Great German and American Inflations” one which we periodically remind readers is absolutely critical reading in preparation for what comes next.

Then overnight none other than the Big Short, Michael Burry, who has been rather busy making waves within the financial community with his hot takes (most recently, his slam of Robinhood and his bullish view on Uranium), picked up on the theme of Weimar Germany and specifically its hyperinflation, as the blueprint for what comes next in a lengthy tweetstorm cribbing generously from Parsson’s seminal work…

…click on the above link to read the rest of the article…

The Foundation for Potential Price Hyperinflation is Being Laid

February 13, 2021

The Foundation for Potential Price Hyperinflation is Being Laid

The Federal Reserve sure seems to have a tough time finding and reporting signs of rising inflation — especially when it’s hidden in other sectors like a lack of demand for energy.

A recent example of the Fed’s “inflation blindness” comes from a speech Chairman Jerome Powell gave to the Economic Club of New York. According to a MarketWatch piece that reported on that speech:

Powell said he doesn’t expect “a large nor sustained” increase in inflation right now. Price rises from the “burst of spending” as the economy reopens are not likely to be sustained.

It’s odd that Powell would say he doesn’t expect a sustained increase in inflation, because food price inflation has consistently run 3.5 to 4.5 percent since April last year. That sure seems like a sustained increase in food prices.

What Powell seems to have “forgotten” is that some of the overall inflation includes negative energy price inflation (as low as negative 9 percent at one point). But now that the demand for fuel is returning, the official gasoline index rose 7.4 percent in January.

It will be much more challenging for Powell to keep downplaying the risk of hyperinflation once energy price inflation rises back to “pre-pandemic” levels.

In fact, Robert Wenzel thinks the main inflation event is “just about to hit.” If it does, and inflation does rise past Powell’s two percent target, it isn’t likely to stop there. Jim Rickards thinks that’s when hyperinflation can gain momentum:

If inflation does hit 3%, it is more likely to go to 6% or higher, rather than back down to 2%. The process will feed on itself and be difficult to stop. Sadly, there are no Volckers or Reagans on the horizon today. There are only weak political leaders and misguided central bankers.

…click on the above link to read the rest of the article…

Historical lessons in prosperity vs. poverty

February 7, 2021

Historical lessons in prosperity vs. poverty

As the grandson of Genghis Khan, Kublai Khan had a lot to prove.

So he set his eyes on the biggest prize in the known world at the time: southern China.

Kublai Khan completed his conquest of China in 1279, forging a new empire and creating the Yuan dynasty.

The Mongols were known for their expensive habits— they liked war and women especially. So when the money started to run out, administrators in the Yuan dynasty started printing paper money.

Yuan officials weren’t the first to come up with this idea; the government from the prior Song dynasty had also printed paper money. But there was a huge difference—

Paper currency from the Song dynasty, known as guanzi, was backed by copper, silver, and gold coins.

The Yuan currency, however, was backed by nothing. So whenever the government started to run out of money, they simply printed more.

By 1350, Kublai Khan had been dead for decades. But the Yuan dynasty’s economic overseers were still printing paper money like crazy. And it was causing severe hyperinflation across China.

People’s lives were turned upside down by the government’s fiscal irresponsibility, and rebellions broke out across the country.

By 1368, the Yuan dynasty had completely collapsed, and a destitute peasant farmer-turned-monk named Zhu Yuanzhang rose up to become Emperor and found the new Ming Dynasty.

To stimulate the economy ravaged by inflation, the Ming dynasty created an unprecedented level of economic freedom.

Markets and industries were deregulated; the government abandoned its monopoly on salt production, for example, and merchants were encouraged to allow market competition to set prices.

In time, the government stabilized the currency and reintroduced metallic coins. And by the 1500s Ming officials even allowed foreign currencies like the Spanish Silver Dollar to circulate in China.

…click on the above link to read the rest of the article…

If You Thought 2020 Was Bad, Watch What Happens In 2021

December 12, 2020

If You Thought 2020 Was Bad, Watch What Happens In 2021

In terms of the economy and the American social situation, 2020 is definitely one of the ugliest years on record, there’s really no way around it. That said, I get the impression that many in the public are operating under the assumption that we are about to cross over the peak of the mountain and it will be all downhill from here on. Unfortunately, this is not the case.

All eyes have been focused on the pandemic event, and the thinking is that once the pandemic is “over”, the crisis will be over and everything will go back to normal. But, as the globalists have been telling us since the outbreak began, the world “will never go back to normal again”. It’s not because of the pandemic, mind you, it’s because THEY won’t allow things to go back to normal. The “great reset”, as the World Economic Forum calls it, is meant to go on for many years. And, the globalists intend that every aspect of our lives be changed into something almost unrecognizable.

First I want to make it clear that I don’t expect the reset agenda to be successful. In fact, I think it’s going to fail miserably. The globalists have reached too far too fast and exposed themselves, and millions upon millions of people around the world and in America are not buying the pandemic narrative. But here is the problem; the pandemic is a distraction from a much greater threat, namely the economic collapse that is developing right now.

The financial downturn has been created by international banks and central banks through massive debt creation and inflationary stimulus measures. The initial spark for the wildfire took place in 2008, the economic threat has been under the noses of the public for quite some time…

…click on the above link to read the rest of the article…

The “Great Reset” And The Risk Of Greater Interventionism

November 23, 2020

The “Great Reset” And The Risk Of Greater Interventionism

Global debt is expected to soar to a record $277 trillion by the end of the year, according to the Institute of International Finance. Developed markets’ total debt -government, corporate and households- jumped to 432% of GDP in the third quarter. Emerging market debt-to-GDP hit nearly 250% in the third quarter, with China reaching 335%, and for the year the ratio is expected to reach about 365% of global GDP. Most of this massive increase of $15 trillion in one year comes from government and corporates’ response to the pandemic. However, we must remember that the total debt figure already reached record-highs in 2019 before any pandemic and in a period of growth.

The main problem is that most of this debt is unproductive debt. Governments are using the unprecedented fiscal space to perpetuate bloated current spending, which generates no real economic return, so the likely outcome will be that debt will continue to rise after the pandemic crisis is ended and that the level of growth and productivity achieved will not be enough to reduce the financial burden on public accounts.

In this context, The World Economic Forum has presented a roadmap for what has been called “The Great Reset”. It is a plan that aims to take the current opportunity to “to shape an economic recovery and the future direction of global relations, economies, and priorities”. According to the World Economic Forum, the world must also adapt to the current reality by “directing the market to fairer results, ensure investments are aimed at mutual progress including accelerating ecologically friendly investments, and to start a fourth industrial revolution, creating digital economic and public infrastructure”. These objectives are obviously shared by all of us, and the reality shows that the private sector is already implementing these ideas, as we see technology, renewable investments and sustainability plans thriving all over the world.

…click on the above link to read the rest of the article…

What the Great Reset Architects Don’t Want You To Understand About Economics

October 24, 2020

What the Great Reset Architects Don’t Want You To Understand About Economics

It shouldn’t come as a surprise that the Vice President of the World Bank Carmen Reinhardt recently warned on October 15 that a new financial disaster looms ominously over the horizon with a vast sovereign default and a corporate debt default. Just in the past 6 months of bailouts unleashed by the blowout of the system induced by the Coronavirus lockdown, Reinhardt noted that the U.S. Federal Reserve created $3.4 Trillion out of thin air while it took 40 years to create $14 Trillion. Meanwhile panicking economists are screaming in tandem that banks across Trans Atlantic must unleash ever more hyperinflationary quantitative easing which threatens to turn our money into toilet paper while at the same time acquiescing to infinite lockdowns in response to a disease which has the fatality levels of a common flu.

The fact of the oncoming collapse itself should not be a surprise- especially when one is reminded of the $1.5 quadrillion of derivatives which has taken over a world economy which generates a mere $80 trillion/year in measurable goods and trade. These nebulous bets on insurance on bets on collateralized debts known as derivatives didn’t even exist a few decades ago, and the fact is that no matter what the Federal Reserve and European Central Bank have attempted to do to stop a new rupture of this overextended casino bubble of an economy in recent months, nothing has worked. Zero to negative percent interest rates haven’t worked, opening overnight repo loans of $100 billion/night to failing banks hasn’t worked- nor has $4.5 trillion of bailout unleashed since March 2020. No matter what these financial wizards try to do, things just keep getting worse. Rather than acknowledge what is actually happening, scapegoats have been selected to shift the blame away from reality to the point that the current crisis is actually being blamed on the Coronavirus!

…click on the above link to read the rest of the article…

Hyperinflation is here

October 17, 2020

Hyperinflation is here

Definition: Hyperinflation is the condition whereby monetary authorities accelerate the expansion of the quantity of money to the point where it proves impossible for them to regain control.

It ends when the state’s fiat currency is finally worthless. It is an evolving crisis, not just a climactic event.

Summary

This article defines hyperinflation in simple terms, making it clear that most, if not all governments have already committed their unbacked currencies to destruction by hyperinflation. The evidence is now becoming plain to see.

The phenomenon is driven by the excess of government spending over tax receipts, which has already spiralled out of control in the US and elsewhere. The first round of the coronavirus has only served to make the problem more obvious to those who had already understood that the expansionary phase of the bank credit cycle was coming to an end, and by combining with the economic consequences of the trade tariff war between China and America we are condemned to a repeat of the conditions that led to the Wall Street crash of 1929—32.

For economic historians these should be statements of the obvious. The fact is that the tax base, which is quantified by GDP, when measured by the true rate of the dollar’s loss of purchasing power and confirmed by the accelerated rate of increase in broad money over the last ten years has been declining sharply in real terms while government spending commitments continue to rise.

In this article it is documented for the dollar,but the same hyperinflationary dynamics affect nearly all other fiat currencies.

…click on the above link to read the rest of the article…

The emerging evidence of hyperinflation

October 3, 2020

The emerging evidence of hyperinflation

Note: all references to inflation are of the quantity of money and not to the effect on prices unless otherwise indicated.

In last week’s article I showed why empirical evidence of fiat money collapses are relevant to monetary conditions today. In this article I explain why the purchasing power of the dollar is hostage to foreign sellers, and that if the Fed continues with current monetary policies the dollar will follow the same fate as John Law’s livre in 1720. As always in these situations, there is little public understanding of money and the realisation that monetary policy is designed to tax people for the benefit of their government will come as an unpleasant shock. The speed at which state money then collapses in its utility will be swift. This article concentrates on the US dollar, central to other fiat currencies, and where the monetary and financial imbalances are greatest.

Introduction

In last week’s Goldmoney Insight, Lessons on inflation from the past, I described how there were certain characteristics of Germany’s 1914-23 inflation that collapsed the paper mark which are relevant to our current situation. I drew a parallel between John Law’s inflation and his Mississippi bubble in 1715-20 and the Federal Reserve’s policy of inflating the money supply to sustain a bubble in financial assets today. Law’s bubble popped and resulted in the destruction of his currency and the Fed is pursuing the same policies on the grandest of scales. The contemporary inflations of all the major state-issued currencies will similarly risk a collapse in their purchasing powers, and rapidly at that.

…click on the above link to read the rest of the article…

Hyperinflation, Fascism and War: How the New World Order May Be Defeated Once More

September 23, 2020

Hyperinflation, Fascism and War: How the New World Order May Be Defeated Once More

While the world’s attention is absorbed by tectonic shifts unfolding across America as “a perfect storm of civil war, and military coup threatens to undo both the elections and the very foundations of the republic itself, something very ominous has appeared “off of the radar” of most onlookers. This something is a financial collapse of the trans-Atlantic banks that threatens to unleash chaos upon the world. It is this collapse that underlies the desperate efforts being made by the neo-con drive for total war with Russia, China and other members of the growing Mutlipolar Alliance today.

In recent articles, I have mentioned that the Bank of England-led “solution” to this oncoming financial blowout of the $1.5 quadrillion derivatives bubble is being pushed under the cover of a “Great Global Reset” which is an ugly and desperate effort to use COVID-19 as a cover for the imposition of a new post-covid world order operating system. Since the new “rules” of this new system are very similar to the 1923 Bank of England “solution” to Germany’s economic chaos which eventually required a fascist governance mechanism to impose it onto the masses, I wish to take a deeper look at the causes and effects of Weimar Germany’s completely un-necessary collapse into hyperinflation and chaos during the period of 1919-1923.

In this essay, I will go further to examine how those same architects of hyperfinflation came close to establishing a global bankers’ dictatorship in 1933 and how that early attempt at a New World Order was fortunately derailed through a bold fight which has been written out of popular history books.

…click on the above link to read the rest of the article…

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