I hope this thread is not dead yet.

Re: Hyperinflation. It might not be the case. I cannot do it total justice, but if you have a lot of time, look at the battle between Mike Shedlock “Mish” v. Peter Schiff. They have been back and forth on the deflation v. inflation battle.

Right now we are in a deflationary death spiral. Think real estate, Dow, US Treasuries. Ben Bernanke’s worst enemy is deflation. The Fed and the US Tres Dept are at wits end trying to “re-flate” the system, but it is not taking. Look at their complaint that the banks are not using TARP money to create new loans. Look at the spike in US savings rate. The consumer is toast and is hunkering down. Yet, the banks are tight fisted with the bailout money. Why? Because they are insolvant! The bailout money is sitting in the case that the consumer/depositors go deep underground demanding their cash back.

The Fed and Tres don’t get it. They want another asset bubble to lift consumer spending and the GDP. Not going happen for a long time. Money has been flying out the risky stocks into safe US Tres notes. However, there is a bubble forming there now. If the money freaks out (don’t ask me how or why) and pulls out of the Tres notes it will not be going back to the stock market, it will go to cold hard cash in hand.

This flight to the safety of cold cash will cause depositors to demand their money out of the banks. Bec the banks were leveraged 30:1 during the housing bubble, they don’t have it. That is where your bail out tax money went to. The banks stopped loaning and are hoarding the baliout dough just waiting for the runs to begin. And they will. The first few depositors that ask for their cash will just be getting their tax dollars back!

The Johnny-come-latelies will get nothing. The FDIC is so poorly funded, they will not get their $100,000. This will cause MASSIVE civil unrest, to say the least. This is The Event Horizon. This is when deflation will shift to inflation. The Fed and Tres will try to correct by printing $100g’s for every stiffed depositor to try to make right. Those who never even had a deposit will flip out screaming discrimination and demand $100g’s also or else. The Fed will cave due to further civil unrest, and will print $100g’s for every American, legal or not.

There are two very large problems at this point. Number one, how long has the deflationary death spiral lasted? If it goes on for too long the GDP will be greatly reduced and American production will be minimal. Imagine nearly every factory shut down and moth-balled. The issue is the length of time our production ability needs to ramp up.

The Second major issue will be how long the athorities allow the civil unrest to persist. The longer it persists, the longer it takes for the angry populace to become docile consumers again. The printing of money directly to the populace and the reduced production abiliies of this country will be the hyperinfaltion rocket ship. And it will only cause a further civl unrest spiral.

IMHO, this or something like this is the senario that Bush’s Tres Sec Hank Paulson spelled out to Nancy Pelosi on his knees. Pelosi obviously did not take him seriously.

Hope ya’all have a good day!