$5 trillion a year

That's just the current rate the Treasury is issuing debt:

Update--Teetering on the edge of economic collapse

The government is trying to keep the struggling economy propped up with massive borrowing, which is clearly not sustainable.

If the medium/long duration scenario still holds, we are about to enter the Ramp-Up phase:

MEDIUM/LONG-DURATION SCENARIO:
Slow climb:    (already happening)
Ramp up:       Sep 2009
Crazy:         Jun 2010
Dollar Nuked:  Sep 2010
Recovery:      Sep 2010 - Mar 2012

Inflation Is Good

The key here is that the Fed is monetizing the debt in an indirect way, so as to not appear to be monetizing the debt.

The Fed knows this dragon will get out of control, otherwise they would not try to hide what they are doing.

Hyperinflation Nation

An Order Of Magnitude Increase in the Monetary Base

From a Wall Street Journal Article here.


The article is worth reading, but the chart really says it all.

Fed Planning Inflationary Dollar Destroying 15-Fold Increase In US Monetary Base

By September of 2009: Read it here...

This fits well with with the previous post, Update to Hyperinflation Scenarios.

Update to Hyperinflation Scenarios

This scenario seems likely, for the time being:

MEDIUM/LONG-DURATION SCENARIO:
Slow climb:    (already happening)
Ramp up:       Sep 2009
Crazy:         Jun 2010
Dollar Nuked:  Sep 2010
Recovery:      Sep 2010 - Mar 2012

For background:
Hyperinflation Scenarios
Discerning The Pattern

H/T to MSimon for stirring me up...

The Multi-Trillion-Dollar Scorecard

Here's a handy reference on how much money is spewing forth: Economy rescue: Adding up the dollars

Total score to date: $2.3 trillion spent, $11.6 trillion planned.

Add another trillion to that list: Fed to pump another $1 trillion into U.S. economy

Soon to be followed by two more: Obama climate plan could cost $2 trillion

Pretty soon we're talkin' about some real money!

Hyperinflation Is (not completely) a Black Hole

The hyperinflation meme is rising on the Media-Attention-Meter. A lot of commenters treat hyperinflation as an event horizon, beyond which no information is available. That's not exactly true.

There is a pattern to hyperinflation, and while it can be really nasty, it is not the end of the world.

It could, however, be the end of your retirement account, assuming it consists of treasuries, mortgage-backed securities, derivatives, or other abstract financial instruments that are not based on anything real. U.S. Dollars fall squarely under that category.

And I've been meaning to post something at least a little positive for once: On the plus side, if you can maintain income increases through the hyperinflation phase, you could possibly pay off your debts really quickly. Good for you, bad for banks and credit card companies.

---------------------
Why hasn't Polywell Fusion been funded by the Obama administration?
IEC Fusion Technology (Polywell Fusion) Explained

A Really Clear Explanation

Glenn Beck on Fox News gives a great, concise explanation of where we are at right now.

Even Glenn Beck Is Starting To Get It

H/T to MSimon at Power and Control.

---------------
O/T:Why hasn't Polywell Fusion been funded by the Obama administration?
IEC Fusion Technology (Polywell Fusion) Explained

The Chinese are Watching

This is from a Wall Street Journal article:

...the U.S. is printing money to pay for its soaring budget deficit. He noted that China and other developing countries hold U.S. dollars as their foreign reserve on the premise that the dollar is being managed responsibly. But in recent years, the U.S. "didn't assume its responsibilities."

China buys a great deal of our debt on the assumption that we will be able to pay that debt back. If they think we are not acting responsibly, they will stop buying our debt, and we will be even deeper in the hole.

Shadow Government Statistics

This sums up the current situation quite nicely:

As inflationary pressures mount anew and the financial markets increasingly shun U.S. Treasuries, an inflationary depression can evolve quickly into a hyperinflationary great depression. Although hyperinflation became inevitable in the last decade, the onset of the process just recently was triggered by Fed and the Treasury actions in addressing the systemic solvency crisis. The process would be accelerated by unfettered and unfunded government spending that appears to loom in early 2009.

This is from John William's excellent web site, Shadow Government Statistics. Unfortunately you need a fairly pricey subscription to get to the rest of the article quoted above. I can't blame Williams for that, ya gotta make a living. But there's a lot of other great stuff there available for free, including special reports on hyperinflation and the money supply. This is highly recommended material.

The Spigot Starts to Close...

U.S. debt is losing its appeal in China
No problem, just print more money!

Obama gives us a head's up

You can't say he didn't warn us, sort-of:

Obama says trillion-dollar deficits may last years

The New American Currency

The dollar may already have been nuked, the new dollar is the "Amero"

Hal Turner muestra el Amero

I'm not sure how factual this is, but it certanly fits the pattern of a planned hyperinflation followed by a new currency. Hal Turner portrays this as a "New World Order" conspiracy to create the North American Union. I'm skeptical, but hey, whatever works, you know? Also, notice that this video was posted prior to the bailout mania.

My question: If this is true, how long with the "Amero" last before it's worthless? What will back the Amero, or will it just be another debt-backed security like the dollar? The hyperinflation cycle is often repeated two or three times before settling down.

UPDATE:
Hooookay, never mind. Hal Turner has gone a bit around the bend.

Hal Turner Show

Right or wrong, advocating violent revenge in a public forum is just dumb.

Revolution may be justified, but I don’t think we’re there yet. And any revolt must be based on supporting and defending the Constitution, not on vengeance. I hope most people remember that: Stand by the Constitution!

And the Amero is probably not quite real:

Amero Coin Con

The latest score: $7.7 Trillion

Well, that sure ballooned quickly:

U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit

The initial relief package was $700 billion, and that was on October 3rd. Nobody was really surprised that it went over a trillion shortly after that. But this is amazing, not even 2 months later and we're talking ten times as much.

Fortunately gas prices have dropped, which will provide a little relief for the moment. But all of this cash is dispersing into the system right now, and in the next few billing cycles we'll see prices rising, so hang on.

Hat in hand

We beg for money:

US seeks 300 billion dlrs from Gulf states

If they lend us the money, it just pushes the problem farther back. There is also the little matter of what the Gulf states may want from us in return.

If they won't lend us the money, that would be a major blow to our standing as a reliable borrower. When the world loses confidence in the US and stops buying our treasury securities, we can resort to the button!

Obama and Hyperinflation

There is nothing complicated about this. Barack Obama wants to increase government spending in a major way to fund his various programs. To do this, he wants to increase taxes. Sounds reasonable on the surface. Problem is, raising taxes reduces GDP. The economy shrinks, and overall tax revenue is reduced. But the increased government spending remains. How will he pay for all this?

Like anyone who spends more than they take in, Obama will have to borrow money to pay for all these new or expanded programs. The government borrows money by selling treasury securities. People, firms, and governments around the world buy US Treasury securities because they consider the US to be a trustworthy borrower.

Now, what happens if people around the world start losing trust in the United States' ability to pay back it's debts?

A company or individual that cannot borrow will simply have to suck it up and do without. A government, on the other hand, has another option: If you don't have enough money and you can't borrow more, just print what you need!

So with a Democrat President and Democrat-controlled Congress, with a shrinking economy and reduced tax revenue, and with reduced ability to borrow, what will prevent them from ordering up a trillion new dollars? Or five trillion?

Or is this already happening?

Bailout Mania: We Are Cleared for Takeoff!

Suddenly, the media is tossing the word "Trillion" around a lot. This may be the start of the ramp-up:

Wall St. Bailout Could Cost Taxpayers as Much as $1 Trillion

Paulson plan could cost $1 trillion

Analysis: Washington's Trillion Dollar Wall Street Bailout

If this is indeed the ramp-up phase, we appear to be right on schedule for the short-duration hyperinflation scenario, which would actually be the best of a set of bad options.

I often wonder how much this was all planned out ahead of time.

Hyperinflation Scenarios

I'm projecting three possible scenarios for hyperinflation, based on reading the different historical accounts.

1. Short Duration: This is the soonest that hyperinflation could realistically hit.

2. Middle Duration: The "average" time scale scenario

3. Long Duration: Hyperinflation that is years away, but still based on current conditions.

This is not any kind of statistical analysis, just a range of values for planning purposes:

                 DURATION ESTIMATE
PHASE           SHORT     MID     LONG
Slow climb:     6mo       1y       2y
Ramp-up:        2mo       6mo      1y
Crazy:          1mo       2mo      5mo
Dollar Nuked:   1 day     1 day    1 day
Recovery        6mo       1y       2y

I wrote this in March, so taking these numbers and laying them out on the calendar, here's my predictions with March 2008 as a starting point:

SHORT-DURATION SCENARIO:
Slow climb:     (already happening)
Ramp up:        Sep 2008
Crazy:          Nov 2008
Dollar Nuked:   Dec 2008
Recovery:       Dec 2009 - May 2010

MEDIUM-DURATION SCENARIO:
Slow climb:     (already happening)
Ramp up:        Mar 2009
Crazy:          Sep 2009
Dollar Nuked:   Nov 2009
Recovery:       Nov 2009-Nov 2010

LONG-DURATION SCENARIO:
Slow climb:    (already happening)
Ramp up:       Mar 2010
Crazy:         Mar 2011
Dollar Nuked:  Aug 2011
Recovery:      Aug 2011 - Aug 2013

See previous post for more explanation. Mileage may vary. Feedback is welcome.

Sources:
http://en.wikipedia.org/wiki/Hyperinflation
http://www.sjsu.edu/faculty/watkins/hyper.htm

Discerning the Pattern

Hyperinflation has happened before, quite a few times. For that matter it's happening in Zimbabwe right now. Given that this is not a unique phenomenon, we should be able to learn from past data.

Looking at the historical record, there does seem to be a pattern to hyperinflation:

1. Slow Climb: 6 months to 2 years
2. Ramp-Up: 2 months to 1 year
3. Crazy: 1 month to a year
4. Currency Nuked: 1 day
5. Recovery: 6 months to years

In more detail:

1. Slow Climb: This is arguably "normal" inflation, but with a noticable upturn. By itself it doesn't guarantee hyperinflation, as inflation typically fluctuates anyway, but I have not found a case of hyperinflation that started with deflation. So an uptick in "normal" inflation may be a red flag that something bigger is on the way. Approximate time scale is 6 months to 2 years.

2. Ramp-up: This is the transition from "normal" inflation to something unusual. In this phase, the majority of people start changing their spending patterns due to inflation. It starts significantly affecting economic behavior. Approximate time scale is 2 months to 1 year.

3. Crazy: Full-fledged hyperinflation is truly crazy. This is the Weimar Republic, wheelbarrow full of money to buy a loaf of bread phase. There is no mistaking this one. The primary economic effort will be getting rid of your cash as fast as possible. Got money in your bank account? Wrong! Get rid of it now! Buy stuff as soon as you get paid, otherwise your paycheck is worthless by next week. Better hope your employer starts making COLA increases for each paycheck. This could last perhaps 1 month to a year.

4. Currency Nuked: Inevitably, hyperinflation is halted by revaluing the currency. There is no time scale to this, you just wake up one morning and bam! The Central Bank (The Fed in our case) puts the hammer down and says "The value of the currency is now [whatever]." It's that [whatever] that is critical. Often they will simply issue new currency at, say, 1000 times the value of the previous currency, and call it "New!". The "New Peso", the "Rentenmark", the "New Dollar", whatever. This is not a revaluation, it's just shifting the decimal point and it doesn't solve the underlying problem. Argentina tried this several times. The key to nuking the currency is to tie it down to something of real value. In the Weimar Germany, with typical German efficiency, the currency was revalued only once by tying it to a mortgage on all the land in Germany.

5. Recovery: Nuking the currency doesn't necessarily solve everything. There will be instabilities and hyperinflation could even start over again. Or you can get a recession. In the end, the solution is always for the government to maintain a sound, stable, and sustainable monetary policy while the economy sorts itself out. Recovery can happen fairly quickly (6 months), or could go on for years.

At this point, I'm not sure if we're in phase 1 or 2. Feedback is welcome.


Sources:

http://en.wikipedia.org/wiki/Hyperinflation
http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999-2002)
http://www.sjsu.edu/faculty/watkins/hyper.htm