The Upcoming Hyper-inflationary Great Depression
On Friday morning I had a long conversation with my friend, Jim Cook. I went to work for Jim in 1983 at Investment Rarities and we quickly developed a friendship apart from work. Jim is a well-learned man, a true Libertarian and a student of Ludwig von Mises. During our conversation, for the first time ever, he told me that he was afraid things had gone beyond the point where they could be fixed, beyond the point of no return.
I have maintained for the last year that the problems could no longer be fixed, that it was a mathematical certainty that were on the path toward the destruction of the dollar and the most likely course of events would be a hyper-inflationary Great Depression.
Bill Holter has recently voiced the same view in these pages as well. Jim proceeded to read a few pages from von Mises seminal work, Human Action, where he discussed monetary economics and inflation. If I didn’t know in advance, who Jim was quoting, I could easily believe the author was writing a critique of our economy and the inflationary consequences of what the central bankers are doing now, in 2012. Von Mises was a visionary and the father of Austrian Economics.
The German bankers, pre-1922 laughed at his statement that a German Mark would be worth one-millionth of what it was at that time. Actually, the Mark, by 1923 was worth one-billionth of what it was worth after WWI.
You think it couldn’t happen here? They thought it couldn’t happen there either.
Whether our dollar evaporates in a rapid burst of hyperinflation or merely loses a significant portion of its value, the path to safety is to own physical gold and silver and hold a minimum of dollars.
John Williams just released his Hyperinflation Special Report 2012. If you give Williams any credibility, and I certainly do, then its time to start to prepare for the hyperinflation now. William’s time frame has been moved forward, from 2018 to 2014! That’s it, just two or three more years to get your portfolio adjusted to survive the event. Tomorrow I will feature some of his concerns and several of his charts from the report. If you don’t subscribe to Shadowstats, I urge you to do it now, and read the entire 100 + page report. I will only touch on the highlights to wet your appetite for more.
In what may turn out to be the most important gold story of the year, reported by the International Forecaster – and quoting heavily from one of our favorite sources, DEBKAfile:
Iran to Sell Crude Oil for GOLD
It’s been reported by a publication called DEBKAfile that Iran is negotiating to sell its crude oil to India and then China for gold. The story has been picked up by a number of other commentators and analysts and appears to be true.
Nevertheless, the story traces to just one source: DEBKAfile and its confidential “intelligence sources”. Because we have only a single source, and the story is so fantastic, we can wonder if the story is true, false or even a hoax. Reports state that the government of India (which plays a prominent role in this story) has been asked if the story is true, and refused (so far) to either confirm or deny. That’s pretty good corroboration.
Therefore, lets proceed on the presumption that the fundamental story – Iran is preparing to sell crude oil to India and perhaps China for gold – is true. If it is true, it may be the single most important story of the year.
Reported earlier, the fiat dollar has been the World Reserve Currency since the end of WWII and the only currency capable of purchasing crude oil on the international markets from A.D. 1971 through A.D. 2000. The fiat dollar’s primacy in international oil trade created a foreign demand for “petro-dollars”. That demand created an artificial, extrinsic value for fiat dollars that is intrinsically worthless.
Saddam Hussein threatened the dollar’s primacy as the world’s only “petro-dollar” in A.D. 2000 by selling Iraqi crude for Euros. We invaded Iraq in A.D. 2003, wrecked the country and hanged Hussein, but it was too late to stop the world’s slow slide away from reliance on “petro-dollars”. As a result, the dollar’s value as measured on the US Dollar Index has fallen about 36% since A.D. 2000.
Earlier this month, in “Iran, Russia Replace Dollar With Rial, Ruble in Trade,” Bloomberg reported:
That announcement constituted a body blow to the dollar. Insofar as China, Japan, India and Russia (the 2nd, 3rd, 9th and 11th largest economies in the world) are beginning to trade in their own currencies and without the intervening “aid” of US dollars, the dollar is clearly being stripped of its status as World Reserve Currency and “petro-dollar”. Without that status, the extrinsic support for the dollar’s value must fade and the dollar will be increasingly subject to inflation and devaluation.
Note that the proposal to abandon the dollar was raised by Russia. There are more ways to attack an adversary in this world than with mere guns or bombs. Merely choosing to use one currency or another can constitute a virtual act of war.
Earlier this week, DEBKAfile published an article that, if true, may be the single most important story of the past year. The headline reads, “India to pay gold instead of dollars for Iranian oil. Oil and gold markets stunned”.
Oil and gold markets must be stunned. The U.S. government must be stunned. Those who believe in the value of the dollar must be stunned. The world’s central bankers and New World Order (both of which are built on fiat currencies) must be stunned.
It’s one thing for the nations of the world pay fiat rubles, fiat rupees or fiat Yuan (rather than fiat dollars) for crude oil. Such payments hurt the fiat dollar’s illusory value, but leave the power of fiat currencies and central banks largely untouched.
Paying for crude oil with gold rather than fiat dollars, attacks all fiat currencies and not only threatens to terminate the dollar’s role as World Reserve Currency, but threatens to prevent any new fiat currency from taking its place. From the perspective of the U.S. and New World Order, paying gold for crude oil must be deemed an act of war.
According to the DEBKAfile report,