- Bob Chapman: Warnings Of A Great Depression or Hyperinflation
Unemployment at 22.4% is causing a run on assets of retirement funds. That is probably why legislation is being introduced to limit how much money can be removed from these investment vehicles. About 11% of participants have taken out loans over the past year, up from 9% y-o-y. In overall total 22% have loans out and the numbers are accelerating. Almost all the loans will never be paid back. Hardship is forcing people to withdraw, as well as those who believe that government will try to commander 401K’s and IRA’s to fund a bankrupt government, that wants to replace those vehicles with bogus government guaranteed annuities.
If the extension of the short-term debt is not legislated by August 2nd, we may see legislation regarding a takeover of some retirement plans. As this possible misuse of Americans hangs in the balance, inflation plods, relentlessly onward and at the current rate of acceleration we could see hyperinflation two to three years down the road. We projected 14% inflation before the end of 2011 just over a year ago, and we have six months to go to make it to that level. There is no way to avoid what is coming whether it is hyperinflation or straight into deflationary depression. Eventually it will be deflationary depression. The very fact that sovereign states are creating money and credit willy nilly trying to avoid financial failure is surely proof that they are unable or incapable of generating sufficient revenue to satisfy their debt obligations. Currencies are inflated and depreciated in order to pay back debt with less valuable currency. This is the mode that the US dollar and many other currencies are in today. All currencies for the past eleven years have fallen more than 20% annually versus silver and gold and there is good reason for that, they are all being deliberately devalued not only against one another, but versus gold and silver as well. That means that if this policy continues the US dollar and other currencies will eventually go into default. The unavoidable conclusion has to be an eventual dollar and dollar related collapse of things denominated in US dollars. What lies ahead has some uncertain aspects, as to which route will be taken. Presently it is inflation that probably would lead to hyperinflation and then collapse into deflationary depression. At first buyers will perceive less purchasing power, then they will be frightened as the dollars buys less and less, then like a thunderbolt hyperinflation strikes. The public will be ill prepared not having listened to those few who predicted such an event. They will generally speaking not be prepared. Once hyperinflation hits there will be chaos just as there was between 1921 and 1923 in Weimar Germany and most recently in Zimbabwe. Markets will be empty of food, clothing and everything else. It all will have been sold or perhaps even looted. This will happen overnight as the dollar becomes worthless and the country’s social fabric disintegrates. At this stage no one will want to accept dollars in exchange for anything. Barter will begin and gold and silver coins and bullion will become the medium of exchange.
The most important aspect of the inflation, hyperinflation, followed by deflationary depression is its effect on prices of things such as goods and services. Financial assets will degenerate in value usually between 70 and 90 percent, as witnessed during the last US “Great Depression.” The only assets that retained value and purchasing power were gold and silver related assets, which rose in value and buying power. By the end of 2011 we should see 14% real inflation as we predicted over a year ago. If QE3 type of polices are followed next year we’ll see 25 to 30 percent and in 2013 50 percent or more. That is the beginning of hyperinflation. This happens due to the excessive creation of money and credit by the Federal Reserve, an entity that represents private banking interests. All currencies in today’s world, except a 5% to 7% backing in gold of the euro, are fiat. They have no backing whatsoever other than the good will of the issuer. What you are about to see is nothing new. It has been practiced by governments and bankers for more than 1,000 years. Mankind seems to learn little from their mistakes, making the same stupid mistakes over and over again. There are always those few who have read history and understand the mistakes of the past and plan for the future. They are the survivors and they are the ones who take the time to read articles such as this and prepare for the difficulties ahead.
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