Tuesday, April 3, 2012

Is The Weimar Hyperinflation Happening Today?

Weimar Debt
Weimar Debt Chart
Source : www.nowandfutures.com/weimar.html
Well below we can see startling similarities between mistakes made in the 1920's that created and strengthened the Weimar Event along with many of the same mistakes being made by the United States and many other world governments today.

US Debt
US Debt Chart
Source : www.brillig.com
• The US Government's unwillingness to raise taxes to support its 10+ year war costs. Looking back at Weimar the same parallel can be seen, as their lack of raising taxes was a huge factor in the lack of funding for their post war re-construction and war reparation payments.

• High prolonged unemployment.
• Both the United States and 1920's Weimar Germany have operated with huge budget deficits and huge deficit spending.
• 40% of every dollar the US Government spends today is borrowed, while at the time Weimar's Government was borrowing 50% to support its costs.
• Both have kept interest rates way below the rate of inflation.
• Both creating rapidly increasing money supplies
Increasing the money supply is one of the most devastating factors in the creation of hyperinflation. Central Banks such as the US Federal Reserve are responsible for the creation and distribution of the paper currency they print. This 2-way responsibility creates an unbalanced supply and demand for printed money or fiat currency. With products and services attaining minimum growth at best, they do not match the "additional" amount of printed money, so the intrinsic value of this excessive money supply decreases.
Just as Weimar Germany had done many years ago, the Federal Reserve has been creating new money too, out of thin air. More recently during the last two "quantitative easing" bond buying schemes, operation twist and international dollar swaps programs with foreign central banks. Soon most likely, round three of the quantitative easing program will be coming out from the Fed. This money creation is done through speculative bets on the books of private banks; furthermore it produces nothing of value for the US Economy...
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