Posted Jan 28, 2013 by Martin Armstrong
I really do not understand why people insist that HYPERINFLATION must take place. That ASSUMES government will print to meet its unfunded obligations rather than just change laws and fail to meet promises. They are cutting entitlements already. Yes Rome debased its currency to the point that its worth was 1/50th of its former value. However, the system devolved into a TWO-TIER monetary system where they refused to accept their own currency in return for taxes. Taxes were imposed “in kind” so they just came and took stuff. In terms of gold, the tax was by weight not by coin so you have tax-collector gold bars that have survived.
Everything is NOT fair and orderly. One of the reasons there was the invention of paper money in the American Colonies is because there was a shortage of coins. Britain insisted anything Americans purchased they had to pay in silver or gold. But what the British purchased from America they paid in copper. That is why we have the DOLLAR because the Colonists adopted the Spanish monetary system rather than Britain. This was hugely deflationary extracting silver and gold from the money supply.
This insistence upon HYPERINFLATION appears to be nothing more than a sales pitch to buy gold and silver with promises that it will rise in value when everything else falls. Even the German hyperinflation ended when they issued a new currency backed by land. Gold and silver are simply an object suitable for trade in the underground economy. That has been its role historically – the hedge against government rather than inflation.
Both the COLLAPSE of Rome as well as Japan in 974 AD, centered around the collapse in the currency so that people just no longer accepted it and they turned to barter. Japan was not that different from Rome in that respect. There was NO coinage at all produced for 600 years! The economy turned inward to barter and taxes had risen so much that people were just forced to abandon property and that led to Japanese feudalism. Since the rule of law collapsed and there was no effective government to protect property, landlords had to hire their own protection and that is known as the Samurai Period.
There has NEVER been some nice orderly HYPERINFLATION where you become rich overnight. EVERYTHING collapses right down to the rule of law. It all goes out the window. In a major economy where there is a bond market, the bankers insist behind closed doors that unless they are paid, you will not sell more debt, and government will collapse. The problem is interest rises and consumes everything and this becomes the GREATEST transfer of wealth ever to take place always through debt. It is not the corporations insisting you have to pay double for a car. It is the banks threatening government who then comes after you to placate the bankers.
This is how debt destroys the economy. HYPERINFLATION has only taken place in peripheral economies. It has NEVER taken place in a major empire. Everything falls apart first. So yes the coinage fell to 1/50th of its former value in Rome, but that is because people turned to barter, left the cities, and the succession of emperors was unreal. They were being killed generally in less than 2 years. In the case of Japan and Rome, people just abandoned their homes and fled away from government giving birth to feudalism.
Property taxes are rising. Even New Jersey imposed an exit tax. If you try to sell and leave the state, they then want a tax to leave. Taxes are rising and the same patterns exist. People cannot afford to live with the tax burdens we have that always rise irrespective of the economic conditions. This is what forces people to just abandon property.
What is different in this cycle is we have no place to go. There is no new world to flee to. The idea that we just simply HYPERINFLATE and pay bills is not realistic. Society will collapse long before that and government is not taking this laying down – they are attacking everything everywhere. They are tracking all gold. They have enacted laws that any package being mailed OUT of the USA must now declare everything in it. They are looking to confiscate wealth everywhere. Gold will NEVER reach $30,000, FOR THERE WILL BE TROOPS AT YOUR DOOR TO CONFISCATE WHAT YOU HAVE LONG BEFORE THAT!
What will happen is the dollar will rise and be the last to fall. Europe is being held together with bubble-gum and promises of the next bailout as if there is any country without the same problem. Japan has kept interest rates so low, a quarter-point uptick in rates will be devastating. The US will be hit because of a debt contagion BEFORE there is a default. This will be the economic pressure that will cause the economy to implode. We will be forced into a complete new monetary system. Everything will go, It is just a question of time. The HYPERINFLATION idea assumes a passive role on government’s part. Sorry, they will not take this lying down.