What Will Hyperinflation in the U.S. Look Like?
November 06, 2010
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In this audio interview, John Embry, chief investment strategist for Sprott Asset Management, tells King World News why he believes hyperinflation is a certainty.
Blogger Gonzalo Lira has also published a disturbing piece detailing what the effects of hyperinflation in the U.S. would be.
He used as an example one of the modern instances of hyperinflation -- Chile under the government of Salvador Allende.
The currency became worthless, and when consumer goods ran out and were rationed, people perceived as unfriendly to the government received insufficient rations or none at all.
A black market soon arose, which accepted only foreign currency. The economy collapsed completely as people cashed out their assets to buy basic goods and staples on the black market.
In the U.S., the blog predicts a slightly different path to the same destination:
"If Treasuries tank ... then prices will rise for regular consumers ... [I]f the higher consumer prices continue -- or become worse ... They'll start buying more gas now, rather than wait around for tomorrow ... Prices of commodities will rise even further ... once the American economy gets there, the effects of hyperinflation will be exactly the same [as they were in Chile]."
Already, signs of hyperinflation are evident. As Lira writes, he is confident this will occur even if a panic in Treasuries does not occur:
"I am no longer certain if there will ever be such a panic in Treasuries … But that doesn't mean that the second part of my thesis—commodities rising, which will trigger inflation, which will devolve into hyperinflation—will not occur.
In fact, it is occurring.
The two key commodities that have been rising as of late are oil and grains, specifically wheat, corn and livestock feed.
… Grains as a class have risen over 33% year-over-year. Refined oil products have risen just shy of 13%, with home heating oil rising 18% year-over-year. In other words: Food, gasoline and heating oil have risen by double digits since 2009."
Further, according to the 2010 Legatum Prosperity Index, the United States ranks only 10th overall in an assessment of wealth and well-being, behind Norway, Denmark, Finland, Australia, New Zealand and five others, and only 14th in measures of economy.