Featured StoryOn February 8, Venezuela devalued its currency, the bolivar. They hacked it by 32% - from 4.3 to the U.S. dollar to 6.3 to the USD.
Nobody was really shocked by the move. When it comes to the currency wars, massive devaluation is simply one of the keys to the"race to the bottom."
But Venezuela's bad fiscal behavior does mean trouble. We've seen it before; Venezuela has defaulted no fewer than 11 times in its 202 years of existence as an independent nation. And the effect is hardly isolated. If half the continent goes bust, it can't be good news for the other half.
Indeed, I believe Latin American countries are now likely to suffer hyperinflation or declare bankruptcy.
Here's what that means for anyone invested in Latin America...
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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