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Hyperinflation Is it even Possible?

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QUESTION: Mr. Armstrong; I have investigated your explanation of hyperinflation and can see that you are correct in that this is limited to third world and revolutionary governments. Is it correct to say that as government becomes a bit more aggressive to try to meet its obligations, the economic collapse is a self-destruction process of deflation?

Louisiana 1842

ANSWER: Correct. We are seeing benefits cut on a major scale. Detroit filed bankruptcy and that shines a light on the path for state and municipal governments going forward – DEFLATION. Even in Germany, about half of the municipal governments are likely to end in bankruptcy. This theory of hyperinflation is just not realistic. We have generally a three-tier form of government – not one. The state and local governments are incapable of printing money. They can only default upon pensions and liabilities. That is what happened to many states during the 1840s.


Andrew Jackson destroyed the Bank of the United States and shifted federal deposits to state banks. That proved to be a disaster and collectors call this the period of the Broken Banknote era for numerous banks issued their own money. As state banks went bankrupt, some states issued bonds trying to bail out the banks. They ended up defaulting on state bonds where some remain on the books of the Bank of England to this day.

MainzThis nonsense about the risk of hyperinflation is antiquated and fails to take into consideration the modern three tier government structure. Established government ALWAYS, and without exception, keep raising taxes to sustain their power. Even the City of Mainz kept raising taxes driving the rich to flee the city and completely destroyed the entire economy. Mainz had been where the Guttenberg press began and this created like an internet boom. The politicians went nuts and assumed this new found wealth would never end and they borrowed against future revenues that did not materialize. The worse it became, the more they raised taxes. Mainz eventually defaulted on their bonds and the creditors sacked the city and burned it to the ground. This was before there was even a national state.

If you open your eyes and abandon this prejudice that we have to collapse in hyperinflation, then perhaps you will be able to survive. You will see that the difference between the destruction of the economy by hyperinflation or deflation is like getting on an amusement ride. The question is do you pay for the ride before you get on (deflation) or when you get off (hyperinflation)? This assumption of hyperinflation must be the inevitable outcome is way too generous. You are assuming politicians will create money to meet obligations rather than reduce their promises, change laws, hunt down money and the rich everywhere while rising taxes on everyone, and eventually just default when they cannot sell any more bonds.

The bankers and foreign governments will not tolerate hyperinflation in a mature economy. Revolutionary and third world governments can go into hyperinflation because there is nobody willing to lend them money. When we have the entire world using US government bonds as “reserves”, it is simply not possible to maintain that position and hyperinflate at the same time. This is why they are hunting down anyone with money right now destroying the world economy going after children and mentally incompetent people.

There are people who still have not received their refund checks from last year. They are told their payments are under “investigation”. I knew one person who always paid more so he could get that refund check in a chunk. He is still waiting for his $50,000.


These theories of hyperinflation are far too simplistic. Yet people are so sold on this idea and hell-bent that it just has to happen, they cannot see the trend before their eyes. Government is hunting capital and destroying the world economy. It is not expanding – it is contracting. The velocity of money is declining along with liquidity in markets and volatility in 2013. This is a set up for a major crisis, but it will not be inflation. Sorry, just look at the rising unemployment in Europe. Governments are destroying the future of the youth. We face rising civil unrest because the world economy is being seriously weakened by all these hair-brain ideas of socialism where almost 70% of the national debt went out the back-door to interest payments, not to help a soul.

So while you are looking for hyperinflation – government will be looking at you and what you have they can grab. Why do you think Homeland Security bought more than 2700 tanks for domestic use and enough bullets to shoot every citizen 5 times? This does not suggest they will meet their obligations and just inflate their way out.