surviving hyperinflation
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This Is a Recipe for Massive Hyperinflation or Bankruptcy
Nobody was really shocked when Venezuela devalued the bolivar earlier this month from 4.3 to the dollar to 6.3.
When it comes to the currency wars, massive devaluations are simply one of the keys to this "race to the bottom" strategy.
But Venezuela's bad behavior, and that of several other countries in the region, means that several Latin American countries are now likely to suffer hyper-inflation or declare bankruptcy.
For investors in Latin America, that raises the risks for everyone, even for countries with good policies and relatively low debt.
Unfortunately, long-standing investors in this part of the world have seen this hyperinflationary pattern before.
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Hyperinflation in America: When a Loaf of Bread is $3 Billion
Too few understand just how disruptive hyperinflation in America would be.
Truth is, it would be a nightmare.
In an episode of hyperinflation, money loses value so rapidly that people spend it as quickly as possible, which only feeds the cycle of pushing prices higher and higher at a faster and faster rate.
Imagine prices at the food store and gas pump not just going up a few cents at a time, but doubling in a matter of months, weeks, or even days.
And now some economists and market experts think many of the ingredients for hyperinflation are brewing in America.
That's because years of profligate U.S. government borrowing and spending have created trillions of dollars that lurk in the reserves of foreign countries and major financial institutions. The situation escalated after the 2008 financial crisis, with the U.S. Federal Reserve's policies of "quantitative easing" creating even more money.
"The U.S. government and the Federal Reserve have committed the system to its ultimate insolvency, through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, gross mismanagement, and a deliberate and ongoing effort to debase the U.S. currency," said John Williams of Shadow Government Statistics in his annual report on hyperinflation.
Historically, governments that have suffered bouts of hyperinflation - most notoriously Weimar Germany from 1922-1923 - have set the table by printing too much money during a time of economic contraction.
The trouble is, once it starts it's impossible to stop. Hyperinflation in America isn't here yet, but we're edging dangerously close to the point of no return.
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