by Floyd and Mary Beth Brown

Ben Bernanke 2 SC

Few among us have any real experience with the hyperinflation that ravaged post-WWI Weimar Republic. It’s history to us, and rather abstract. Harvard law professor Friedrich Kessler did experience it, and said this is a 1993 interview:

It was horrible. Horrible! Like lightning it struck. No one was prepared. You cannot imagine the rapidity with which the whole thing happened. The shelves in the grocery stores were empty. You could buy nothing with your paper money.

Obama’s economic policies could trigger a currency crisis for America. If it does, it will most likely come in a flash. One day the greenback will be accepted by everyone, then overnight its value will implode. Sheiks won’t want it for oil; the Chinese won’t want it for everything on the Wal-Mart aisle.

A full-blown currency crisis will make the financial crisis of 2008 look like a cake walk.

It’s important to understand that hyperinflation is a currency event, not an economic event. Put differently hyperinflation can strike even when the official economic numbers look better. A currency crisis is a triggered by fear that the dollars you get back in return for savings will be worthless.

This is why gold and silver have already seen their price rocket. They are predicating inflation.

As we go about our lives, the Federal Reserve is engaged in what they call “quantitative easing.” Since only 3 in 100 people understand what this means, the Fed is getting away with it. Economists call it monetizing the debt. Functionally the Federal Reserve is creating money to pay the debts Obama is ringing up.

The starched shirts in Washington insist they’re “monetizing the debt” in order to fight deflation. Either they lie, or they are deluded.

By all reasonable definitions of deflation, we are not in deflation. Prices are continuing to rise for most goods. We go to the grocery store and we see it with our own eyes!

It’s true that we are experiencing price deflation in home prices. This is happening because housing prices were wildly inflated and are now just settling back into long-term appreciation trends. Also banks have been reluctant to lend to consumers in the last two years because bankers can make decent money with less risk gaming Obama’s easy-money policies without making mortgage loans. Finally, consumers remain over their heads in debt and as they continue to work on getting their household balance sheets in order, housing is likely to remain weak.

A weak housing market means many things including a weak recovery, but it does not mean we are stumbling into deflation.

America is drowning in debt. When the government pulls its snout out of the debt trough, that will free up some room for businesses to squeeze in and borrow for growth. And that will lead to new investments, accelerating business profits, new jobs being created, and yes, home price recovery.

We remain hopeful that the November elections will put our government back on a sensible course, and we will never need to see the worse-case scenario. But even those elections won’t fix things is Obama isn’t stopped soon.

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