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
Gold & Silver Prices in
In the same category

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 :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
The Finanser Interviews Jon Matonis
29 Marovertheedge
"In late 2009, I got introduced to Bitcoin by a random email from Satoshi Nakamoto. I didn’t give it much thought at the time and then 3-4 months ...
Gold Effect on Mining & Shale Wa...
27 Maruser4779
A jumbled and rambling article, seasoned with hyperbolic rant, but redeemed by interesting information. So 3/5. A good editor could turn this into ...
Oil Surges, Gold and Silver Spik...
26 Marovertheedge
"That a country would choose to directly intervene militarily in the affairs of another country is a dangerous precedent, ..." Precedent?<...
Water Wars Loom Over California ...
26 Marovertheedge
Ellen Brown should stick to what she understands versus geology, hydrology and financially available technology. Example: "With discussions...
Kicked to the Curb
24 MarFalconflight2
I'm both ashamed and disgusted by the government 'of, by, and for the people,' every bit as much as I am ashamed and disgusted by the People.
The Silver:Gold Ratio, 1687-2011
24 Marconey1
"large new deposits of silver were found"? So what was found by ECB that enabled them to cough up an extra trillion euros for failing European econ...
The Silver:Gold Ratio, 1687-2011
23 Maruser4779
You are right that a currency based on precious metal is subject to inflation if there is a big increase in the supply of that metal. Indeed, this ...
The Silver:Gold Ratio, 1687-2011
23 Maruser4779
"The red line in the chart is a 16:1 silver:gold ratio, and the green line is a 15:1 ratio." This is the wrong way round: swap "red" and "green".
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Comments closed
Subscribe to 24hGold’s daily market briefing
  • Prices and data of precious metals in 119 currencies and world mining companies
  • Daily analysis of the economy, markets and more
  • Free, daily and indispensable
Stay informed, subscribe now !
* Your email will never be shared.