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.James Turk – Last Piece Now To Trigger Hyperinflation
Money is no different from any other good or service. It too complies with the laws of supply and demand. If you create money at a rate faster than the demand for it, its ‘price’ declines, which for money is its purchasing power. With crude oil and other commodity prices like copper continuing to work their way higher, the purchasing power of dollars and other fiat currencies is being eroded. So all of this money printing is clearly taking hold and becoming apparent. That gold and silver prices remain in their trading ranges suggests to me that both of them have some catching up to do with the price rises we are seeing in some basic commodities.
What is clear is that central banks have flooded the world with QE – or in other words, money printing – but it is a policy that doesn’t work. Look how much QE has been unleashed by the European Central Bank, which has not stopped Europe from sliding into a recession. It’s the same in the US, where the Federal Reserve’s balance sheet has started growing again. Its total assets topped $3 trillion a few weeks ago.
In fact, the QE4 announcement may have been the tipping point because US government debt purchases by the Fed have apparently switched from being bond friendly to bond bearish because of the hyperinflationary implications from turning government debt into currency. The evidence for this conclusion is that yields have been rising since then, notwithstanding continuing purchases by the Fed.
Importantly, the suspension of the debt ceiling we spoke about last time has been signed into law by the President. There is now no limit whatsoever on what the federal government can borrow, and therefore spend. The federal government has now taken a big leap down the road to hyperinflation of the US dollar.
Remember, hyperinflation is not an event, it is a process. Hyperinflation occurs when changes are made to eliminate prudent checks-and-balances. The big change occurred in August 1971 when President Nixon broke the US dollar’s constitutional link to gold. That is when the US government fell over the fiscal cliff, and has been falling since then.
There have been dozens of other changes since 1971, but suspending the debt ceiling means the last restraint on government spending has been eliminated. With the Federal Reserve committed to buying US government debt, nearly everything is in place for hyperinflation.
The sovereign debt downgrades in recent years have lit a slow fuse. It is a sign that the big countries resting on their past laurels can no longer expect a free-ride from the rating agencies. Therefore, it won’t be long before this burning fuse hits the UK, the US, Japan or a number of other countries. When it does, an explosion in prices will be the hyperinflationary result. Thousands of years of history have taught us unequivocally that the best way to protect investors and savers from the coming carnage is to own physical gold and silver.”