Tribulation: The USA Hyperinflation Potential Crisis
Go study the Weimar Situation of 1923; because we track it well.
By Nich Fluh June 25, 2020
The US government’s persistent use of Keynesian economic (Marist Economic Methodology) to boot-strap the economy, underwrite socialist/communist programs, e.g. in retirement, health and education, and finance the global military industrial complex and associated military engagements worldwide by printing money and accumulating incredible amounts of debt is creating a strategic capability for a “nuclear” and sudden economic unwinding of the US Dollar’s value vs. hard assets and necessary fundamental services, e.g. real estate, food, water, drugs, law enforcement and essential services, e.g. medical services.
It should be understood that in such a crisis, “a lower tide lowers all boats”. Specifically all currencies based on the ability to service the national debt will all suffer demonstrably. The challenge will be worldwide.
America is the Ruhr Valley of 1923
America does not have reparations like the Germans in 1922, but we do have an unsustainable and growing amount of national debt and credit payments that is every bit as onerous. In 1900 the US national debt was $2.1 Billion ($27.6 per person). In 2000 the US national debt was just under $5.7 Trillion ($10,000 per person). As of June 2020, the US national debt is estimated to be just under $25 Trillion ($75,530 per person). The nation’s debt is now greater than the Gross Domestic Product (GDP). Get the picture.
Private national bankers, i.e. the Federal Reserve, own a substantial portion of America’s national debt; i.e., over $4.4 Trillion as of June 18, 2020
What would be the consequences if the dollar becomes relatively worthless due to hyperinflation? How would the banks react to a severe devaluation of their “assets” and associated reserves? In the Weimar Republic, mortgage-back bonds indexed to gold (“Retenmark”) were introduced with revaluation. Eventually, some debts were reinstated to compensate creditors partially for the catastrophic reduction in the value of debts that had been quoted in paper marks before the hyperinflation. A decree of 1925 reinstated some mortgages at 25% of face value in the new currency, effectively 25,000,000,000 times their value in the old paper marks, if they had been held for at least five years. Similarly, some government bonds were reinstated at 2.5% of face value, to be paid after reparations were paid.
Mortgage debt was reinstated at much higher rates than government bonds were. The reinstatement of some debts and a resumption of effective taxation in a still-devastated economy triggered a wave of corporate bankruptcies.
Revaluation is a term that normally refers to the raising of the exchange rate of one national currency against other currencies. As well, it can mean revalorization, the restoration of the value of a currency depreciated by inflation. The German government had the choice of a revaluation law to finish the hyperinflation quickly or of allowing sprawling and the political and violent disturbances on the streets. The government argued in detail that the interests of creditors and debtors had to be fair and balanced. Neither the living standard price index nor the share price index was judged as relevant.
The question begs itself. What if hyperinflation occurs in America, how will bond holders react to the relative destruction of the value of the bonds, mortgage-backed, government and corporate? The catastrophic impact will be felt worldwide, across multiple currencies and national banks and it won’t be pretty.
Architected by the Globalists with the help of the Democratic Party, due to the Covid-19 lockdown the state and local governments presently are significantly missing their budget forecasts particularly in respect to tax revenue (by the billions for each state). For example, New Jersey shortfall is estimated at $3+ Billion. California is estimated to be over $4.8 Billion.
If Congress does nothing to fix the Social Security under-funding, the financial reckoning will be huge — as much as $11.4 trillion down the road. The SSA estimates that Old Age and Survivor Insurance (OASI) will run out of money by 2034. Americans can anticipate major cuts in benefits, higher premiums, raising the age for full benefits, link benefits to longevity, switch the inflationary tether to the Chained CPI, freeze annual raise based on CPI-W, mean test for benefits, fully or partially privatize the program, cut benefits by up to 21% per existing law.
Think Social Security is nearly bankrupt? State pensions are far worse off. State pension funds for state employees, education administrators and teachers, law enforcement and emergency responders presently are underfunded severely.
In the Ruhr region over 132 were killed and hundreds injured and over 150K expelled. And America? Look at all the citizens and law enforcement and rescue workers injured and killed to date. Expulsion? Nah. We got CHAZ/CHOP. Marxist isolation.
Meanwhile, American history is being wiped out publicly. Statues are being destroyed or removed, Paintings and statues in the hall of Congress (but not KKK member, the late Democratic Senator Robert Byrd) are being removed.
The Weimar Republic’s answer was to print more money. America’s answer: Succubus stimulus package. A succubus is a demon in female form (Nancy Pelosi?), or supernatural entity in folklore, that is traced back to medieval legend (e.g., Hillary Clinton’s idol, the witch named Jean Houston), that appears in dreams and takes the form of a woman in order to seduce men. The male counterpart to the succubus is the incubus (e.g., George Soros, Bill Gates). Pelosi cries out the old Masonic symbol, “Let them eat cake” i.e., give them money, while Soros calls for the “tired and suppressed” to join ANTIFA and Brats Lives Matter and go riot, loot and pillage. And another Succubus stimulus package is under consideration by Congress and the President. What happens when the federal subsidy of unemployment and small business loans (targeted for over 32 million “small businesses”) runs out?
The popularity of a Ruhr invasion by German Wehrmacht would have added to the German government’s unpopularity, despite the fact that it was the French who killed people in the Ruhr valley. Why was this?
In America, the globalists in conjunction with the Chinese, the World Health Organization and Center for Disease Control architected the “Plandemic” called Covid-19 to attack Americans and defeat Trump’s 2020 reelection campaign. These malcontents successfully cripple the nation’s economy because, “we can’t be too safe”. Why did American’s support such a clear and present danger by the anarchists, communists and globalists?
In the Weimar Republic, borrowers, such as businessmen, landowners and those with mortgages, found they were able to pay back their loans easily with worthless money. In America, unless there is some form of “fiat” declaration by the government to the contrary, it appears that the same would apply.
In the Weimar Republic, farmers coped well because their products remained in demand and they received more money for them as prices spiraled or they bartered for other products or services. Provided America does not enter into a civil war or becomes a completely communistic state (think the Holodomor in the Ukraine), farmers may cope with the hyperinflation crisis. A key difference between America vs. the Weimar Republic is the reliance of the farmers on manufacturing and distribution. As we have seen with the Plandemic, the supply of grocery goods in the stores on occasion remain at severe shortage due to supposed breakdowns in factories, e.g., produce such as poultry, and in distribution, e.g. storage and transportation.
Residential real estate prices will initially benefit from hyperinflation. But this will be short lived. See comments in next section. Owners of real estate in less developed/ lower taxed regions could become more desirable.
With hyperinflation and the revaluation of the currency, a high tide raises all boats: should hard asset values increase, even substantially, it is likely that they will only hold their relative value against each other. Hard assets will be volatile. Certain hard assets may fall initially, yet ultimately rise appreciably. This may include commodities such as gold and silver. Keep in mind that should gold appreciate considerably it may become less convenient to sell or trade a one ounce gold coin worth thousands of dollars. It may be prudent to acquire 1/10 ounce 24K gold coins. On the other hand, Silver, would probably be valued at orders of magnitude less and therefore easier to sell or trade. Because US government issued gold and silver coins are currently protected by law as “currency” with certain benefits appertaining to this classification, it is advisable to acquire only these types of coins. It also may be desirable to acquire essential commodities such as food, water, medical goods and possibly energy. The latter will be dependent somewhat on production and the ability to distribute and retail the products and associated services locally.
Treasury Inflation-Protected Securities (TIPS) are questionable. To benefit from TIPS (the Treasury Bond), the investor apparently needs to hold the bond to maturity. If liquidity becomes a priority, the benefit of TIPS becomes negligible at best, and at worse, a loser. Exchange Traded Funds, ETF, are typically “leveraged”. With hyperinflation, owners may be compelled to sell which would cause demand to drop precipitously making the ETF worth significantly less.
Owners of real estate in lower taxed counties of the United States. Lower property taxes, no sales tax, no income tax or no tax on retirement income means more disposable income for retirees. Even if taxes are instituted or raised across the board, such owners will be less susceptible to the impact of higher taxes.
During the inevitable period of societal disruption associated with hyperinflation, it will be advantageous to be an owner of guns, well water and other self-sustainable environmental resources. This includes livestock and gardening. Home solar energy may not be a worthwhile investment because it requires that the owner sell the energy to the electric service providers who in turns provides a “credit” or “discount” on electricity used by the homeowner. The terms and conditions of the deal; plus the ability of the electrical service provider to sell and service its electricity may become a problem.
During the inevitable period of societal disruption associated with hyperinflation, it will be advantageous to own a sufficient inventory of necessary consumable goods, e.g. food, toiletry, medical supplies for a period of time (at least 3 months).
People on fixed incomes, like students, pensioners or the sick, will find that their incomes do not keep up with prices. As presently constructed this includes fixed annuities and life insurance, both whole and term.
People dependent on Social Security and other government transfer benefits, Medicare and Medicaid, etc.
Wage Earners. It is questionable whether employers will renegotiate in good faith on a regular, if not daily basis (as they did in Germany) the wages of their employees. Regardless, as seen in the Weimar Republic even wages eventually failed to keep up with prices.
People with time-deposit savings including Certificates of Deposit, and those who had lent money, for example to the government (e.g. Treasuries). This was particularly painful during the Weimar Republic’s period of hyperinflation as this segment of investors were the most badly hit as their money became worthless. With America’s financial demise, it is probable that foreign currency based time-deposits will be losers as well.
Owners of subordinated and senior debt may be severely impacted by corporate liquidity challenges and bankruptcies. Private equity funds may be particularly vulnerable in this category.
Exchange Traded Funds are marketable securities (sometimes highly leveraged) and are somewhat at risk during hyperinflation.
Collateral Debt Obligations / Asset-Backed Securities are typically associated with high-risk, junk bonds and will be very susceptible to hyperinflation. Think 2008 financial crisis on steroids.
Common stock owners are “subordinated by class” within equity and vs. debt. During the liquidity crisis associated with hyperinflation, common stock owners probably will experience significant downward pressure on stock prices and dividend reduction, suspension or discontinuation may occur. Higher yielding preferred stock dividends held in arrears may become problematic; especially if bankruptcies or reorganizations occur.
Mutual Funds both domestic and international portfolios, growth-oriented, emerging markets, whatever.
Home real estate owners in high tax localities. There will be a flight from such geographic areas due to the high rents, taxes, breakdown in law enforcement, medical services and utilities and political upheaval.
Real Estate Market ultimately will collapse. As the economy collapses, aside from “essentials”, demand for goods and services will be negatively impacted. It is quite possible, perhaps likely that a disruption in economic activity (not price index related) will cause a disruption in demand for employment as corporate liquidity issues arise and bankruptcies ensue. This ultimately may cause severe price pressure on commercial and residential real estate as highly leveraged owners are unable to make the monthly payments due when they are unemployed or bankrupt.
Home Equity will decline significantly. Additionally, what will be impacted severely appears to be the implied or “hidden” wealth that homeowners believe they have in equity that is or was associated with their home ownership. This probably will impact the use/demand for Home Equity Loans (HELOC) and reversed mortgages. Is now perhaps a good time to get a HELOC? Perhaps, only if the borrower is prepared to utilize it in the short-run. In a hyper-inflated world what would the value of such a loan be worth? What could it buy?
Real Estate Investment Trusts (REIT) is a company that owns and operates various real estate properties in which 90% of the income it generates is paid to shareholders. There are non-traded and traded REITs. Non-traded REITs (those that aren't publicly traded on an exchange) inherently have little liquidity and will be difficult, if not impossible to trade or sell during hyperinflation. Publicly traded REITs have the risk of losing value as interest rates rise (they provided fixed rate income), which historically sends such investment capital into bonds. But during hyperinflation, commercial real estate associated with REITs will undergo significant liquidity crisis with many possibly going bankrupt. And converting to bonds will be of no positive consequence in this situation.
Unsurprisingly, the hardships created in the Weimar Republic during 1923 by hyperinflation led to many uprisings as groups struggled to take power from the government.
A nationalist group called Black Reichswehr rebelled in September. Communists took over the governments of Saxony and Thuringia in October. Communists also took over the Rhineland and declared it independent in the same month. A fascist group called the Nazis attempted a putsch in Munich in November.
In America today, we are witnessing the beginning of social upheaval and violence throughout the country, particularly in traditional Democratic-controlled cities. At the present time the leaders of this unrest are well funded and organized primarily, but not exclusively within ANTIFA and Black Lives Matter. Capitol Hill Autonomous Zones (CHAZ), also known as, Capitol Hill Organized Protest (CHOP) is radical technique utilized by the globalist, anarchist and communist interests to disrupt civilized authority and publicize their radical agenda. This can only be viewed as an initial stage to test the resolution of the Establishment and to refine the revolutionary’s strategies and tactics for future deployments and confrontations. With the arrival of hyperinflation, it is anticipated that these “interests” will accelerate their confrontations across America with the hope of initiating a military response by the Federal Government; which these radicals believe will help generate empathy if not sympathy for their cause. And this agenda is not exclusive to America. With hyperinflation spreading throughout the world, these radical interests are rebelling in Europe and the rest of the world as well.
The question one may ask after all this is when? I suggest that there are a number of what I call strategic sequential signals that may offer a sufficient glimpse into the short-term future that may act as a warning to prepare and to act. What are these signals? There is a biblical saying that goes something like this: “But he answered and said to them: When it is evening, you say, It will be fair weather, for the sky is red. And in the morning: Today there will be a storm, for the sky is red and lowering. You know then how to discern the face of the sky: and can you not know the signs of the times?"