August 15, 2012
Hyperinflation and Kotlikoff's Figures
by Gary North
Hyperinflation is always a possibility for any national government or central bank. If a national government is running massive deficits, it can call upon the central bank to buy treasury bills or treasury bonds with newly created money. This digital money is transferred to the treasury, which then spends the money into circulation.
There have been cases of hyperinflation in the past which have become legendary. The most famous of all of these hyperinflations is Germany from 1921 through 1923. Simultaneously with that hyperinflation was a hyperinflation in Austria. These were not the worst cases of hyperinflation in history, but they were the worst cases in industrial societies. The worst case was Hungary for two years immediately after World War II. The second worst case took place a few years ago in Zimbabwe. Both were agricultural nations.
No other nations in Western Europe have ever experienced anything like the hyperinflations of Germany and Austria in the early 1920s. Their currency systems were completely destroyed. Farmers were able to pay off debts that had been accumulated prior to World War I by selling one egg and handing the money over to the creditor. This of course destroyed the creditors. It is generally believed that the middle class in both Germany and Austria suffered enormous losses. They had been creditors.
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If this form of hyperinflation ever comes to the United States or any other Western industrial nation, it will lead to the complete destruction of creditors. It will mean the complete destruction of long-term creditors. Anyone who bought long-term bonds of any kind, anyone who invested in mortgages of any kind, anyone who is the recipient of a government pension, or anybody who is dependent upon Social Security and Medicare could not survive this kind of hyperinflation. It would always be paid off in money that is worth far less than when the debt was contracted. When we think of the delay in payments that already exists with respect to Medicare reimbursements to physicians, we get some idea of what it would do to the healthcare industry. The delay of 90 days would basically eliminate the debt.
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The important fact in all of this, with the exception of Brazil, is this: this possibility of escaping the burden of debt is available only on a relatively short-term basis, and it is available only where the borrower has the right to repay the loan at any time in the national currency.
There's much more to this very interesting article. Read the whole thing here: http://lewrockwell.com/north/north1186.html
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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