Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench

Will the US dollar hyperinflate?

IMG Auteur
Published : April 29th, 2013
570 words - Reading time : 1 - 2 minutes
( 12 votes, 4.6/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...

The hyperinflation of a currency is typically described as an event, as if one day everything is normal and then the next day hyperinflation is manifest throughout the economy. This description explains, for example, how the hyperinflations that destroyed the currencies in Germany in the 1920s, Serbia in the 1990s and Zimbabwe more recently are generally viewed.

Hyperinflations, however, are not spontaneous. They do not appear “out of the blue”. It is therefore more accurate to describe hyperinflation as a process. There are many steps taken on the road to hyperinflation that ultimately and eventually leads to the destruction of a currency.

The US government recently took a big leap down that road. When it suspended the debt ceiling, which is the self-imposed limit on how much it can borrow, it removed the last remaining check on the proclivity of politicians to spend money. It abandoned the last semblance of any discipline on federal spending.

In every year since the 2008 financial crisis, the US federal government has been incurring an operating deficit of more than $1 trillion. Because it is spending more than it receives in revenue, it needs to borrow dollars to fund these deficits. These borrowings cause its total debt to grow, so the debt ceiling must be raised periodically to enable it to keep borrowing. The latest ceiling of $16.4 trillion was reached in January.

Rather than deal with out-of-control spending, politicians of both parties agreed to suspend the debt ceiling, meaning that there will be no limit on what the federal government can spend and borrow through May 18. On May 19, the debt ceiling will be raised to the total amount of debt outstanding as of that date, and as a consequence, at that time the debt limit must again be considered to enable more borrowing to fund what is likely to be another year in which the deficit exceeds $1 trillion. I fully expect that that this scheme will repeatedly be used to avoid facing any limit.

This mechanism eerily parallels a step taken by President Nixon in August 1971. Rather than address the financial imbalances the US government faced, he chose – in his words – to “suspend temporarily” the US dollar's constitutional link to gold. His “temporary” suspension has now lasted 42 years. This observation brings up an important point.

This current suspension of the debt ceiling is not going to be temporary. From now on, each time it comes up for consideration, I expect that the politicians will just keep extending the suspension again and again. They will always take the soft political option, just like the politicians did in the German, Serbian and Zimbabwean hyperinflations.

The debt ceiling was never much of a limit because it has been raised dozens of times over the years, but it did serve one purpose. It highlighted the lack of political will to get spending under control. Importantly, the dire financial condition of the federal government became apparent each time the ceiling was hit. The last time it was reached, the US lost its Triple-A credit rating.

Out of control spending by a government is always the cause of hyperinflation. The debt ceiling had been the last remaining roadblock to unlimited federal government spending. By suspending the debt ceiling, the US government has given itself a blank cheque, taking one giant leap down the road leading to the hyperinflation of the US dollar.


Data and Statistics for these countries : Germany | Serbia | Zimbabwe | All
Gold and Silver Prices for these countries : Germany | Serbia | Zimbabwe | All
<< Previous article
Rate : Average note :4.6 (12 votes)
>> Next article
James Turk is the founder of the Free Gold Money Report and of GoldMoney.com. He is also the co-author of The Coming Collapse of the Dollar (www.dollarcollapse.com).
WebsiteSubscribe to his services
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Here We Go Again: Banks Are Impl...
02:27sonora69
What is going to happen NEXT Monday? The Shanghai markets are closed all this week for the Lunar New Year. Monday morning ( or Sunday night U.S. t...
First Report since April, 2014
05 FebAndy_K1
Jason, One of your articles written way back is one of the reasons I started paying attention to silver and shortly thereafter started to ...
Something has Changed in Gold St...
06 Febneville
No nothing strange has happened in GOLD stocks....absolutely nothing.....The fact of the matter is that you byrne have been playing the man and...
The Revisionist Theory and Histo...
05 Febovertheedge
"The key is in the hand of the U.S. government. It is the same key that was used to lockthe U.S. Mint to silver in 1873, and to gold sixty years la...
First Report since April, 2014
05 FebS W.1
Here I was just 2 days ago thinking whatever happened to that evangelical silver guy. Low and behold up he springs, like some spirit from the g...
LBMA Silver “Price”: A Perfect S...
03 FebS W.
There is no doubt that the Comex can be used as a casino for those who want to trade Silver up/or down or maybe some just wish to take a small punt...
LBMA Silver “Price”: A Perfect S...
30 JanOzSILV1
Bron refuses to EVER admit this market is a Casino and the disconnect between Paper and Physical is a big clue to this
LBMA Silver “Price”: A Perfect S...
30 JanS W.
Usually I enjoy Bron's take on things,but to be perfectly honest, I can't understand 95% of what he his on about here. I get the feeling that h...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Lara Expl.(Cu-Zn-Au)LRA.V
Revised Resource Estimate Report Filed for Maravaia Copper Gold Deposit
CA$ 0.33+3.13%Trend Power :
Corporate news
Black HillsBKH
Black Hills reports 4Q loss
US$ 51.64-2.75%Trend Power :
Corporate news
Kinder Morgan(Oil)KMP
Midstream Companies Were above the 20-Day Moving Averages
US$ 102.03+1.98%Trend Power :
Corporate news
Kinder Morgan(Oil)KMP
Midstream Companies Were above the 20-Day Moving Averages
US$ 102.03+1.98%Trend Power :
Corporate news
Devon Energy(Ngas-Oil)DVN
Gasoline Inventories Rose Last Week despite Fall in Production
US$ 21.25-1.76%Trend Power :
Corporate news
United States Steel(Fe-Sn)X
U.S. Steel (X) States Ratification of Labor Agreements
US$ 6.83-3.53%Trend Power :
Corporate news
Black HillsBKH
4:34 pm Black Hills Corp beats by $0.04, misses on revs; guides FY16 EPS below consensus
US$ 51.64-2.75%Trend Power :
Corporate news
Black HillsBKH
Black Hills Corp. Reports 2015 Fourth Quarter and Full Year Results
US$ 51.64-2.75%Trend Power :
Corporate news
Transcanada PipelinesTRP.TO
TransCanada to Sign Substantial Agreement to Benefit Québec Economy
CA$ 48.65+0.16%Trend Power :
Corporate news
Devon Energy(Ngas-Oil)DVN
4Q15 Crude Oil Prices: Fallout for the Energy Sector and SPY
US$ 21.25-1.76%Trend Power :
Corporate news
Comments closed