Hyperinflation Lessons
Markets moved sideways today – all of them.
In the news today…..
AIG Bailout – was MUFFED – according to the TARP Special Investigator. They said in their report that the FED bailout did use its negotiating power to reduce payments to AIGs clients. Now here is the real truth. AIG immediately upon receipt of its TARP billions, paid Goldman Sachs ALL of the money it owed it. The FED did not require a reduced payment. Why? Because Goldman Sachs runs the Treasury, the FED, etc. If that sounds too harsh – just look at the resume of the people at the top. I’m just surprised this report was allowed to be reported.
GMAC CEO –was fired by the GMAC board. GMAC has been losing too much money, and is an embarrassment to the GM brand of companies. The government’s hand is in this firing – as they control GMAC. I just say “good.” GM needs to be cleaned out at the top to allow new ideas to be spread throughout the company. The old, stodgy way of thinking that lead to GM’s original demise is still entrenched in the hallways of GM and GMAC.
UK Inflation – was reported at 1.5%. This is up from previous measures. I know, I hear you say “Who cares?” I care because the UK has ruled its economy the same way the US has ruled its economy after the crisis. Since UK inflation rates are rising, you can expect US inflation rates to rise too.
Mortgage Delinquencies – people over 60 days due on payments, is at a new high; that’s 6.25% of all mortgages. What does this foretell? It’s saying that there are MORE people who will be foreclosed upon. While this “percentage increase” is declining (except FL, AZ, CA and NV which were rising), and that’s what the news folks are talking about, the truth is that the absolute number of people who are delinquent is rising. We aren’t out of this mess yet. Remember that housing started our decline, and housing must be resolved before we get out of this mess. The big banks still hold that “toxic waste” and they are linked to housing value and foreclosures. This overhang of declining housing values is driving the value of bank assets downward – and that’s not good for anyone – even though I give ZERO comfort in for banks due to their complicity in the economic meltdown.
PPI rose – 0.3% last month. While this was less than “expected,” it is an increase in whole costs. (PPI = Producer Price Index)
US Treasuries – are still being purchased for foreign nations – mainly China and Japan. This is critical to your health and welfare, so rest easily this month. When this changes, and it must if the US goes into an inflationary period, interest rates will rise further and faster than anyone has ever predicted. That’s why it’s critical to your welfare – as credit card interest rates, adjustable mortgage rates, new mortgage rates, HELOC rates, and anything tied to interest rates will to UP.
Tonight’s Dinner Conversation……
Hyperinflation – that’s the topic for discussion today. How fast can hyperinflation hit a country? Well, the best example in the past century was Germany in the 20’s when it took a wheel barrel load of cash to buy a loaf of bread. How fast did Germany’s hyperinflation hit it? Here is a great chart to show you what actually happened.
Hyperinflation in Germany
It took two years to destroy the German Mark in 1921 to 1923. However, and even more important – look at the run up to the real hyperinflation. During 1914 through 1918 – there was inflation, as measured by the exchange rate to the US Dollar. The key historic fact is 1914 to 1918 was World War I, and this resulted in Germany owing extensive reparations which caused the inflation. Reparations is just money, just like excess spending in the US today. This is starting to look like the US Dollar exchange rate we are experiencing right now.
Being informed is powerful. Now what are you going to do with this knowledge?
Here are the last numbers for today:
Dow Jones 30 Industrial – 10,437 (up 30 points)
10 Year Treasury Bond – 3.32% (down 0.01%)
Euro – $1.4862
Gold – $1139 (no change)
Oil – $79.62 (up $0.48)
Gasoline – $2.00 (up $0.02)
