When I first read about the Federal Reserve printing money and lowering interest rates to an effective -5% interest rate, images of Argentina and the Weimar Republic flooded my head. Rest assured I believed my fears were just that.
Now we have investor Mark Faber saying hyperinflation is guaranteed. Happen here? Well, there are a lot of things, which are stuck on stupid happening in the United States, but with the U.S. as a reserve currency and the number one economy in the world?
The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.
Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.
“I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”
Is Faber just promoting Gold or some sort of strategy or can hyperinflation happen?
Naked Capitalism has more on the H word prediction.
Only If
Bernanke is a disingenuous frightened little man. He knows full well that the deficit is created by interest the Fed charges the government when it "loans" fiat money to the government to pay for public sector needs.
He also knows that interest need not be charged on its fiat money. That's right, we could have debt free paper money. He knows this, and so do Gietner, Summers and Volcker, and perhaps even the President since he's a student of Abraham Lincoln who gave us "Greenbacks" a debt free currency that financed the Civil War.
Yet, Bernanke persists in his duplicity, his hypocrisy of counselling America to be fiscally responsible. Well then, let's start with monetizing the debt. Congressmen and others who fear hyperinflation would result from doing so are just stupid parrots trained by the bankers to reflexively, although erroneously, scream "hyperinflation."
Monetizing the debt, say $14 trillion in bonds, bills, and notes, simply means printing that amount in new U.S. Treasury Dollars. Federal Reserve Notes, would be liquidated and replaced by these U.S. Treasury Dollars which would pay off all creditors over a period of 12 months. Then, a new Secretary of the Treasury, would mandate the liquidation of all redeemed debt instruments never to be issued again. The economy has what it had before, $14 trillion in dollars and no debt, no increaase in M3....it's a one for one swap including interest due, which would be a one time payout.
If the debt instruments and the Federal Reserve Notes were allowed to remain as part of M3 (the money supply)for recirculation of course we'd have hyperinflation. Liquidating both removes that threat.
We would also be wise to curtail the fractional reserve system. Raising the reserve requirement to 100% and forcing commercial banks to loan only those funds that were used to capitalize and invest in bank profits from commercial and individual loans. Savings and checking deposits would not be loanable.
The fractional reserve system is the primary source of inflation in the world since banks create money by creating debt at the ratio of 10 to 40 to 1. All the banks do is make entries into ledgers by computer. The Treasury Department orders money from the Mint. There is no gold or silver, just the "good faith and credit of the U.S. Government" backing the Federal Reserve Notes and debt instruments.
Transitioning to a debt free currency needs no new authorization/legislation. The authority is contained in All of the above could be done tomorrow morning. If we had a President who would use existing authority, Executive Order 11110 to restore America's sovereignty over its currency, wresting that authority from private bankers. Secondly, EO 11110 permits the monetization crushing domestic and international public debt. Thus reigning in the One Worlders and Masters of the Universe. And, most important, EO 11110 would usher in an era of limitless prosperity where debt free currency allows all levels of the public sector to;
-- employ idle resources,
-- rebuild America,
-- reemploy Americans,
-- train and educate all citizens needing those services,
-- provide for universal health care,
-- rationale energy policy, and
-- the downsizing of monopolies and oligopolies since their
would be no need for "too big to fail" enterprises anti
trust regulations could be liberally enforced.
-- provide America with the highest standard of debt free
living in all the world.
President Obama would simply call the Fed Chairman and tell him to implement Executive Order 11110:
If President Obama wants to "fix" America for all Americans and lead the way for the rest of world with real change all he need do is apply EO 11110.
As America's debt reaches unbearable levels and conflicts rage in Afghanistan, Iraq, and Pakistan all of which will further increase America's debt, one is forced to ask, will President Obama have the courage to consider utilizing Executive Order 11110 and, if not, is he willing to pay the ultimate price, national bancrupty?
Executive Order 11110 AMENDMENT OF EXECUTIVE ORDER NO. 10289
AS AMENDED, RELATING TO THE PERFORMANCE OF CERTAIN FUNCTIONS AFFECTING THE DEPARTMENT OF THE TREASURY
By virtue of the authority vested in me by section 301 of title 3 of the United States Code, it is ordered as follows:
Section 1. Executive Order No. 10289 of September 19, 1951, as amended, is hereby further amended-
By adding at the end of paragraph 1 thereof the following subparagraph (j):
(j) The authority vested in the President by paragraph (b) of section 43 of the Act of May 12,1933, as amended (31 U.S.C.821(b)), to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury not then held for redemption of any outstanding silver certificates, to prescribe the denomination of such silver certificates, and to coin standard silver dollars and subsidiary silver currency for their redemption
and --
By revoking subparagraphs (b) and (c) of paragraph 2 thereof.
Sec. 2. The amendments made by this Order shall not affect any act done, or any right accruing or accrued or any suit or proceeding had or commenced in any civil or criminal cause prior to the date of this Order but all such liabilities shall continue and may be enforced as if said amendments had not been made.
John F. Kennedy The White House, June 4, 1963.
Silver certificates were printed without interest. The Order was for the Treasury to issue silver certificates against all silver held by the government which did not already have certificates against it. The Order was needed due to the passage of Public Law 88-36 which repealed the Silver Purchase Act and other related monetary measures. One result was that after the repeals, only the President could issue new silver certificates.
Kennedy knew that if the silver-backed United States Notes were widely circulated, they would have eliminated the demand for Federal Reserve Notes. This is a very simple matter of economics. The USN was backed by silver and the FRN was not backed by anything of intrinsic value. Executive Order 11110 should have prevented the national debt from reaching its current level (virtually all of the nearly $14 trillion in federal debt has been created since 1963) if LBJ or any subsequent President were to enforce it. It would have almost immediately given the U.S. Government the ability to repay its debt without going to the private Federal Reserve Banks and being charged interest to create new "money". Executive Order 11110 gave the U.S.A. the ability to, once again, create its own money backed by silver and realm value worth something.
Kennedy was assasinated before full implementation of EO 11110. Although some $4 billion in debt free silver notes had been issued they were withdrawn shortly thereafter.
Debt free currency is a Banker's worst nightmare, as reflected in the following article in response to Lincoln's
"Greenbacks." The article was attributed to an unidentified editorialist writing for the London Times in 1865.
It warned:
"If that mischievous financial policy, which had its origin
in the North American Republic, should become indurated down
to a fixture, then that Government will furnish its own
money without cost. It will pay off debts and be without
debt. It will have all the money necessary to carry on its
commerce. It will become prosperous beyond precedent in the
history of the civilized governments of the world. The
brains and the wealth of all countries will go to North
America. That government must be destroyed, or it will
destroy every monarchy on the globe."1
President Obama has either been lied to by his economic team when presented with alternative monetary policy strategies, or having been informed of the alternatives chooses to take the path of least resistance and ultimately the path to national bancrupty. We will see over the next year to 18 months as debt and deficits mount and as unemployment rises with the unprecedented decline in economic activity, (consumption and exports,) and since the stimulus is woefully inadequate as a substitute for these traditional engines of GDP growth.
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1 G.H. Brown, "Web of Debt" the one book the Federal Reserve does not want you to read. If you only read Chapters 1-3 and 40-45 and 47 you will know what the bankers fear most. You may also wish to view the authors Q & A on www.youtube.com or visit her excellent site at webofdebt.co