Thread: Paper Money Eventually Returns To Its Intrinsic Value - Zero! hyperinflation

Paper Money Eventually Returns To Its Intrinsic Value - Zero!



"No country, if properly mismanaged, is immune to hyperinflation..."

Tue, 09/04/2018 - 23:15
Authored by Alex Deluce via GoldTelegraph.com,

In socialist Venezuela, the price of a cup of coffee has doubled every few weeks.



The annual inflation rate could hit 1,000,000 percent by years end. People can no longer afford food, but that’s okay because there isn’t any food to be found. South America’s once wealthy nation has spiraled from secure and stable into an unimaginable state of hyperinflation. Venezuela is experiencing the results of government mismanagement, corruption, and socialist ideology. President Maduro’s solution to the problem is to proudly lob three zeros off the hyperinflated Bolivar and call it a “miracle solution.”

Gold Telegraph‏ @GoldTelegraph_









Venezuela Before hyperinflation vs NOW!






10:51 AM - 2 Sep 2018





At one time, Venezuela had the largest oil reserves in the world, which provided steady revenues for the country and a good living for its citizens. Oil accounted for most of Venezuela’s exports. Life in Venezuela was excellent. Then, in 1998, came President Hugo Chavez. Chavez used the abundant income stream to go on a spending spree as he instituted a large number of entitlement programs using the oil revenues. A strike in 2003 interrupted Chavez’s plans and caused the GDP to crash by 27 percent in just four months. Chavez began nationalizing industries and instituting price controls, which was the beginning on Venezuela’s inflationary spiral as Venezuelans developed a reliance on their government for products and services.
The price of crude oil plummeted in 2014, and the economy shrank by 30 percent. Oil revenues, in the form of U.S. dollars, were dwindling, and Venezuela was unable to continue importing necessary goods. These days, in 2018, stores are empty as people attempt to survive on dealing through the black market.
Venezuela is printing currency at the speed of a copy machine. The more money that is injected into circulation, the more it becomes devalued. The cup of coffee that could be bought for 140,000 bolivars rose to over 1,000,000 within weeks. Today, that cup costs 2,000,000 bolivars. Hyperinflation has placed the purchase of everyday items out of the reach of the average Venezuelan, although President Maduro has granted four wage hikes this year alone.
Venezuela has lost most of its imports as it remains in a state of unprecedented crisis. People are starving, and the average weight loss is 25 pounds due to lack of food. Still, Maduro continues to print worthless currency. For Venezuela to reach this low abyss has taken a combination of corruption and mismanagement on every level of its nationalized industries.

Hyperinflation in invariably the result of government mismanagement and the printing of fiat currency. Venezuela isn’t the only country experiencing inflation. According to Steve Hanke of the Cato Institute, the value of the Iranian rial decreased from 98,000 rials to the dollar to 112,000 rials in one day. That’s a one-day devaluation of 12.5 percent. As in Venezuela, the black market currency business in Iran is thriving. While the official exchange rate to the dollar is 44,030, the black market rate is 112,00, an increase of 154 percent over the official rate.
Professor Hanke has previously dealt with hyperinflation in Bulgaria as adviser to President Petar Stoyanov. At that time, Bulgaria’s rate of inflation was 242 percent a month. Professor Hanke instituted a fixed rate of exchange for Bulgaria’s currency linked to an anchor currency, the German Mark. This prevented manipulation of the country’s currency and allowed market forces to determine its value. This stabilized Bulgaria’s currently quite effectively. Taking the government out of the equation was the prime move to successfully halt the country’s inflation. Bulgaria’s debt has decreased because it was forced to stop printing valueless money and continue spending money it didn’t have.
Professor Hanke sees this as the solution to Iran’s current inflation problem. He suggests gold as the best “anchor currency” because the value of gold is dependent on market forces instead of government manipulation and whim.
In 2017, Zimbabwe was another country with a daily inflation rate of 98 percent and an annual rate of 79,600,000,000 percent. Unemployment in Zimbabwe reached 80 percent. The country’s economy had broken down entirely due to its printing of fiat money and extreme socialist policies. In the 1990s, the government began to redistribute land from white farmers to black farmers. The inexperienced black farmers failed to produce enough food and caused a massive shortage and production fell sharply.

Like other socialist countries, Zimbabwe began to print fiat money and flooding the economy with it. The worse the economic situation became, the more money was being printed. As government debt increased, the money machines continue to crank out currency that became more devalued, thus making it even harder to pay off any debt. As the economic output declined, shortages were on the rise. People had money, but few goods became available. The combination of increased money supply and a higher demand for goods forced up prices sharply. Foregoing all economic logic, President Mugabe blamed the greed of manufacturers for wanting to raise prices. It is the printing of worthless currency that causes inflation and price increase, not greed.
In a repeat of Chavez’s move in Venezuela, Zimbabwe imposed price controls. But production costs increased quicker than prices, leaving producers with no incentive to produce. This increased the shortages and raised prices even more. Inflation invariably becomes a self-fulfilling prophecy. There was money to go around, but even a million dollars become worthless if the price of bread is two million dollars. The fare for transportation increased between the morning and evening commutes.
The causes of hyperinflation are always the same, yet countries are refusing to learn from history.
When governments begin to print money to pay off their debts, the money supply increases, as do prices. When goods become unaffordable, their demand increases, sending prices even higher. People begin to hoard goods, creating even greater shortages and higher prices. And governments continue to print money that keeps losing value. The formula is tried and true. Still, it continues. Since any articulate eight-year-old can state why a commodity that is rarer will be more valuable, it is a puzzle why central banks and governments can’t seem to grasp that increasing the money supply makes it naturally less valuable.
1930s Germany, of course, is the standard example of hyperinflation. During WWI, the number of Deutschmarks being circulated rose from 13 million to 60 billion as the government kept the printing presses busy 24 hours a day. While the Deutschmark became valueless, the nation’s debt rose from 5 billion to 100 billion.



The identical scenario has been repeated in Zimbabwe, and now in Venezuela. Governments have instituted the same solutions and have been met with identical failures.
No country, if properly mismanaged, is immune to hyperinflation. Gold and silver are the best counterattack for individuals faced with fiat currency and spiraling costs. Hard assets are beyond the control of government manipulation and retain their value during the worst of time. Especially in the worst of times.

https://www.zerohedge.com/news/2018-...sic-value-zero

"MAVA" Make America Venezuela Again "Vote Democrats back into Power"

The media continue to report the fake news that Trump's tax cuts blew a big hole in the budget

September 5, 2018

President Trump has proposed freezing civilian federal workers' pay in 2019. Instead of journalists actually reporting on the cost of the raise that has been canceled and corresponding benefits to the taxpayer, they choose to repeat Democrat talking points.

By Jack Hellner

President Trump has proposed freezing civilian federal workers pay in 2019. Instead of journalists actually reporting on the cost of the raise that has been canceled and corresponding benefits to the taxpayer, they chose to repeat Democrat talking points. They whine about hurting the bureaucrats and trash Trump. Worse, they retreat to the blatant lie that Trump's tax cut "for the rich" and big corporations has blown a hole in the deficit.
CNN:

That measure, along with a new two-year federal budget and tax cuts heralded by Republicans, have led to accusations Trump is ignoring the federal deficit, despite promising he would address it as president. The tax plan alone is expected to increase the deficit by $1.4 trillion over 10 years, according to a government estimate.
"It is outrageous and hypocritical that after spending billions of taxpayer dollars on unnecessary tax cuts for the wealthy and big corporations – and as the President boasts about the 'great' state of the American economy, that suddenly the White House finds that there is zero money left to pay a minimal cost-of-living adjustment to the patriotic, dedicated public servants."

The actual facts are that federal corporate and individual taxes have declined a whopping $9 billion in the first ten months of F.Y. 2018, which is a drop in the bucket in an over $4-trillion budget.
The economy is growing much faster than projected precisely because of the tax cuts, and wage growth is the fastest since 2008, which means that Social Security tax receipts are also going up faster because of the tax cuts. The faster economic growth also has caused food stamp usage, disability claims, and unemployment claims to drop – which also lowers the projected spending. People are also driving and flying more, which also increases federal revenues. All of those items are easy to spot as helping reduce the deficit.
In December 2017, when bureaucrats, Democrats, and the media were fighting to defeat the tax cuts and reform, the CBO put out a garbage number that the tax cuts would increase the deficit by $1.5 trillion over ten years. By March of 2018, the CBO lowered the estimate to $1 trillion over ten years, and even with that, CNN uses the lie of $1.4 trillion in the above article.
Anyone with an ounce of common sense or intelligence knows that even the $1 trillion number is bad because growth is substantially higher than projected, but since political power and electing Democrats are more important than telling the truth to the public, the media regurgitate the number.
CNS News:

The federal government collected a record $1,415,150,000,000 in individual income taxes through the first ten months of fiscal 2018 ( October 2017 through July 2018 ), according to the Monthly Treasury Statement.
But the federal govenrment [sic] also ran a $683,965,000,000 deficit for those ten months, according to the statement.
The previous record for individual income tax collections in the first ten months of the fiscal year was in fiscal 2017, when the Treasury collected $1,351,409,020,000 in individual income taxes (in constant July 2018 dollars) in the October through July period.
While individual income taxes collected in the first ten month of the fiscal year increased from 2017 to 2018, corporation income tax collections declined. In the October-through-July period of fiscal 2017, the Treasury collected $239,013,770,000 in corporation income taxes (in constant July 2018 dollars). In the October-through-July period of fiscal 2018, the Treasury collected $166,004,000,000 in corporation income taxes.

Interest expense is actually the fastest growing component of the federal budget, and Obama, the Democrats, and the complicit media never minded the $10-trillion increase in debt in eight years. When Republicans tried to freeze or cut anything other than defense, they were ripped as heartless.

Interest on the U.S. debt is $363 billion. The U.S. Treasury must pay it to avoid a U.S. debt default. The United States has been fortunate because interest rates have been low. A worldwide flight to safety increased demand for Treasury notes, lowering rates. Now that the global economy is strengthening, Treasury yields are rising. So will interest payments. Interest on the $21 trillion debt is already the fastest growing federal expense.

The only time journalists and other Democrats care about the deficit is when Republicans propose letting the people keep more of the money they earn.
Good journalists would report what federal workers make if they were complaining about a wage freeze. In 2016, federal workers made an average of $88,809, while the average private-sector worker made $59,458. With benefits, total compensation was $127,259 vs. $70,764. Median income in the D.C. area is the highest in the country at $93,294 vs. $55,775.

The pay is great, the benefits are even better, and they take every federal holiday off (Wikimedia Commons).

Democrats, and especially those who describe themselves as socialists and progressives, always complain about income inequality, but the greatest inequality in numbers of people exists between government employees and the rest of us, and every policy I have seen them propose is to transfer more money and power to the government from the rest of us, which will expand, not reduce the gap.

Federal employees earned 80 percent more in 2016 compared to private sector workers, according to Chris Edwards, director of tax policy studies at Cato. Federal employees earn 42 percent more than state and local government workers, he added.
Edwards used Bureau of Economic Analysis data to compare average wages and benefits for the 2.1 million federal civilian employees to the average compensation for the nation's 114 million private sector workers.
The federal average, according to Edwards, has grown significantly higher than the private sector in the past 15 years.
Adding benefits such as health care and retirement, federal employees have a higher advantage than private sector workers. Average federal compensation reached $127, 259 in 2016, while private sector averages topped out at $70,764 – or $56, 495 lower.

The swamp is deep and consists of politicians, bureaucrats, lobbyists, and most of the media. The truth is not important to them, but political power is.
They truly cannot stand that someone who is the opposite of a dictator and a fascist is trying to transfer the power and purse back to the people as fast as he can, and he actually wants to enforce laws Congress passed.

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