The Dollar Is Headed Toward Hyperinflation

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I have been warning about hyperinflation since March 2, 2009 when I wrote that the dollar was on the cusp of hyperinflation. I noted that “the federal government has embarked on a course of runaway spending, and it is runaway government spending that causes runaway inflation”, which if left uncontrolled leads to hyperinflation.  The trend has not changed for the better. http://www.fgmr.com/on-the-cusp-of-hyperinflation.html

From February 28, 2009 to August 31, 2010, runaway federal government spending has resulted in a $2.57 trillion increase in the national debt.  But over this period GDP increased by about $0.5 trillion, and the increase in economic activity is even less after adjusting for inflation.  So clearly we need to ask ourselves, what have the bailouts and stimulus programs really accomplished?  http://www.bea.gov/national/index.htm#gdp

The answer is very little in terms of economic activity, but there is an ominous consequence from this foolish binge by policymakers of soaring debt and reckless money creation. Given that these dollars are not being used to generate economic activity, they are now sloshing around the globe looking for a safe home. Tangible assets are one of the safest places to be to protect your wealth from a currency whose purchasing power is eroding.

The result is that the commodity markets are on fire. Prices are not rising because of a shortage of commodities, but rather, there is a surfeit of dollars. Too much currency has been created, relative to current economic activity. 

Without an abrupt about-face to end the wrongheaded policies being followed by policymakers, there can be only one conclusion. The dollar is headed toward hyperinflation. The new record highs in gold and silver, an across-the-board rise in commodity prices and the renewed downtrend in the dollar's rate of exchange are the “writing on the wall”..

by James Turk,
September 20th, 2010  

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