Specifically, I said that year-over-year inflation of the U.S. Dollar will reach at least triple digits before the year 2029. I don’t see how this can possibly be avoided due to the following:
The explosion in bank excess reserves
The fed’s low interest rate under Greenspan since the early 80’s.
The “flight into real goods” which will commence is inflation seems out of control to even a small portion of Americans
The fed’s exploding balance sheet
The enormous current account deficit & fiscal deficit
The government crowding out private industry in myriad ways
The axiomatic inevitability that all fiat money regimes to end in hyperinflation
The long-term outlook for productive capacity in the U.S. to regain a current account suirplus
The collectivist mindset shared among many Americans inspired by the Prussian model-based government school system.
Am I forgetting anything? People may think such talk is silly, however they will not laugh when their paper money is worthless.
You forgot one thing: how long will it take for the American Empire (aka Western Civilization) to crumble? Empires usually die a slow, painful death but there are of course a few exceptions. You are assuming the American Empire will last at least twenty more years: are you completely sure? Also have you considered the fact that the Great Crisis that will finally destroy the present crooked system may happen sooner than expected? The present situation is very similar to a drug addict having a withdrawal crisis and the quacks are still discussing how much junk they should still pump in his veins since the first shot didn’t have the expected results despite claims to the contrary. The addict may recover, though he’ll need even more junk to stay on his feet, or he may die immediately of overdose. My personal pick is the first one, though we all know how junkies end up one day or another (though many of you didn’ have to live through the heroine epidemic of the late '70s and '80s you are a smart lot).
I’d be careful with long-term forecasts. In 1979, we were all convinced that we were doomed to a life of double-digit price inflation. Foreign policy rested on mutually assured destruction, which mean that we were protected from Soviet nuclear missiles because they knew that the U.S. would fire back at them if they ever launched an attack.
Then Volcker became Fed chairman and price inflation was reduced to less than 2% by 1986. By 1990, the Soviet Union was collapsing and we were all going to get a “peace dividend” since expenditures on U.S. military operations would be a fraction of what they had been. Bold new regulation of the banking and real estate industries was going to ensure that we never had a real estate crisis again.
My point is that history can turn on a dime. Projecting current trends into the future is a very dangerous exercise.
Doug, you are right but at least back in the '70s things were different. I didn’t follow foreign politics much back then (the terrorist season was in full swing here in Europe so we had other things to worry about) but at least there were still some signs of vitality, both in common people and in politicians. When much tighter fiscal legislation was passed here in Italy people at least took to the streets in protest and a few academicians voiced their dissent openly. Right now I fail to see any signs of vitality left: the only apt analogy I can come up with is the opening season of Lost with people wandering at random on a beach for days while a Robinson Crusoe would have already started salvaging what he could from the shipwreck. People is expecting politics to save them but right now politics are frozen: every single politician knows they have to cut taxes, reel monetary inflation in, stamp out debt and let the economy recover itself but they cannot because people expect salvation from above so they have to keep on spending and legislating. It would take lot of courage to break the vicious circle and right now I do not see it.
I fear that current trends are likely to last at least 3 1/2 years given the current administration’s timeframe. This is a long time to create potentially irreversible damage through healthcare reform, climate policy, and other monopolization through bailouts. This, combined with the brick wall of entitlement outlays, other approaching domestic economic threats (e.g. commercial real estate, Alt-A/Option ARM, LBOs, State defaults, etc), and unprecedented money printing, make me think that 20 years is a very reasonable estimate - and lean on sooner than later. To add, I’m not seeing opportunity for our current international policing position to act as a “net positive” as DougM described we experienced in the Soviet standoff.
I am trying to understand what possible scenarios could keep us from further economic collapse, accompanied by or leading to a currency crisis. The best I can come up with is a revolutionary development such as ubiquitous energy or AI. I would love to hear thoughts on an optimistic scenario more realistic than this.
If you studied up on PolyWell, it seems we are realistically “closer” to some sort of fusion energy than before, but currently, of course, massive gov’t projects are getting the headlines, not the design that possibly works [;)]
What if the dollar were to be backed by energy (i.e. a kilo watt dollar as opposed to a petro dollar)?
Thanks - I had not yet heard of this and will check it out.
I heard this question asked on Schiffs’ radio show/podcast this morning (from 6/24 - maybe it was you?). Sounds like an interesting idea, but wouldn’t you think the market should decide on competing private currencies (obviously not the quasi-competition occurring in today’s global fiat system)? Schiff’s point was that the implementation would be complicated, but if it could somehow be simplified, I don’t see why it might not emerge as the best option in a competitive marketplace.
I agree that the market should “decide” amid competiting private currencies, assuming of course this isn’t outright outlawed. I do see the possibility of renewable energy technology (specifically solar) at some point allowing people to generate energy back into the grid, so to speak, especially since solar has been making the recent required leaps in technology to become a viable alternative.
I would imagine communities would be highly keen on coming up with some sort of energy currency based on the “feeding back” rate of energy per house w/ the ability to do so, achieves.
In the past, I have had a few discussions about the potential of “feeding back” to the grid with an engineering buddy of mine, but never in relation to a currency system. It is certainly an interesting thought.
Obviously we’re a ways away from solar energy being a broad/core usable resource and it is likely other options will emerge that may perform better, such as your mentioned Polywell project. Wouldn’t a more ubiquitous energy source make obsolete the use of an energy backed currency? Additionally, the grid as it stands seems to be a mess and likely to get more unmanageable until/unless it becomes deregulated.
Tying it back into the original subject of this thread, it seems like we’re probably at least a decade or so away from an efficient energy system, and that is assuming we quickly discover/develop a solution or group of solutions that would be feasible. Additionally, a transition of currencies integrated with said new system is a whole other long-term process.
As with many hypothetical ideas for society, the transition from point A to point B is a gargantuan hurdle. Perhaps a dramatic fall in the current government-tarnished economy/energy system would enable folks with these ideas to start over and make the transition a little quicker - Certainly a catch-22. Which brings me back to my original point that I would love to hear of a more optimistic scenario that is more realistic [near-term] than ubiquitous energy or AI to bring us out of what seems to be inevitable crisis.
Secession would seem like the best option for managing damage control, by both de-centralizing the effects of a given sovereign-state’s economy on other state-sovereign economies, while at the same time consolidating the crisis into a more managable concept, instead of the possible panic free for-all (i.e. martial law & beyond iron fisted regulation) that is a possibility without secession.
From there on, I think we could talk about private currencies, a greatly needed lessening of massive federal regulation, as providing a good start on recovery, as well independant, market developments & competition towards more efficient energy systems.
Secession would also be the most radically “legit” way, since despite many partisans decrying it as “treason”, the renewed interest & knowledge of the constitution would covince many more otherwise.
Granted, I’m not a constitutionalist nor an advocate for such political or reformative means (being essentially an anarchist), but I think sucession & an eventual realization of the value of smaller economies, states, territories, etc., & their vast advantages over the vast centralization our current government offers, would lead to a rather optimistic outcome of panarchism emerging in the aftermath of recovery from previously being the United States.
Best case scenario, it wouldn’t be officially called panarchism by citizens of that day, but rather a sensible solution to a dangerous problem this country previously had, & a majority eventually realize the means of the market are more efficient & overall better than the means of politics, which yields too many risks of corruption & a lack of peer & prosumer oversight (regulation would still occur, but it would largley be voluntary, depending on the transition time from current government to panarchism & assuming that after recovery, the old ways aren’t adopted again, which is likley) in light of how irresonspibility at the individual level allowed previous administrations of the previous government to leverage power).
I think the projection itself doesn’t bare out in terms of historical analysis, not because big empires cannot fall rapidly, but rather that there are other factors that in the past and even at present are not considered (or even known). As such, I’m more concerned with what can be done today because what is done now will give way to what can be done later. In this perspective, one must realize history isn’t reordained with any certainty (unless you’re a Southern Jesusfreak Premillinealist(sp?) or a Marxist that believes in the Geist), rather it’s made by those alive today; great and small. So, never underestimate your own opportunity to shape it. Nor that of others chances to do the same.
I agree that secession could offer a better scenario than most. Obviously this is best case for those that are on the seceding side or can easily jump on board after the fact. Though the smaller nature of the remaining U.S. at that point might help its restructuring and reemergence after collapse, it seems this would not be a quick or painless process. Also, as you alluded to, hopefully there would be a dramatic and robust restructuring of the seceded state’s constitution that would stave off a relapse in direction.
To ladyattis’ point about our own or others’ opportunity to shape it, I agree as well. Which is why I ask the question: what are optimistic scenarios that are also realistic? So far a revolutionary breakthrough and secession seem to be the best guesses. Although one (i.e. revolutionary breakthrough) seems quite unlikely, while the other still leaves many in pain.
Sure, the unknown could save the situation, and has in the past in the U.S. and other societies – but there are also many instances in other societies where it has not. The current situation seems to be so unprecedented and extreme that it is hard to imagine a realistic scenario of optimism, and therefore Pvincent87’s original statement of the probability of a currency crisis/economic collapse occurring within 20 years seems like it may be the most realistic scenario.
It makes sense. Nevertheless, this argument is only sound in predicting a stagflation, because the printing machine of FRB is not going too crazy yet, not to mention other Central Banks print money, too, so the depreciation pressure will not go too serious. The thing is, Americans still have a strong desire of consuming, so the Asian and other emerging economies will continue taking it for granted, therefore basing themselves on the exporting industries. Therefore, those export-led countries, like CHina, will struggle to death to keep a relatively strong dollar. What Peter Schiff argues is that the other Central Banks will abandon their policies of bulding up dollar reserves, and therefore sell up the Treasury Bills they are holding, making dollar depreciate like hell, thus shuttering the hyper-inflation. However, other banks will not do so partly because of the Asian economies’ desire to hold dollars. Another reason is that there are so far no better alternatives to dollar’s role of the reserve currency. CFR monetary economist Brad Sebster makes a perfect point. He argues that only an open free market can support a reserve currency. No matter how socialist the Obama’s Administration will be, American Economy is in fact still more market-oriented than any other competing economies.
Despite loud talks against “Dollar Hegemony” by nationalist mainstream media in many Asian countries, the commanding heights of Asian economies will continue financing the deficit in order to maintain a strong exporting industry, which is a source of economic growth of the emerging economies.
In the 70s the government was also crowding out private industry, right? However, when those Big Government policies turned out to be inefficient, the elites soon put Ronald Reagan in power to end the socialist trend.
True, but how does it necessarily mean that dollar will collapse in 15 years?
Just like what I said, many developing countries will continue supporting the deficit.
Ok, the ignorance of the good is a key source of rise of evil. But still the future of Empire depends on the elites, not the mass. If the elites found Obama’s agenda unhelpful in the long run, which is so true, then they will simply find another one in charge to end the wrong trend, do you think the Reagan-Thatcher is merely a historical coincidence?
I’m expecting stagflation. At the rate we’re going, if Obama is in for a 2nd term and congress doesn’t gain more republicans in 2 years, I’m expecting dollar collapse, economic collapse and if that happens perhaps secession before the end of Obama’s 2nd term.
Fingers crossed we get some libertarians like Peter Schiff and Rand Paul in the Senate and get to audit the Fed and Obama has only one term.
At this point I’m thinking secession and/or a political revolution may be the best option. We will default on US treasury debt. No doubt about it. The dollar is dying.