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- Hyperinflation in America: When a Loaf of Bread is $3 Billion
- Is the U.S. Federal Reserve Setting the Stage for Hyperinflation?
- Four Reasons Why Hyperinflation Hasn't Hit the U.S. Economy...Yet
While the investing world is focused on Greece, events unfolding right now in Africa offer another important cautionary tale.
Thanks to reckless political and economic mismanagement, Zimbabwe holds clues to the future of other nations - like ours.
Granted, this failed state's policies have been more egregious than those perpetrated by the U.S. government against its people. Nonetheless, some of the outcomes could be similar. And I'm going to tell you one way to protect yourself.
As the financial crisis in Greece intensifies, it serves as a reminder to investors everywhere of the importance of knowing the best investments for keeping your assets safe.
You never know when some sort of financial tragedy will strike, so it pays to be prepared.
Gold stocks are poised for an upswing.
Just recently, the European Central Bank (ECB) announced a new policy to promote lending and, ultimately, inflation in the Eurozone. The move sent investors flocking to precious metals like gold and silver. And a recent election in April saw the seating of a new government in India. On account of the platforms of these new leaders, the Indian press has indicated to expect a considerable decrease in import duties.
Silver prices have been sideways this week, cooling off from a mid-June rally sparked by inflation-minded investors wary of the U.S. Federal Reserve's dovish talk.
The Library of Economics and Liberty defines the Law of Unintended Consequences as such: Actions of people-and especially of government-always have effects that are unanticipated or unintended.
Our current economic state is a perfect example. Central banks have flooded the economies, and yet the world still inches toward deflation. But for savvy investors looking at the right stats, this is an opportunity to buy one sector in particular.
Here's a great bargain and why it's a great buy now...
On 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...
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.
The U.S. government wants to stimulate growth in the moribund economy by stoking the fires of inflation. But by leaving interest rates low and buying up bonds - a policy known as quantitative easing (QE) - the U.S. Federal Reserve risks debasing the dollar, which could lead to a prolonged period of hyperinflation that would send prices skyrocketing.
After their most recent meeting on Sept. 21, Fed policymakers said low inflation warranted looser monetary policy. Minutes from the meeting said central bankers were prepared to ease policy to boost inflation expectations "before long."
The Fed is seeking ways to boost the U.S. economy after keeping interest rates at record lows and buying in $1.7 trillion of U.S. securities. The next move may be another round of quantitative easing that would expand the Fed's balance sheet even further.
But as it feeds more and more money into the financial system, the central bank may very well be sowing the seeds of hyperinflation.
But we're not...yet.
Classic economic theory says that money supply can be used to stimulate the economy and our central bankers seem to agree. That's why they've pumped more than $1 trillion dollars into the economy, engineered countless bailout bonanzas for zombie institutions, put Detroit on life support, and delivered a bunch of financial Band-Aids to the trauma ward - all in a desperate bid to make Americans feel better about the global financial crisis.