Wednesday, October 28, 2009

Hyperinflation or Great Depression? The 'Event Horizon' is close

If I'm reading him right, Dr Gary North is predicting that central bankers will continue propping up their government treasuries until a financial hyperinflationary 'Event Horizon' is reached.

Because of our hugely complex modern societies, urban society will collapse if the central bankers allow hyperinflation to occur. As central bankers are generally urban dwellers, who do not know one end of an unplucked chicken from another, the self-preservation instinct of central bankers will cause them to cut their government treasuries adrift at the moment just before the event horizon.

They will stop buying government bonds with counterfeit money. They will allow interest rates to gravitate upwards towards a more 'natural' level. (I.e. a lot higher than they are now.)

This 'Event Horizon' choice will immediately create a Great Depression in the economies thus affected, as unwanted and unnecessary businesses, currently propped up by false interest rates, collapse by the tens of thousand. Because governments will have no funds to 'bail these businesses out', due to being cut adrift by their own central bankers, and so long as governments do not resort to guns and bullets, these Great Depressions could be over quite quickly.

However, if as is likely, governments do resort to price controls, guns, and bullets, to 'prop up' these unwanted businesses, then we could be in these depressions for decades. In the UK's case, I think they will try to bounce us (probably successfully) into the Euro. But could the current Euro countries cope with a moribund Britain begging at their knees?

If central bankers do cave in to government pressure, and go past the event horizon with their counterfeit cheque books still open and their purchases of government bonds remaining at full tilt, the ensuing hyperinflation could kill millions of people in the 'western' world, as food riots and other revolutionary forces run amok in cities full of people who can create nothing worth bartering for in a society where food and energy suddenly command the vast majority of everyone's attention.

Think Argentina on steroids. Zimbabwe is perhaps the wrong analogy to use, because of its fairly small cities and the ability of much of its population to return to the land to feed itself and produce useful agriculural products which can then be bartered, plus a strong tribal tradition where you look after your own. After a hundred years of deliberately trying to destroy the family and the extended family, to create state subservience, the western world's welfare state socialists have even severed this potential lifeline.

The Weimar republic itself is also a bad example, because much of Germany's population at the time was still close to the land and could still generate the basics required for day-to-day living by popping over to Uncle Hans's farm and working all day slopping out the cow shed in return for a hatful of eggs. Or even in Austria by selling tasteless paintings to dumb-schmuck tourists on the streets of Vienna.

Could a graphic design consultant in North London barter his way into a hatful of eggs by 'selling' his logo creation skills in a hyperinflationary society where money is useless? Or more importantly, in Dr North's analysis, could a central banker barter his apparatchik political and financial blathering skills for a hot chicken sandwich? I wouldn't have thought so. I wouldn't even ask one to shine my shoes, as they would probably be incapable of even combing their own hair without help.

So expect a great big financial crunch, when central bankers know that the hyperinflation event horizon is near. They already know that they will be the first against the wall in a hyperinflationary situation, especially when there are lots of lamp-posts and piano wire around, therefore they will probably not allow it to happen. (At least we hope they won't.)

Purely from a personal perspective, a Great Depression may be fairly bad for most people, but central bankers aren't really going to suffer, are they? They'll still be picking up salaries of valuable money and will be the last to be made unemployed. In a hyperinflationary situation, they will be the first to go down, as the middle classes bear down upon the central banks armed with avocados and artichokes. I'll bet, for instance, that there weren't too many central bankers begging on the streets in the 1930s. So what would you do if you were in their shoes? I would go for a Great Depression choice every time and to heck with the car manufacturing plants in Sunderland.

So what you gonna do, Pilgrim? Is Uncle Gary right? Or is he being too spectacularly pessimistic, in the style of Marc Faber, Gerald Celente, Jim Rogers, and Peter Schiff?

Obviously, you may know that if I had to bet my own life on the opinions of the above gentlemen against the prognostications of Obama, Bernanke, Brown, and King, I would tend to go for the former. But that's just my humble opinion. In the meantime, while you're thinking about it, may I suggest:

Physical gold. Physical silver. Well-hidden. As much physical protection for your property as you can safely provide. Get yourself out of a large city and into the country. An exit strategy to a commodity-based or manufacturing-based economy, which produces something people need. Along with gold coins stuffed into a money belt buried somewhere unobtrusive in your back garden.

Just in case.

Of course, I'm assuming that Gordon Gecko Brown and other idiots do not sack all the central bankers and then with 'Emergency Powers', just start running the printing presses directly under the command of their own miserable government treasuries.

And then we will generate those same angry political forces which the Weimar republic created, and all of those bone-head 'intellectuals' in Britain, who refuse to lay the blame for anything at their paymaster government's door, will have all the British National Socialists they could ever wish for, to march against. If they aren't rounded up and shot first.

No, surely not. Politicians are far too sensible and long-sighted to be so stupid.

Aren't they?


Anonymous said...

The 2 r not mutually exclusive.

Theron Hesper said...

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