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Forum Post: Alternative to hyperinflation

Posted 10 years ago on Sept. 28, 2012, 8:17 p.m. EST by arturo (3169) from Shanghai, Shanghai
This content is user submitted and not an official statement

Inflation is already visible in the form of commodity prices, real estate, gasoline, energy. But, you know, basically you could have a complete explosion, like it happened in 1923. Because if you remember, in 1923, you already had almost four years of money-printing on the side of the Reichsbank, because the Versailles conditions imposed on Germany, meant that Germany had to print more money than the Germany economy could possibly compensate for. But only after the French troops had occupied the Rhineland, and production came to a standstill as a result of the opposition of the German population, only then, from spring to November 1923, it exploded.

Today, we have a similar process, not in one country, but we have it in the entire Eurozone and in all of the dollar-zone. So therefore, this could go much, much more quickly, and since the dollar is not just the currency for the United States, it would affect, naturally every country, it would to a general collapse and outbreak of chaos.

Now, what would be the social consequences? If people realized that hyperinflation is on, well, the EU and even the British government, they have made contingency plans for the evacuation of British citizens from the Continent, if there would be such a collapse.

So, it's short term: I can not tell you exactly how many weeks, but it's already on! Hyperinflation is on. Bankers, like Deutsche Bank bankers and others are already saying, "Ja, there will be a rather big inflation, but that is the price we have to pay." Others even peddle the line that inflation would be good, because it would reduce the debt. Now, this is expropriation of the population, and therefore it would not eliminate the dangers of war and general collapse.

Now, concerning Glass-Steagall, well, that is absolutely true: If you impose Glass-Steagall right now, in the United States and in Europe, you would wipe out a large part of this virtual money, which has been created through derivatives, through structured paper, through securitization, through all these creative financial instruments, which were the result of the deregulation already under Greenspan in the '90s, but especially after the repeal of Glass-Steagall in 1999.

You would have to write off most of this paper. And as the former Economic Minister of Italy, Tremonti, has pointed out, people would not really lose anything, because they would only write off something which existed only virtually before. So, people naturally are opposed to this, because they say, "But I have all this structured paper, and I have this and that," but it does not exist, it does have a real value in terms of the real economy.

So therefore, when you impose Glass-Steagall, and you protect the commercial banks, you have not enough credit. You have not enough money, not enough liquidity. And this is why you have to combined Glass-Steagall with the concept of national banking of Alexander Hamilton, of, as I said, Kreditanstalt für Wiederaufbau principles after the Second World War in Germany; and you have to have a credit system where the sovereign power of the state to issue credit for the common good, towards future production, for productive investment, that has to be put on the agenda.

Now, this is, I know, a big problem, because people who have been thinking in Europe and elsewhere in terms of monetarist categories, they have a real mental block in understanding that. They somehow can not make the jump. They say, "Yeah, but if you issue credit, then that is inflationary." Or, "Where is the difference between what the central banks are doing now, and your credit system?"

Now, the difference is absolutely fundamental, because, as I mentioned, the liquidity published right now, is entirely for past accumulation of debt, outstanding debt, outstand derivatives, outstanding accumulation of things from the past. If a sovereign state says, "I have the following manpower, with the following investments in well-defined programs and projects of physical economy, I will cause productive full employment." Productive full employment means an increase in the productivity of the labor force, and the industrial capacity by applying the newest results of scientific progress and the principles of increase of energy flux density, in the production process. Because you want to increase the productivity by making investments in those areas which are necessary for the long-term survivability of civilization, and that does require an increase in energy flux density.

Now, if you obey these principles of physical economy, then a credit is not inflationary, because you issue that credit with a low interest rate, and you don't expect a return after month — not like Ackermann wanted to have 25% returns; you have to say good-bye to that idea. You issue the credit for 10 years, for 20 years, as long as it is needed to fulfill the project you have designed.

Now, if you have international cooperation among nations, let's say, for the World Land-Bridge, then you make multinational, long-term credit arrangements, among all participating countries, and you also balance the differences among the countries. Like, for example, some countries are very huge, like Russia; many time zones, relatively few people as a population. Then you have other countries, very small, many people, like Belgium. Then you have other countries who have monocultures; others have... so you have a diversity of conditions, and you have to have a network of multinational treaty arrangements, where the aim is to increase the productivity of the labor force of the respective population, and then, you increase the buying power over a long period of time, and you change the entire way how people think about that.

Now, I would say, that we need this debate, in all countries. In Germany, we have the precedent of the reconstruction of the postwar period, where the Marshall Plan, so-called, was being implemented by the Kreditanstalt, according to these principles. Roosevelt did it with the New Deal. And I think, in Russia, I know that there is a very competent economist who has written about that, Sergei Glazyev, that the state has the right to issue credit towards production and that is the sovereign right of a nation.

Now, therefore, when you want to realize these large projects, I think it would be a complete mistake, that you need foreign investment of some offshore bankers to invest in this, but it must be the sovereign power of the government and of the state to do these investments for the common good. Now, if that is being done, there would be naturally a period, where a certain change would have to occur, and the population probably would be anxious about what that means, like "currency reserves" in Germany has a very bad name.

But I think that right now, the much, much bigger danger is what we're facing through the combination of a war going out of control in the Middle East, and hyperinflation. Because if you have more or less global hyperinflation, you have social chaos beyond belief.

If on the other side, the responsible governments of the world work together, and say, "we have a plan, how we get mankind out of this mess. Here is what we are we going to do." Then I think it can be done, and the people who have by now at least in Western Europe this is the case, and I think in the United States as well, lost a lot of trust in their governments, and that is a very dangerous condition as it is. Because if you have a complete divide between the mass of the population and their governments, this also forebodes big dangers for the future.

So, I think we should have an international debate, public conferences, TV programs presenting these ideas, and get the population very rapidly accustomed to the idea that we do have an alternative. Because all of this talk about "there is no alternative" is just totally ridiculous and irresponsible, because it is the creativity of man, always to be able to come with alternatives. And there is only one thing that has no alternative, and that is death. Everything else has an alternative. So let's just be human and implement them before it's too late!




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[-] 2 points by flip (7101) 10 years ago

from a piece by michael hudson on hyperinflation- "So the flip side of asset price inflation is debt deflation. More and more money has to be spent to carry the debt overhead. The problem is not central banks financing domestic government budget deficits. Every hyperinflation in history has come as a result of the collapse of the balance of payments. The Germans are most familiar with 1921, but they tend to forget that the Weimar inflation was a result of Germany trying to pay reparations abroad. They were ordered by the Allied powers to print Deutsche Marks not for domestic spending, not to run a domestic deficit, not to rebuild Germany, not to employ labor, but to throw reichsmarks onto the foreign exchange market to obtain the foreign currency to pay the Allies, so that the Allies could turn around and pay the arms debts for what they bought from the United States before entry into World War One. It was the collapse of the foreign exchange that caused the hyperinflation, not domestic spending. And Germany’s hyperinflation was not cured by the central bank creating less money. It was cured by setting up a triangular flow of international payments. American bondholders would lend money to German municipalities that would issue bonds. The municipalities would receive dollars, and turn them over to the Reichsbank. It then would issue German currency against this for local spending – using the dollars to pay the Allies. The Allies would pay America, and that would keep the circular flow going. But to do this, interest rates had to be held down in the United States, to make German and other European borrowing more profitable for international lenders.

The same thing happened in Chile, which is another textbook hyperinflation. Rogers wrote a book on the process of hyperinflation in France that also occurred in the 1920s. The classic study of German inflation is by Salomon Flink, The Reichsbank and Economic Germany. The book actually was printed in Germany at that time. The same thing happened in Russia in the 1990s. The Russia hyperinflation occurred as a result of the depreciation of the ruble. This was already determined in advance at the meeting in Huston, Texas, between the World Bank and the IMF and the other Russian authorities. All this was published at the time, even before break-up of the Soviet Union. So to talk about hyperinflation as if it is a domestic phenomenon is to ignore the fact that never in history has it been domestic. It always is a balance-of-payments phenomenon, associated either with war or a class war, as in Chile’s case.

[-] 1 points by richardkentgates (3269) 10 years ago

Lofty goals that require a level of engagement that the world population (especially Americans) are not capable of right now. Much like Bush watched the towers fall so the people would get behind a war, those who understand what is happening behind the curtain must wait for the banks to fall before the people will get behind meaningful change. Unlike bush, we don't have any choice but to allow the collapse to happen because the media and idiocy have a hold of the collective psyche at the moment and only the impending collapse will wake them the fuck up.

Good thread by the way ^

[-] 2 points by arturo (3169) from Shanghai, Shanghai 10 years ago

Thanks. But I don't know if our chances will be much better after a collapse, as it will probably sink the world into utter chaos.

[-] 2 points by flip (7101) 10 years ago

" So to talk about hyperinflation as if it is a domestic phenomenon is to ignore the fact that never in history has it been domestic. It always is a balance-of-payments phenomenon, associated either with war or a class war, as in Chile’s case"

[-] 1 points by richardkentgates (3269) 10 years ago

It probably will. It won't be the first time either. But it will do two things;

  1. It will remove any emotional sentiment toward current systems leaving an open minded population.

  2. It will motivate those who have any modicum of civility to create solutions instead of striving for mediocrity.

[-] 3 points by TrevorMnemonic (5827) 10 years ago

many economists are predicting another financial collapse sometime around spring in 2013. Some say it could be much worse than 2008.

Also in regards to your number 2... sadly I think the majority will just think they have to choose a different candidate in their 2 party system of corporate frauds.

[-] 2 points by flip (7101) 10 years ago

most economists can't predict what will happen tomorrow

[-] 2 points by richardkentgates (3269) 10 years ago

You are correct on both counts.

[-] 1 points by stevebol (1269) from Milwaukee, WI 10 years ago

It could be much worse and I'm guessing spring 2013. People have already adjusted to the current mess by sharing living space, getting assitance like food stamps and not spending what little money they might have.

[-] 1 points by hchc (3297) from Tampa, FL 10 years ago

I agree with you on the next collapse timeline, after the tax cuts expire, and Europe (Germany's elections are right after ours) and the US have their elections and realize its all still just crooks, I cant see the markets reacting well.

[-] 1 points by TrevorMnemonic (5827) 10 years ago

But you have to vote for Obama or Romney will win

But you have to vote for Romney or Obama will win

They got the people in this country brainwashed good.

[-] 2 points by arturo (3169) from Shanghai, Shanghai 10 years ago

Hopefully, you are right. But there is also the possibility that the situation will degenerate into nuclear world war, similar to what happened last time we went through this pattern.

But hopefully, like I said, you turn out to be right.

[-] 1 points by richardkentgates (3269) 10 years ago

I don't think we have to wait on economic collapse for war to be a threat. Honestly, I'm pretty freaked out already over the heated rhetoric coming from Israel and Iran.

[-] 1 points by arturo (3169) from Shanghai, Shanghai 10 years ago

I agree, we don't have to wait for economic collapse, we're in the middle of it, its just getting worse, and it could trigger a war at any moment. I'm pretty freaked myself, but I think the main threat is from the financial oligarchy, which is closely tied to Israel.