“… The Fed created $2.5 trillion, rounding it off, in the crisis of 2008 -They doubled their balance sheet. Clearly, that money is sitting in corporate deposits and bank deposits. Once that money comes off the sidelines, then you’ll start to see what happened in Weimar, Germany from 1922 onward.
People forget what happened in the first couple years of Weimar, Germany …
They had very low unemployment. The big manufacturing centers of Germany were expanding and growing. The illusion of all this new printed money was great. It made everybody feel better. It’s kind of like right now in America. Corporations have never had more cash than they’ve had before.
But once that money starts building velocity and all of a sudden, prices start going up … Hyperinflation in its definition is when you see a 50% increase in price within a 30 calendar day period. I know this is going to really surprise you, but I believe by 2015 unless some serious changes are made, we will see months in 2015 where you will see inflation rates of 50% a month. If we stay on the course we’re on, hyperinflation is not just a possibility, it’s a certainty. …”
This ends Part 3 of my interview with Craig R. Smith by James R. Gorrie. - A long article called: “China, Gold, and the Dollar, The Other American Recession. Parts 1,2&3 at http://www.absolutewealth.com/. Part 4 to issue next Friday.
Billy T comment: This is completely consistent with my more than 6 year old prediction of a run on the dollar by Halloween 2014. I.e. in first or second quarter of 2014, the 2.5 trillion of FED created thin air money will start to emerge from corporate balance sheets, banks will be lending as FED is still keeping interest rates low at least until the second half of 2014. People will be buying, even unneeded expensive goods like yachts and campers as well as no longer keeping their belts tight.
This surge in demand will cause more hiring and salary increases as unemployment falls to ~5%. The economically ignorant masses will think the good times have returned, as briefly salaries grow faster than inflation, but with trillions pouring out into the economy, inflation will be rapidly accelerating. (The supply of goods can not increase as rapidly as the flood of circulating money trying to buy them.)
This lowering of the value of the dollar will make those who sought “safety” in Treasury bonds, finally realize that they are not safe but a means to rapidly lose purchasing power. With the “good times,” lower unemployment, etc. the FED will, as promised, let interest rates rise in second half of 2014. That of course makes the price of Treasury bonds fall, and accelerates the losses of bond holders. Before Halloween 2014, there will be a rush to get funds out of bonds before even greater losses are taken and invest them in something that is safe. As the article quoted states: {People will} say: “I’ll cash that ten-year Treasury bill out that’s paying 1.6% and buy a farm down in Brazil.”
This liquidation of Treasury bonds adds to the circulating money made by the FED´s 2.5 trillion coming out of banks and corporate accounts, making more than 6 trillion dollar surge in money available. – I.e. the accelerating inflation that soon turns into hyper-inflation. I.e. the history of 1923 Weimar, Germany will repeat. - A collapsed economy in depression with hyper-inflation. Despite this being a historically known combination, many will tell you that hyper inflation can not exist simultaneously with depression – they will learn from direct experience, if not from history, that it can.
SUMMARY: my predicted, "worst ever" economic disaster in US and EU is coming just on schedule, as I predicted. China, some other Asian countries, and their suppliers of food stocks and raw materials, such as Brazil, Australia, even Canada and several African nations, which have signed long-term delivery contracts with China, will only have a recession, not a depression.
People forget what happened in the first couple years of Weimar, Germany …
They had very low unemployment. The big manufacturing centers of Germany were expanding and growing. The illusion of all this new printed money was great. It made everybody feel better. It’s kind of like right now in America. Corporations have never had more cash than they’ve had before.
But once that money starts building velocity and all of a sudden, prices start going up … Hyperinflation in its definition is when you see a 50% increase in price within a 30 calendar day period. I know this is going to really surprise you, but I believe by 2015 unless some serious changes are made, we will see months in 2015 where you will see inflation rates of 50% a month. If we stay on the course we’re on, hyperinflation is not just a possibility, it’s a certainty. …”
This ends Part 3 of my interview with Craig R. Smith by James R. Gorrie. - A long article called: “China, Gold, and the Dollar, The Other American Recession. Parts 1,2&3 at http://www.absolutewealth.com/. Part 4 to issue next Friday.
Billy T comment: This is completely consistent with my more than 6 year old prediction of a run on the dollar by Halloween 2014. I.e. in first or second quarter of 2014, the 2.5 trillion of FED created thin air money will start to emerge from corporate balance sheets, banks will be lending as FED is still keeping interest rates low at least until the second half of 2014. People will be buying, even unneeded expensive goods like yachts and campers as well as no longer keeping their belts tight.
This surge in demand will cause more hiring and salary increases as unemployment falls to ~5%. The economically ignorant masses will think the good times have returned, as briefly salaries grow faster than inflation, but with trillions pouring out into the economy, inflation will be rapidly accelerating. (The supply of goods can not increase as rapidly as the flood of circulating money trying to buy them.)
This lowering of the value of the dollar will make those who sought “safety” in Treasury bonds, finally realize that they are not safe but a means to rapidly lose purchasing power. With the “good times,” lower unemployment, etc. the FED will, as promised, let interest rates rise in second half of 2014. That of course makes the price of Treasury bonds fall, and accelerates the losses of bond holders. Before Halloween 2014, there will be a rush to get funds out of bonds before even greater losses are taken and invest them in something that is safe. As the article quoted states: {People will} say: “I’ll cash that ten-year Treasury bill out that’s paying 1.6% and buy a farm down in Brazil.”
This liquidation of Treasury bonds adds to the circulating money made by the FED´s 2.5 trillion coming out of banks and corporate accounts, making more than 6 trillion dollar surge in money available. – I.e. the accelerating inflation that soon turns into hyper-inflation. I.e. the history of 1923 Weimar, Germany will repeat. - A collapsed economy in depression with hyper-inflation. Despite this being a historically known combination, many will tell you that hyper inflation can not exist simultaneously with depression – they will learn from direct experience, if not from history, that it can.
SUMMARY: my predicted, "worst ever" economic disaster in US and EU is coming just on schedule, as I predicted. China, some other Asian countries, and their suppliers of food stocks and raw materials, such as Brazil, Australia, even Canada and several African nations, which have signed long-term delivery contracts with China, will only have a recession, not a depression.
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