The Debt Ceiling Debate Really Doesn’t Matter – Either Way U.S. Government Finances Are Going To Crash

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Congratulations America, you are now 14 trillion dollars in debt.  The U.S. national debt is now more than 14 times larger than it was just 30 short years ago.  The federal government is literally drowning in debt.  Now some members of Congress are actually debating whether we should raise the debt ceiling again.  At the moment, the U.S. government debt ceiling is is set at $14.294 trillion, and considering the fact that the U.S. government is borrowing approximately 2.63 million more dollars every single minute, that cap will be reached very quickly.  The U.S. Congress has raised the federal debt ceiling six times in just the past three years, so you would think that raising it again would not be that big of a deal for our debt-addicted politicians.  But this past November a significant number of Tea Party candidates were elected to the U.S. House of Representatives, and they are eager to prove that they are serious about fiscal responsibility.


So exactly what is the debt ceiling?  Well, it is an arbitrary limit on U.S. government debt that is set by the U.S. Congress.  The original idea of the debt ceiling was that it would keep U.S. government debt from getting out of control, but obviously that has not happened.  Whenever we have started getting close to the debt ceiling Congress has always raised it.  It has been raised ten different times since 2001.  Now it is time to raise it again, and if it does not get raised the U.S. government could actually start defaulting on its obligations.

So exactly how would such a scenario play out?  Well, according to former Congressional Budget Office Director Rudolph Penner, financial disaster would ensue….

“Our bond market and stock market would crash.”

Austan Goolsbee, the chairman of Barack Obama’s Council of Economic Advisers, made comments during a recent appearance on ABC’s This Week that were even more ominous….

“This is not — this is not a game. You know, the debt ceiling is not — is not something to toy with. If we hit the debt ceiling, that’s the — essentially defaulting on our obligations, which is totally unprecedented in American history. The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw in 2008.”

So would the financial system really crash if the debt ceiling is reached?

Well, it would certainly spook world financial markets.  Whether a full-blown financial panic would erupt would depend on a lot of things.

But the truth is that U.S. government finances are going to crash whether we raise the debt ceiling or not.

The U.S. government is in the terminal phase of a debt spiral.  Just look at the chart below.  Is there a single person reading this article that actually believes that this debt is sustainable?

What would happen if your own personal household debt looked like that?

Right now, the U.S. government is in a debt trap.  If it stops all of this borrowing the party will be over and our economy will plunge into a depression.  But if it continues to borrow at this pace it is going to keep making the eventual collapse even worse.

There are a few Tea Party politicians that want to face the day of reckoning right now and attempt to start living within our means, but most of them don’t even realize how horrific that would be for the U.S. economy.  Right now, out of control government spending is one of the only things stabilizing our economy.  If U.S. government spending was slashed to a level where we would not have a budget deficit it would absolutely devastate consumer spending.

So is continuing to borrow massive amounts of money the answer?  Of course not.  But most of our politicians seem to want to keep “kicking the can down the road” and so that is what is probably going to happen for a while.

Eventually the rest of the world is going to get sick and tired of lending us money and interest rates are going to start spiking like crazy.  At that point either the U.S. government will go bankrupt or the Federal Reserve will just start printing trillions of dollars out of thin air to keep the system running.  Either option will be absolutely disastrous.

Not that we aren’t already in serious economic trouble.  Even with the unprecedented government budget deficits of the past few years, the U.S. economy just continues to get worse….

*There were more U.S. consumer bankruptcies in 2010 than there were in 2009.

*There were more bank failures in 2010 than there were in 2009.

*Foreclosures were higher in the third quarter of 2010 (the last quarter we have numbers for) than they were in the third quarter of 2009.

*According to the U.S. Labor Department, the unemployment rate went up in two-thirds of America’s largest metropolitan areas in November.

So what would happen to the economy if the debt ceiling did not get raised and the U.S. government stopped pumping gigantic piles of cash into our economic system?

It would not be pretty.

But how in the world can we live with what we are doing to future generations?  We are literally robbing them blind just to feed our endless debt addiction.

We have stolen so much money from our children and grandchildren that it is almost unimaginable.

For example, if the federal government stopped all borrowing today and began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the U.S. national debt.

Instead of showing financial restraint, each new Congress just seems to push the debt pedal even closer to the floor.  Sadly, the 111th Congress added more to the U.S. national debt than the first 100 U.S. Congresses combined.

So where is all of this going to end?

In financial disaster of course.

There is no avoiding it at this point.

About the only thing we can do to avoid financial disaster for a while is just to keep borrowing even more money.

Eventually it will all catch up with us, and when it does it is going to be a financial nightmare unprecedented in U.S. history.

To get an idea of what we are headed for, please take a few minutes to watch the short YouTube video posted below.  It is entitled “The Madness Of A Lost Society 2: Final Warnings” and it does a good job of explaining how the path we are currently on is likely to end in a hyperinflationary collapse of the U.S. dollar….

  • Susan L

    The debt is getting close to going kaboom.

    Alot of people think we are doomed, but there are still great ways to make money. Even while the economy is collapsing around us.

    I subscribe to the guy from australia and his FFT economic newsletter at that guy has called many big events before they have happend, including the stock market crash in 2008 and the current financial collapse of the US. (currently happening) I found him from a friend last year, and he has some important work.

    His oil calls are insane, and I have been making good money with them. He is well worth a look, if you want to keep two steps ahead of the sheeple out there.

    I am worried about my financial future. Is anyone else nervous out there?

  • MFS

    Hi .
    Many years ago i predicted this day would come,now it’s way to late to say “Told you so”!

  • mondobeyondo

    We’re screwed.

    There are no easy answers to fix this. In fact, I fear there are NO answers left.

    The can has been kicked down the road one too many times. Oh sure, tax the rich. Tax the poor. Tax your dog and cat. It still won’t be enough.

    The problem is not revenue, it is spending.
    Spending is more than out of control. The U.S. government basically has a credit card with an infinite credit limit. If it comes close to maxing out on the card – just ask Congress to increase the debt ceiling! Problem solved!

    Unfortunately, cutting spending will be very painful. Our entitlements (Social Security, Medicare, Medicaid, etc) take up a huge amount of our budget deficit. Cutting even a portion of those would help in the long run.

    Cutting even a portion of those would also trigger civil war.

  • William

    OK, folks, here is just one small example of why the USA is doomed. Incoming Speaker Boehner is cutting the budget for the US House of Representatives by 5%, resulting in a savings of federal expenditures of about $35 million a year. The US wastes $5 BILLION (five thousand million dollars) a MONTH in the war with no victory in Afghanistan. The unnecessary war of choice in Iraq has cost a TRILLION dollars….1/14 of the entire US federal debt. I do not hear any Republicans saying anything about the unaffordable EMPIRE that has bankrupted America. The specious “war on terror” is a phoney war based on LIES. But, Americans just will not wake up to FACTS. That is why we are doomed.

  • Gary

    (Reuters) – Most Americans think the United States should raise taxes for the rich to balance the budget, according to a 60 Minutes/Vanity Fair poll released on Monday.

    Hate to break it to my detractors-most people agree with me-tax the rich spread the wealth.

  • Mark …

    The best way out I see is $200+ oil prices.

    That would kill trans-pacific shipments from Asia, and force companies to set up factories very close to home.

    With factories come jobs, and that’s the ONLY way to pay off some of that debt.

    Sure, everything will be much more expensive, but that level of inflation is still controllable, while with hyperinflation it’s not.

    However, the only realistic way to get rid of this debt is through hyperinflation. Germany paid off its (internal) debts within a couple of months in 1922.

    The good thing about hyperinflation is that it can not last for long, say a year or two max. The exception is Zimbabwe, but that’s more due to the extreme regime there and alternative money available (the dollar).

    For the U.S. there is no alternative money. Gold will have to be confiscated, and there simply won’t be enough Canadian money around to exchange your dollars in time. Remember, Canada is sitting on the largest potential oil reserves in the world (especially with oil above $200+++), that will keep their dollar very strong.

    History shows that hyperinflation will run for about a year. The higher the hyperinflation, the faster it will disappear because debts will be paid off faster and the population will simply not have any buying power left for higher prices because wages never keep up. Many government employees will likely be fired, so that will not be helpful as well.

    Now, that’s where the big negative of hyperinflation comes in. Everybody with little knowledge of investments will be reduced to poverty. Plain and simple !

    Unless you can settle in Canada, the only way to keep some of your money is to either smuggle your gold etc abroad to places like the Bahama’s, or put all your money in stock of companies likely to survive the hyperinflation onslaught.

    Which kind of companies? Mining, food related, any company that provide basic needs people will always have to buy (or governments will provide to them in aid).

    You think the DOW at 10.000 is high? After an initial economic collapse to perhaps 1.000, hyperinflation will set in. People will then be told to buy stock, land, anything of value, and the DOW can jump to 100.000, 500.000 or even higher.

    Of course, this will be the mother of all bubbles ! As fast as hyperinflation starts, as fast will it stop as well. Expect the DOW to fall back to 100.000 very, very quick and level off to “normality”.

    In other words, when you see enormous high volume in the stock markets, do the opposite of what everybody else is doing, sell some of your stock. Why? If ordinary people buy a lot of stock, guess who is selling it to them?? Professional money!

    Why would professional money sell you something if they know prices will go much higher? They better keep it then, and the volume will stay relatively low while the prices are going up.

    However, when the stock volume is very, very, very high, then you know they are happily to sell to you because they know prices will collapse afterwards. It’s the kind of game they have been playing for at least the last 100 years.

    Alright, I hope this makes sense. Search for “Master the Markets” (pdf) by Tom Williams if you want to know all about how the markets are there to fool you.

    My final advise to survive hyperinflation: learn a useful professional trades NOW. Learn how to make cabinets, ironworks, welting, anything useful when imports stop. The people doing best (besides traders and bankers) during 1922 Germany where professional people. With a very cheap dollar, guess where the world will order goods from: U.S. factories. Germany had a shortage of labor in 1922, while France, Germany and even the U.S. had high unemployment.

    So, the news is not all that good for Canadians when hyperinflation happens.

    Greetings, and happy New Year !

  • Mark …

    One more remark about housing …

    Buying a house when hyperinflation starts would be a great investment to actually make money. Say, $500K will be worth $50 in pre-hyperinflation dollars after a couple of months. If you are lucky, you could pay off that house very quickly.

    When the DOW is at 1.000, there will be plenty more houses for sale than currently. The big problem will be getting a loan, and banks will likely be not that stupid when they expect hyperinflation.

    However, if you can buy a home at that time, make sure to buy it down-town !!!

    After hyperinflation, most people will simply not be able to afford gas for cars. Whatever happens, gas prices will likely stay high because peak-oil will never go away, it will only get worse.

    A crisis can only last a number of years. Eventually, people will have to buy new clothes, household items, etc, etc. When people slowly start to get out of poverty by new jobs, the last thing on their minds will be to buy a car.

    Housing will be the most urging need, and if you don’t have a car, guess where they (or developers) would want to buy: down-town !

    We will probably go back to 1920’s style housing where a lot of people will live very close to their factories, which is very close to down-town.

    Like in Detroit, suburbs will become wastelands, unless governments provide good public transport. But with the debt experience of the last 40 years, that might be difficult to set up.

    So, down-town will be the first area for re-development. You might see “green-towers” being setup, which will be sky-scrapers built for farming. First, that would provide employment for people in the area, second it would avoid transport costs. The green market would be at the first floor, come and shop after work (next door).

    Please, people, don’t think hyperinflation will be the end our society. It would finally get rid of this debt drain on the economy. It would finally get rid of the transfer of our wealth to Asia and the Middle East.

    “Thank you very much, you shipped us products and oil. We shipped you paper. And guess what, it’s worth nothing. Thank you very much!”

    Things will be different from now on. We will make new laws, trade with us is fine, but our imports may never again exceed our export. Bye, bye.

    If you play it well, it could be a great start of a new life to come.

    It will be a huge destruction and transfer of wealth. I really feel for all those coming retirees (baby boomers) who will likely end their days in poverty. But in the end, they all caused this by voting for idiot politicians and demanding “cheap” credit.

    I prefer that they pay for it rather than my kids.

  • Stray Cat

    Bring it on; get it over with. Some of us are still AMERICANS. We can handle it.

  • A Dodgy Bloke

    Austan Goolsbee is hardly an impartial advocate of fiscal sanity. On the subject of your graph Harry Figgie Jr. in his book Bankruptcy 1999 talked about the graph he called the hockey stick. Take a close look at the graph looks familiar? Despite the title it’s a very good historical primer on how we got here and gives an example of an inflationary and deflationary crash.

    That said the Congress will raise the debt ceiling and kick the can down the road a few more months. This is the same Congress who’s first acts was to make it easier for tax cuts approvals.

    Lets face it folks we’re basically screwed if your not out of debt, get there. If you don’t have at least 6 months or more worth of food stored do it Goggle Prepping on a Budget there are tones of low cost resources you can use. If you don’t have a gun get one and learn how to use it, ammo too. If money is an issue (It is with all of us) look at used firearms. A little known fact is most gun owners are not shooters, you can get a new gun or nearly new for the price of the used one I saw a guy sell a Ruger revolver that had never been fired. The store I was selling it a week later as a used gun. Look at where you live is it area that’s going to be a problem area look at surrounding areas. There are plenty of low cost alarm systems you can install yourself. Most importantly think though any plan to many morons have sold everything set up some Doomstead and are now in worse shape than if they had stayed put.

    PS if your thinking about buying freezes dried food you may want to do it now before the 2012 madness starts.

  • Mark

    Odds of a debt ceiling increase: 100%
    Odds of a debt ceiling decrease: No way Jose!

  • Aurora

    I’ve had it with this kicking the can down the road a gazillion times now and all this denial.

    Been observing this for quite some time now and I find it difficult to believe Americans will EVER reach critical mass in terms of an awakening. If they haven’t woken up now, why would they later this year?

    I’m interested in knowing how many people can see this for the hopeless situation it is and would like to leave the country but just cannot find the means to do so.

  • William

    Being an American is not enough. One has to be an intelligent and informed American. Clearly, being intelligent and informed escapes those who live in Shrub World.

  • Alan

    The article raises the questions but never answers them.

    What does “would not be pretty” actually mean?

    Has the ‘debt ceiling’ ever actually been enforced – and if so, what happened?

    The question is moot really, for a handful of tea party politicians are not going to be able to prevent the ceiling being raised yet again. This may cememnt it for all time as an entirely meaningless number, of absolutely no meaning – but that just means business as usual.

    The idea that they’re stealing from future generations is false. They’re stealing from you, right now. It’s YOUR productivity being stolen by taxes and inflation.

    As for reducing imports, why? You people really need to learn some real economics. Why complain when you receive real products in exchange for paper?

    There’s only 2 ways America can recover, without default and/or hyperinflation:

    1. Increase exports, in exchange for a real currency, such as gold

    2. Improve productivity, to the point prices come down, so people can afford to maintain their current lifestyles (or even improve them)

    #1 isn’t likely to happen, leaving the vague possibility of #2. What America NEEDS is deflation.

    What America will almost certainly get, is inflation.


    Because as Libertarians have been trying to tell people since the 1800s or so, government is not your friend, it is not any solution, it is not “your country” and it is not a practical idea – plus it is evil, to the core.

    Maybe, probably well beyond my lifetime, humanity may come to understand we need “government” as much as we needed the witchdoctors, religion, monarchy or slavery.

    In fact working for fiat dollars IS slavery.

    Anyone have a handy time machine?


  • Gary

    Our economic problems stem from the biggest concentration of income and wealth at the top since 1928, combined with stagnant incomes for most of the rest of us. The result: Americans no longer have the purchasing power to keep the economy going at full capacity.

    Tax the rich and spread the wealth!

  • Mr Carpenter

    I’ve got really truly bad news for you folks who think hyperinflation will “disappear” debts.

    Germany’s EXTERNAL debts DID NOT GO AWAY in it’s hyperinflation period of the early 1920’s. Only INTERNAL debts did (to people in that country, working with the Reich Mark as their own currency).

    In fact, it hit the news late last year that Germany had finally paid off it’s REAL external debt relating to World War ONE. In late 2010. Some 90 plus years later.

    If you have a spare 15-20 minutes, read this:

    If not, I’ll give you the two money quotes now.

    “The connected elitists never go to jail – they own just about everyone. They have pushed too far. America is headed for inflation, hyperinflation, deflationary depression and that will end in revolution.”

    “The government’s finances not only are out of control, but the actual deficit is not containable. Put into perspective, if the government were to raise taxes so as to seize 100% of all wages, salaries and corporate profits, it still would be showing an annual deficit using GAAP accounting on a consistent basis. In like manner, given current revenues, if it stopped spending every penny (including defense and homeland security) other than for Social Security and Medicare obligations, the government still would be showing an annual deficit. Further, the U.S. has no potential way to grow out of this shortfall.”

    In as plain English as I can muster, I have to tell you all that:

    1) Not only is the United States BANKRUPT but virtually the whole world of governments are also BANKRUPT with almost no exceptions

    2) There is no way out

    3) Hyperinflation does NOT “only generally last a year and then it’s all over.” Historically speaking, it takes several years for the process to occur. It’s not something to wish upon one’s worst enemy; the reality is, that hyperinflation is like the gates of hell opening for humanity when it occurs.

    People starve to death and freeze in the streets. STORES ARE EMPTY. Food is nearly impossible to obtain. GASOLINE WILL STOP FLOWING. Electricity may not work, or may go on and off at your home or work (for those few saps who still have a job).

    So when do you know when hyperinflation occurs?

    When your previously largest paper currency is only good for toilet paper. (That’d be the $100 bill).

    When will it be evident that hyperinflation is at it’s probable peak before total collapse of EVERYTHING?

    When it gets about like the 1923 situation of Germany, when hausfraus (housewives) would go to their husband’s work twice a day with wheelbarrows, for his twice-daily pay (the amount of which goes up astronomically not only from day to day, but from morning to night), and then go try to spend the money before it’s worth too little to buy a LOAF OF BREAD (if any can be found).

    Oh yes; the other thing will be that in any stores which DO have any goods to sell, there will be people employed who will simply be there to continually increase the price of goods. CONTINUOUSLY.

    Think on that for a moment and reflect on what survivors of the Weimar Republic (German) hyperinflation of 1920-1923 said. “It was almost impossible to locate food…”

    Good luck and God bless. May a more civilized and Constitutional people and government come out of the coming ECONOMIC TSUNAMI. Because the probability is that at least 1/3 of everyone you know – including many of us now reading this – won’t be alive, solely due to this situation, within a few years.

  • Mr Carpenter

    Oh I almost forgot. Hey, Gary? You know that super-high tax rate you want to foist on “those” rich folks whom you want to punish?

    Guess what happens with a fixed value tax rate on currency during hyperinflation?

    So let’s say you and your like-minded folks get back into power before hyperinflation hits, and they put a cap of 98% tax rate on people earning, say, over $1 million a year.

    Once hyperinflation takes hold, even with a “minimum wage” job (if you were lucky enough to hold one), you’d be joining the ranks of those “millionares” within a matter of months.

    If America suffered a relatively typical bout of hyperinflation, you’d be a billionaire a few months after that, and a few weeks after that, you’d join the ranks of those ultra-rich trillionaires….. after which the government would most likely wipe off a few zeroes and start over, again. Whereupon you might be in the 90% tax bracket for a few days or weeks until you’re back in the 95% tax bracket again.

    Likewise, anyone prudent and wise who’d put aside US Dollars in their savings and retirement would obviously be WIPED OUT in weeks or months, at the initial outset of hyperinflation.

    Get the picture, folks? THIS IS NOT A COMPUTER GAME. THIS IS REALITY.

  • Steven

    One thing Mark… if your think the government will confiscate gold (I think they will too), then it’s not a stretch at all to think they will create laws that will requirement repayment of mortgages with some kind of inflation adjustment. Why would the government which has been bailing out banks (their friends) for decades change?

  • Buy Gold!!!

    Join the Resistance!

  • Mark …

    “Germany’s EXTERNAL debts DID NOT GO AWAY in it’s hyperinflation period of the early 1920′s. Only INTERNAL debts did (to people in that country, working with the Reich Mark as their own currency).”

    “In fact, it hit the news late last year that Germany had finally paid off it’s REAL external debt relating to World War ONE. In late 2010. Some 90 plus years later.”


    Hello Mr Carpenter,

    Just details, but I think you are mixing up two things here.

    There was German National debt accumulated by pre-WWI governments, accumulated by conducting war, and accumulated by post-WWI governments until 1922.

    80-90% Of those bonds issued were owned by German people. This debt was paid off by 1922, both domestically and internationally, because they were issued in German Mark, which was worth nothing in 1922.

    However, there were also the WWI “reparation” debts to the Allies. But these were issued in Francs, Pounds, Dollars and Lira. Well, except for the Italian Lira, since these currencies kept most of their value over time, yes it took the German government over 90 years to pay off.

    You can easily deduct 30 years from those 90 years, because starting 1935 Germany didn’t pay anymore, and the Allies didn’t ask for it until Germany was strong enough in the 1960s. Everybody after WWII was really scared about what happened after WWI that it simply was not an issue to ask Germany to pay again. It was probably Germany itself who first started to talk about it.

    Do you think 60 years is long? I wonder if we actually paid off any of the Vietnam war bonds in the U.S. ???

    Now, all this U.S. debt is issues in U.S. dollar bonds. With one or two year hyperinflation, as what happened to the German Mark issued debt, that will simply evaporate really quickly, along with your wealth.

    If I am correct, 60% of U.S. bonds are owned by U.S. retirement accounts? I am sorry for the baby boomers, but that will all be gone, and by far most have no idea that they are sitting on a time bomb.

    “then it’s not a stretch at all to think they will create laws that will requirement repayment of mortgages with some kind of inflation adjustment”

    What’s the point of creating such laws if nobody can pay? It’s in the government’s best interest to get rid of all the debts and to get back to normality as soon as possible.

    Hopefully some officials in Government and some politicians have brain stormed about the effects of hyperinflation ?!

    If a crisis takes too long, revolution will automatically follow.

    I think what’s more likely is that Governments will confiscate empty houses and give them to the starving poor along with food aid, just to keep them off the streets.

    I think what you will see is many banks, if not all, collapsing. Hate it or not, the Fed will then set up four new Government banks (one for each region) WITH CLEAN BOOKS, and backed up by gold and other commodities.

    This happened in many European countries after WWII to get businesses going. Many of these banks were privatized after 5 or 10 years.

    That’s what they should have done with the TARP money in the first place. Let the share holders pay for those banks and not the taxpayers !

    Anyway, in general, issuing inflation adjustment laws will only prolong the hyperinflation, and after one year, people will simply not take that any longer. Any politician voting for such laws will simply be kicked out or lynched.

    If you are interested in this topic, search for “when money dies” 2010. Amazon has a new updated (kindle) version of this 1975 book.

    It’s one of the very few books on hyperinflation, but expect many more to come.

  • Mark …

    “Think on that for a moment and reflect on what survivors of the Weimar Republic (German) hyperinflation of 1920-1923 said. “It was almost impossible to locate food…””

    Actually, there was plenty of food. Farmers were doing quite well.

    There problem was, people couldn’t pay for it, so it was smuggled out of the country.

    In Germany there was a financial collapse, but not a government collapse. Therefore the situation could be kept under control. There were plenty of strikes, but food kept flowing to the cities.

    The problem was also distribution. As soon as a store or market had new stock, people would jump on it to get rid of their money.

    However, in Austria, there was both a financial and government collapse, and there people were really starving.

    What happened at lot is that people would buy up other people furniture (piano) etc, and bring it to the farms in exchange for food. After the hyperinflation was over, farmers would sell the furniture back to city folk with a lot of profit.

    Before Mussolini came to power in 1923, the Allies were discussing whether Italy should simply annex (take over) Austria, the situation was that bad. Remember, unlike WWII, during WWI Italy was part of the Allies and fought against Austria.

    However, when Mussolini took power, France and England were smart enough to figure out that if Italy took Austria, eventually fascists governments would take over Germany and Hungary as well. In the end, that’s what happened, but not because of Mussolini, it happened because of the large unemployment after the hyperinflation was stopped. Suddenly, German goods and labor was not cheap anymore and foreign companies stopped buying there.

    This is another danger of hyperinflation. How fast do you stop it as not to kill your exports?

    Government might get addicted to hyperinflation in order to keep jobs?

  • Mark …

    One thing about hyperinflation you might not think about is how many physical bank notes the financial system is able to bring in rotation.

    In 1922 Germany, this was a big problem. The official printers couldn’t keep up. Germany ordered the printing of bank notes from printers all over the country and from abroad. Again, the printers couldn’t keep up.

    Many printers also went on strike. They were exhausted, and their wages didn’t keep up with inflation, so they demanded more money.

    Then the Government finally allowed large companies to print and pay their own employers with “company money”, so called “NotGeld” (emergency money).

    Imagine buying food with Walmart money or GE money. It was totally crazy, and of course with literally hundreds of banks, cities, companies, etc printing their own money, it became a total joke to keep inflation under control.

    Now days, it seems to me, paper money will simply be taken out of rotation, and everybody will be forced to pay by (FEMA) debit cards. The Government can then set controls on how much you can spend, per day, per family member.

    I don’t think you will see people with tons of cash buying bread. However, what I can imagine is financial computer systems failing. The numbers they will have to deal with will be so much greater than currently. To add up wages for large companies will simply give too large numbers to store in memory.

    Remember Y2K? Well it took 5 years to fix that, and there were very few problems reported. Now imagine human resources systems suddenly dealing with wages in the $500.000+++ per month instead of $2.000.

    Imagine how the tax collecting system will deal with that.

    BTW, with hyperinflation, forget about collecting taxes. By the time the government collects it, it will be worth nothing. Another reason why hyperinflation will not last for a long time.

    Hyperinflation will come overnight, it will last for months, one year max, until the debts are paid off, and then it will be up to the government to decide how fast they want to stop it.

    In Italy they simply took out some zero’s from the Lira and issued new bank notes. This will likely happen. If you have a billion on your bank account, they will simply erase some zero’s in everybody’s bank account, and then you can use the $1000 left in your account to collect your new bank notes.

    I wonder which Presidents will be printed on it?

    Enjoy !

  • Mark …

    “#2. What America NEEDS is deflation.”

    The debts are simply too big already, and with deflation they will only get bigger and bigger and bigger, meaning more interest, and more interest.

    Look, we had plenty of hidden deflation already over the last 30 years. Did that reduce our debt?

    Computers, toys, and tons of other products got cheaper and cheaper. Two years ago, I bought a TV for $1500. You can now buy the exact same one for $500. That’s deflation !

    Deflation is not the solution, deflation is one of the big causes of the current crisis. WHY ?

    With deflation came the urgency for a lot of people of wanting to buy a lot of thing == cheap credit == big personal debts.

    And second deflation of most products was only possible by the shipment of these products from Asia !!!

    That’s where the REAL big problem is, GLOBALIZATION.

    If the same TV was produced in the U.S. it would have cost $3000, or $5000.

    Now, it’s your choice: inflation with goods made close at home, or deflation with goods made in Asia ?

    Personally, if I were your next President, I would issue a new law: Imports may never exceed Exports (plus/minus 10%, oil and Canadian trade excluded).

    Will this solve the debt crisis. NO, I really think we have to go through a period of hyperinflation first to get rid of that debt fast.

    But after hyperinflation is over, such a law would bring back a lot of jobs home and keep them here.

    Do I want to go back to isolationism? No, the U.S. will be very happy to trade with equal partners with equal rules and similar wages, like Canada, Europe, Japan and Australia, to name a few.

    However, when you have governments in Asia forcing slave labor on their population, for wages of 25 cents per hour, and keeping their currencies artificially low, YES, that’s where I would draw the line. No more imports from these countries.

    BTW, I would issue also a law stating that all components for the U.S. Armed Forces would have to be produced in the U.S. or by close Allies.

    How many of these components are now made in China?

    One more comment on deflation … deflation is ONLY possible with cheap oil. For the last 30 years we had cheap oil compared to the prices that will come from now on.

    Peak oil production has been proven in the U.S., the North Sea, Mexico, the Middle East, and now Russia as well. The exact peaking year for world production is hard to predict, some say 2005, others 2015, others 2020. It doesn’t really matter when.

    I believe it’s real. I believe peak oil is coming, and since GDP is best measured in units of oil, if oil gets more and more expensive to pump out of the ground, deflation will simply become something of the past.

    Is that bad? Yes and no. Everything will be more expensive, even post-hyperinflation when the debts are gone. The good thing is, it will certainly kill globalization, and you will find a lot more goods made very close at home. Which means more revenues, better infrastructure, and hopefully a better quality of life.

    There is for sure a lot of doom in hyperinflation, but so are cancer treatments. In order to survive, you have to get through that for a while.

  • Daniel Hazelton Waters

    Hyperinflation will look different for us then it has in the past. We will move to electronic currency. It will allow for increasing of the money supply never before seen. Tapping all potential computational ability would require massive hyperinflation. So the wheel barrel will not be needed anymore…

  • from europe

    that Mark guy is on crack. Hyperinflation will collapse your whole society. it will last more than a year for sure coz it’s difficult to control once it starts.
    and you think any1 will trade with you after you whiped out their savings – like the arabs sell you again oil for your “new sound” money? DREAM ON. you don’t have anything to export anyways but your dollars, and when that’s gone so are you! the arabs will just trade with china. and you? well you’ll be riding horses if you survive the civil war that’s gonna errupt.

  • Eric

    It’s time for a global economic apocalypse to wipe the slate clean and start over.

  • wifiwaves

    You should read “The Day The Dollar Died” by JohnGalt.

    Electronic “D-Cards” are issued to replace currency…

  • It is sad to see our government so polarized and divided. If our politicians put in half as much effort into crossing the divide and addressing real, pertinent issues as they did slinging mud at each other and playing this horrible game of he said, she said, we might actually have an efficient government. America’s real problem is that we have lost sight of the real issues at hand and instead we focus on these petty social issues that will never go away nor will ever be agreed upon. Washington needs to lead by example and put the issues aside that will never have a majority ruling.

    The politicians will most likely take the easy way out by printing us into hyper-inflation rather than admit their folly and take the responsible action of implementing Greek-style austerity. Either way, it’s not going to be pretty.

    We help Americans find jobs and prosperity in Asia. For details, visit

  • tmajor

    When I was a kid in the 1970′s, I remember President Nixon putting the final nail in the coffin of our value backed currency, I kept asking adults why the gov’t was borrowing money when there was nothing to borrow. The dollar is a (faith valued) non-convertible fiat currency. In fact that is why the U.S. gov’t designed it, so they wouldn’t have to borrow from anyone!

    Please step outside of the box for a moment and view it like I did as a child. With an asset backed currency there must be physical gold in place to back currency. With a non-convertible fiat currency (which simply means the currency has nothing of physical value supporting it) the value consists of people (here and abroad) believing it has value. So if you compare the difference between the two it is easy to understand that the U.S. gov’t is not borrowing money from anyone because there’s nothing to borrow. It is ink and paper, that is it! It is what it is!

    The US government is a monopoly of its currency. If they don’t print it there is no money. They tax us to control population, spending power, and who gets the money. The gov’t must run a defecit in order to allow economy to run smoothly. When they don’t inject enough money into economy we end up with a lot of unemployment. Excessive gov’t spending contributes to the hyperinflation we have here now where Americans pay from 100-5000% more for products, service, and health care. The gov’t will never go broke, and they do not rely on tax revenues nor do they borrow money from china or any other country to finance this country! In short, they offer bonds to anyone to drain excess reserves and to control the overnight loan interest rates. Technically, the only reason this is done is because it is mandated by law (that has absolutely no merit), and if china (or any investors) were to stop purchasing the securities the gov’t would simply abolish the law Very much like the fabricated debt ceiling that keeps getting raised despite tales of gloom. Or the idle threats of the federal gov’t closing it’s doors due to lack of funds. I personally wish they would close shop long enough to remove the circus that’s running it!

    The value of US currency is determined by what the gov’t demands private sector must do or sell to obtain it. The more unemployed (welfare, forced involuntary unemployment, etc.), the less value the dollar has. Unemployment equals less output. The true debt, we and future generations will have to pay, is the lost output and depreciated human capital!

    The reason America imports more than they export is because exports are real cost (output and labor) and imports are pure benefit for the system. Basically for the cost of the ink and paper to make dollars, America’s elite can purchase the rest of the worlds products (their output and labor). The down side to this is the taxpayer’s here obviously don’t receive products from all over the world just for the price of ink and paper, and the loss of millions of good paying manufacturing jobs. When the US gov’t started forcing outsourcing in the 1960′s they knew this and indicated other equally compensating jobs would definitely replace lost jobs! That has never happened!

    Since my childhood I have spoken to several economists who are 100% aware of how our U.S. monetary system works. I have asked them why they believe the gov’t continues with this charade. They seem to believe that the majority of the gov’t really believes the whole borrowing system to be fact. As for the thousands of economists who follow suit, I suppose they have so much schooling, money, and time invested in the borrowing fairy tale they’ve been fed that they have put on blinders and refuse to look at it as it actually is!

    I don’t see how one can’t see the truth when you simply understand that there is absolutely nothing to borrow!

    The only true constraints here are resource based, not monetary or financial at all!

  • badlimey

    There are more people aware of what’s going on now than ever before in our history. Awareness is not enough, preparedness is mandatory if you want to survive and resurrect a new and better society. I personally am frustrated by the lack of action.