Money Wise

Hyperinflation (from Survival Blog)


The Insidious Nature of Inflation--The Debasement of the U.S. Dollar Continues

I recently helped some elderly cousins move from their two story home of many years into a smaller one story apartment in a retirement community. (They are having "mobility" problems.) Part of this move involved cleaning out a storage space that hadn't been touched in more than 40 years. The accumulation of household goods--mainly books--was not unusual or noteworthy. However, what was indeed notable was that many of the boxes had newspapers used as padding in the top. Pulling out these papers, which were mostly from 1958 was a real eye-opener for our kids. Here are some examples of the advertisement prices that our kids were reading aloud, with much laughter:

Beauty Salon: Ladies stylized haircut $1; Revlon manicure 75 cents; Shampoo and Set $1
Flooring store: Rubber tiles 12 cents each, Inlaid linoleum tile 5-1/2 cents, Vinyl tile 7-1/2 cents
Grocery Store: Leg of Lamb 65 cents/lb., Breast of Lamb 15 cents/lb., Picnic hams 29 cents/lb., Johnnie Walker Scotch $6.38/fifth, Hills Bros. Coffee 49 cents per lb.
Another grocery store: Ice cream 69 cents/half gallon, fresh peaches, 5 pounds for 49 cents; choice tomatoes 2 pounds for 29 cents; Ghirardelli chocolate 53 cents/lb.
Car Dealerships: Current model year Cadillac Convertible $4,395, 1957 Chevy (one year old) $2,195, 1950 Buick Sedan "Real Nice" $165, 1954 Ford Victoria V-8 $875
Classified Ads: 1951 Studebaker V-8 Coupe, new paint $245, 1951 Chevy sedan $145, Olds 1950 "Rocket 88" $140, German Shepard Pups, $25 to $35, Clerk -Typist "Ages 21 to 35" $295 per week, Colt Service .45 Auto [Model 1911] "good cond., with holster" $12.

The prices in these ads illustrate the slow but relentless debasement of our currency. Before 1965, our coinage was 90% silver, and paper money was still redeemable in silver. Granted, wages were proportionately smaller, but any savings held in dollars get relentlessly eaten away by inflation, year after year. It is no wonder that the savings rate in the U.S. recently went below zero. (Americans presently spend $1.06 for each dollar that they earn, piling up debt instead of savings.) The inflation of the money supply is gradual enough that it insidiously goes without raising public alarm. Because inflation is so relentless, I recommend investing in tangibles--things like productive farm land, gold, silver, guns, and common caliber ammunition. The dollar will surely continue to go down and down in value, but for the most part tangibles will hold their value.

Writing recently in The Daily Reckoning (a free e-mail newsletter) editor Bill Bonner (also the co-author of the book "Empire of Debt") summed up the current situation nicely: "We simplify for the benefit of readers with tight schedules or short attention spans: The United States puts out dollars - trillions of them. U.S. consumers use the dollars to overspend, by buying products from overseas, approximately $1.06 worth of buying for every dollar actually earned. Foreign governments want the spending to continue. Instead of sending the dollars back where they came from by buying American goods, they issue local currencies to buy them and put them in their central bank vaults. All this extra money is then magnified...2...3...10 it is lent, re-lent and used as reserves for various financial instruments.
Meanwhile a whole new industry has risen up to help with the lending, mortgaging, gambling that goes along with this explosion of money. Derivatives now equal seven times world GDP and are growing five times as fast. The new 'liquidity' is floating up financial assets all over the world.
Traditionally, more money in the system caused consumer price inflation - which was seen as a threat to the well being of the rich as well as the masses. Central bankers knew they had to get it under control or they would be swamped by it. But this new liquidity is different. People love it. The lumps never get a chance to use it to buy toilet paper. Instead, it sloshes around the hedge funds, banks, financial houses and rich financiers' a 'wave of liquidity' upon which so many super-wealthy are now riding. In 1980, the ratio of financial assets to GDP stood at about 1.5 to 1. Now, it is about 4 to 1. Yes, dear reader, upon this ocean of liquidity rides a great Titanic of asset price inflation. It is why Picasso, Klimt and Pollack paintings sell for such absurd prices. It is why houses in Aspen, Greenwich and Kensington have reached such breathtaking prices. It is why Chinese stocks have doubled in the last year. And it is why the Dow is at an all-time high...and why Manhattan real estate is selling for such high prices that even the rats are having to pack up and move to New Jersey."

The debt merry-go-round that Bill Bonner described cannot go on forever. When the average consumer runs out of credit, when the U.S. Treasury itself is no longer considered credit worthy, and when the U.S. dollar itself is recognized for what it really is (nicely printed toilet paper), then things will get ugly. "The Piper must be paid." In this case the Pipers are foreign lending institutions. If you stop making the payments on your car, the banks send a repo man to tow your car away. And when entire nations go into default, it usually signals cataclysmic events. Be prepared.


Signs of Potential Currency Hyperinflation, by Lee Rogers

Defeat the Coin Act of 2006, by Lee Rogers at The Funny Money Report. Here is an excerpt: "Over this past summer a bill was introduced in the U.S. House of Representatives called the Currency Overhaul for an Industrious Nation. This bill is also referred to as the Coin Act of 2006 or House Resolution 5818. Introduced by Representative Jim Kolbe from Arizona the bill was referred to the Subcommittee on Domestic and International Monetary Policy, Trade, and Technology this past August. The purpose of the bill according to the text of the bill itself is to modernize the legal tender of the United States, and for other purposes. The mainstream media has sold this bill to the American people as legislation that will move to get rid of the penny. Even though that is one of the proposals included in the bill, there are much more significant things in the bill which makes me dead set against it.

The implications of the U.S. Mint being put in the hands of the banking cartel is another major problem. If the Federal Reserve gets control of it, I wonder how long it will take before they order a stop to the production of collectible U.S. gold coins. Or for that matter, how long would it take for them to eliminate the production of all U.S. coins? Obviously if rampant inflation continues, we will either see a change in the composition of the coins or an elimination of them." The preceding article excerpt was forwarded courtesy of Tom W. at



Signs of Potential Currency Hyperinflation, by Lee Rogers

The article on currency hyperinflation [by Lee Roger, posted on November 30th] was interesting. However, trying to keep the puny penny alive to prevent hyperinflation is like trying to prevent floods by banning depth gauges.

Someone will need to explain to me why we need any coinage with a denomination less than the value of a minute of a minimum wage worker’s time. For decades in earlier times, our smallest coin was worth about as much as out current dime.

How many billions in wasted time would be saved if we had a simple coinage system that reflected real current prices, instead of living in denial about past and current inflation?

I propose that we could optimally operate with fewer coins: dimes, halves, and dollars, plus $5 coins. All transactions transacted in tenth dollars (drop the whole darn penny digit) Four useful coins for daily transactions, instead of the current six. Drop the wallet-bursting $1 bill, and the silly $2 bill, and keep the $5 as the lowest [denomination] bill. Add a $500 bill to allow more portable wealth, and the system makes as much sense as it used to.

Anyone who worries that this will cause more inflation is well-advised to buy precious metals. And of course, it would be better if the coinage and currency reflected real value. But that is no reason to live in denial about the reality of inflation. A pocket full of worthless change will not change economic reality.

Also, note that is an interesting source to determine the theoretical “value” of coins based on their metal content. But be cautioned that no one is paying these prices. They reflect the value if the metals were separated and pure. The cost of the mint to buy the metal to produce a coin does not mean that it has that value to any buyer. Sure, you can “double your money” by picking out pre-1982 copper pennies. But if it takes you only 6 seconds to find each one, you are earning only minimum wage. Never mind that the cost to transport it to copper buyers would eat much of your profits.-