hyperinflation
Executive Summary
- Understanding the details of the Ka-POOM! theory
- The end game: hyperinflation
- Transitioning to tangible (vs paper) assets
- The critical importance of timing as things switch from deflation to runaway inflation
If you have not yet read Part 1: When This All Blows Up, available free to all readers, please click here to read it first.
Ka-POOM!
Now it’s time to revisit the Ka-POOM theory which posits that bubbles will be blown, then they will deflate (or threaten to, more precisely), and that will then be met with more money printing. Our view is that this cycle will continue until the entire system is utterly ruined, the underlying currencies destroyed.
What the 2008 financial crisis made clear is that when natural market forces work to purge the oversupply of poor-quality debt from the system. The bad mortgages (think subprime), the bad sovereign debts (think Greece), and the loan portfolios of over-extended financial institutions (think Citibank) represented ‘poor quality debt.’ When the market (finally) figured out that those debts would never be repaid at face value, or perhaps at all, turmoil erupted.
During times like these a vicious sequence begins: the market demands higher interest rates for the increased risks it sees. This makes debts harder to service, ultimately triggering defaults, which only compounds the difficulties as interest costs and defaults spiral ever upwards until the system is purged. Think of it as nature’s way of removing bad credit from the world, the way a lion chases the lamest antelope first.
Because in our fiat currency system ‘all money is loaned into existence’ (see chapters 7 and 8 of The Crash Course on-line video series), during periods of high debt default, the money supply shrinks. Money is created when a loan is made and, conversely, money disappears when a debt defaults (or is paid back). This is the textbook definition of deflation—a common symptom of which is falling prices the cause of which is that there’s just less money (and/or credit) available to chase goods and services.
As a reminder, money is a claim on real wealth and debt is a claim on future money. All that happens when we borrow more and more is that we push our problems of paying for what we want out into the future. Which means that…
The Ka-POOM! Survival Guide
PREVIEW by Chris MartensonExecutive Summary
- Understanding the details of the Ka-POOM! theory
- The end game: hyperinflation
- Transitioning to tangible (vs paper) assets
- The critical importance of timing as things switch from deflation to runaway inflation
If you have not yet read Part 1: When This All Blows Up, available free to all readers, please click here to read it first.
Ka-POOM!
Now it’s time to revisit the Ka-POOM theory which posits that bubbles will be blown, then they will deflate (or threaten to, more precisely), and that will then be met with more money printing. Our view is that this cycle will continue until the entire system is utterly ruined, the underlying currencies destroyed.
What the 2008 financial crisis made clear is that when natural market forces work to purge the oversupply of poor-quality debt from the system. The bad mortgages (think subprime), the bad sovereign debts (think Greece), and the loan portfolios of over-extended financial institutions (think Citibank) represented ‘poor quality debt.’ When the market (finally) figured out that those debts would never be repaid at face value, or perhaps at all, turmoil erupted.
During times like these a vicious sequence begins: the market demands higher interest rates for the increased risks it sees. This makes debts harder to service, ultimately triggering defaults, which only compounds the difficulties as interest costs and defaults spiral ever upwards until the system is purged. Think of it as nature’s way of removing bad credit from the world, the way a lion chases the lamest antelope first.
Because in our fiat currency system ‘all money is loaned into existence’ (see chapters 7 and 8 of The Crash Course on-line video series), during periods of high debt default, the money supply shrinks. Money is created when a loan is made and, conversely, money disappears when a debt defaults (or is paid back). This is the textbook definition of deflation—a common symptom of which is falling prices the cause of which is that there’s just less money (and/or credit) available to chase goods and services.
As a reminder, money is a claim on real wealth and debt is a claim on future money. All that happens when we borrow more and more is that we push our problems of paying for what we want out into the future. Which means that…
This report marks the end of a series of three big trains of thought. The first explained how we’re living through the Mother Of All Financial Bubbles. The next detailed the Great Wealth Transfer that is now underway, siphoning our wealth into the pockets of an elite few.
This concluding report predicts how these deleterious and unsustainable trends will inevitably ‘resolve’ (which is a pleasant way of saying ‘blow up’.)
When This All Blows Up…
by Chris MartensonThis report marks the end of a series of three big trains of thought. The first explained how we’re living through the Mother Of All Financial Bubbles. The next detailed the Great Wealth Transfer that is now underway, siphoning our wealth into the pockets of an elite few.
This concluding report predicts how these deleterious and unsustainable trends will inevitably ‘resolve’ (which is a pleasant way of saying ‘blow up’.)
As we write about the risks of our over-indebted economy, of our unsustainable fossil fuel-dependent energy policies, and our accelerating depletion of key resources, it's not a far leap to start worrying about the potential for a coming degradation of our modern lifestyle — or even the possibility of full-blown societal collapse.
Sadly, collapse is not just a theoretical worry for a growing number of people around the world. They're living within it right now.
This week, we catch up with Fernando "FerFAL" Aguirre, who began blogging during the hyperinflationary destruction of Argentina’s economy in 2001 and has since dedicated his professional career to educating the public about his experiences and observations of its lingering aftermath. Given his first-hand experience with living through, and eventually escaping, economic collapse in South America, we asked him to offer his insider's perspective on the current crisis in Venezuela, as well as the devolving situation in Brazil.
FerFAL: Understanding Societal Collapse
by Adam TaggartAs we write about the risks of our over-indebted economy, of our unsustainable fossil fuel-dependent energy policies, and our accelerating depletion of key resources, it's not a far leap to start worrying about the potential for a coming degradation of our modern lifestyle — or even the possibility of full-blown societal collapse.
Sadly, collapse is not just a theoretical worry for a growing number of people around the world. They're living within it right now.
This week, we catch up with Fernando "FerFAL" Aguirre, who began blogging during the hyperinflationary destruction of Argentina’s economy in 2001 and has since dedicated his professional career to educating the public about his experiences and observations of its lingering aftermath. Given his first-hand experience with living through, and eventually escaping, economic collapse in South America, we asked him to offer his insider's perspective on the current crisis in Venezuela, as well as the devolving situation in Brazil.
Executive Summary
- China is rolling over
- Contagion will eventually take down the core economies, including the US
- We are witnessing a full-blown collapse of the commodity complex
- Deflation will win the day over the next year, but then get ready for helicopter money hyperinflation
If you have not yet read Part 1: Deflation Warning: The Next Wave available free to all readers, please click here to read it first.
The Chinese GDP Lie
Right off the top, China is not growing anywhere near the 7% it claims. That’s just a politically useful lie that the Chinese tell to the world as much as they tell to themselves.
Fortunately, hardly anyone is falling for that particular fib any longer. Let’s start with the completely obvious manufacturing slump that has hit China:
Chinese Factory Gauge Slumps to Lowest Level Since March 2009
Sept 22, 2015
A private Chinese manufacturing gauge fell to the lowest in 6 1/2 years, underscoring challenges facing the economy as its old growth engines splutter.
A global sell off in riskier assets gained pace after the preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics dropped to 47.0 in September. That missed the median estimate of 47.5 in a Bloomberg survey and fell from the final reading of 47.3 in the previous month. Readings have remained below 50 since March, indicating contraction.
Premier Li Keqiang’s growth target of about 7 percent for this year is being challenged by a slowdown in manufacturing and exports even as services and consumption show resilience.
(Source)
The way a PMI reading works is anything over 50 indicates expansions and anything under 50 indicates contraction. Anybody care to explain to me how China can be sporting sub-50 readings every month since March — that’s five full months — and still be claiming to be aiming for a 7% annual growth target? You know, because China is…
From Deflation To Hyperinflation
PREVIEW by Chris MartensonExecutive Summary
- China is rolling over
- Contagion will eventually take down the core economies, including the US
- We are witnessing a full-blown collapse of the commodity complex
- Deflation will win the day over the next year, but then get ready for helicopter money hyperinflation
If you have not yet read Part 1: Deflation Warning: The Next Wave available free to all readers, please click here to read it first.
The Chinese GDP Lie
Right off the top, China is not growing anywhere near the 7% it claims. That’s just a politically useful lie that the Chinese tell to the world as much as they tell to themselves.
Fortunately, hardly anyone is falling for that particular fib any longer. Let’s start with the completely obvious manufacturing slump that has hit China:
Chinese Factory Gauge Slumps to Lowest Level Since March 2009
Sept 22, 2015
A private Chinese manufacturing gauge fell to the lowest in 6 1/2 years, underscoring challenges facing the economy as its old growth engines splutter.
A global sell off in riskier assets gained pace after the preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics dropped to 47.0 in September. That missed the median estimate of 47.5 in a Bloomberg survey and fell from the final reading of 47.3 in the previous month. Readings have remained below 50 since March, indicating contraction.
Premier Li Keqiang’s growth target of about 7 percent for this year is being challenged by a slowdown in manufacturing and exports even as services and consumption show resilience.
(Source)
The way a PMI reading works is anything over 50 indicates expansions and anything under 50 indicates contraction. Anybody care to explain to me how China can be sporting sub-50 readings every month since March — that’s five full months — and still be claiming to be aiming for a 7% annual growth target? You know, because China is…
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