“It Can’t Happen Here”

But It Can Happen Here Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] “It Can’t Happen Here” - We didn’t get inflation before, why should we get it now?… - The U.S. flirted with hyperinflation just over 40 years ago… - Then Jim Rickards shows you why the greatest threat to your savings occurs during inflation, not hyperinflation… Recommended Link [A rare occurrence is happening right now in the gold market]( [Read more here...]( There is something happening in the gold market right now that you need to be aware of… I urge you NOT to invest in anything before viewing this briefing. Because this information could be a true game-changer for millions of Americans. This rare opportunity will be taken offline soon... [Click Here To Take Advantage]( Portsmouth, New Hampshire February 2, 2021 [Jim Rickards] Dear Reader, The Federal Reserve printed $4 trillion in the years following the 2008 crash, expanding its pre-crisis balance sheet of about $900 billion to roughly $4.5 trillion. Many people thought, if hyperinflation were ever going to happen in the U.S., it would have already. Well, it never happened. Today, in response to the pandemic and the economic lockdowns that followed, the Fed has cranked up the printing press to even higher levels. It’s printed almost as much money in one year as it printed in the several years after the financial crisis. On February 26, 2020, the balance sheet was $4.16 trillion. Less than one year later, it’s roughly $7.3 trillion. Meanwhile, America’s M1 money supply spiked 70% last year. But this blizzard of money-printing has not caused the level of alarm that the post-financial crisis money creation caused. If we didn’t get the hyperinflation then, they say, why should we get it now? Most people are complacent. They have a point. We still have no hyperinflation or even moderate inflation (except maybe in asset prices). But I’ve even argued that we won’t see inflation right away. Inflation is not only a product of money creation but also of money velocity. You can print as much money as you want, but if it’s not exchanging hands and there isn’t much turnover, it won’t lead to inflation. Inflation is at least as much a psychological phenomenon as a monetary phenomenon. And expectations right now are for disinflation. Because of the lockdowns and their economic fallout, we will likely suffer a recession in the first quarter of 2021. Money velocity is low, so disinflation is the problem in the short term. But that doesn’t mean inflation isn’t coming back or even that hyperinflation isn’t possible once it does. Inflation will return, and when it does, it could be massive and potentially lead to hyperinflation. All this can happen faster than most people think. When you hear “hyperinflation,” you might only think of two images. One is a reckless third-world country like Zimbabwe or Argentina printing money to cover government expenses and worker salaries to the point where trillions of local “dollars” or pesos are needed to buy a loaf of bread. The second image is of the same phenomenon in an advanced country such as Germany but long ago. Perhaps you think of grainy, black-and-white photos from the 1920s displaying people carting around wheelbarrows of paper money. The last thing you probably think of is hyperinflation in a 21st-century developed economy such as the United States. We tell ourselves that hyperinflation might happen in faraway or long-ago places, but it can’t happen here. Yet, it can happen here. In fact, the United States flirted with hyperinflation in the late 1970s, when Treasury bonds were denominated in Swiss francs because the dollar was rapidly depreciating and people were losing faith in the dollar. We also flirted with hyperinflation in the late 1910s. Other episodes arose after the Civil War and the American Revolution. Hyperinflation acts like a deadly virus with no cure. It may be contained for long periods of time, but once it breaks out into a general population, there may be no stopping it without enormous losses. To explain why, it’s essential to know what hyperinflation is, how it begins and how it feeds on itself. In a complex system such as the U.S. economy, small initial blunders can have catastrophic consequences once feedback loops and behavioral changes take over. Read on for more, including the reason why the greatest damage to your wealth occurs during the inflationary stage, not the hyperinflationary stage. Regards, Jim Rickards for The Daily Reckoning P.S. Gold is perhaps the ultimate inflation hedge. It can protect your wealth while others see their savings decimated. But there’s [something highly unusual happening in the gold market right now]( that you need to be aware of. Unfortunately, shocking details about this rare occurrence are being ignored by the media. What exactly is going on, and how could it impact you directly? A [“Gold Window”]( is opening. And I’ve found a little-known investment play that [moved 21 times higher on average than the price of gold bullion itself during the last Gold Window!]( And my publisher is investing $1,000,000 over five years to give you a chance to do the same. This might be the most important information I’ve ever released. I think you’ll agree when you [go here to see it.]( Recommended Link [Missed buying Bitcoin in 2015? It doesn't matter...]( [Read more here...]( This is your rare second chance to get in early on world-changing crypto tech – without touching a crypto exchange or "digital wallet". This potential market is 800% bigger than Bitcoin, Ethereum, and Ripple. It's all part of a bigger trend you must understand before it goes mainstream... [Click Here For The Full Story]( The Daily Reckoning Presents: “Much of the damage to your wealth actually occurs at the inflationary stage, not the hyperinflationary stage”… ****************************** Hyperinflation Can Happen Much Faster Than You Think By Jim Rickards [Jim Rickards]There’s no universally agreed-upon definition of hyperinflation. But one widely used benchmark says hyperinflation exists when prices increase 50% or more in a single month. So if gasoline is $3.00 per gallon in January, $4.50 per gallon in February and $6.75 per gallon in March and the prices of food and other essentials are going up at the same pace, that would be considered hyperinflationary. It also tends to accelerate once it begins, meaning the monthly 50% increase soon becomes 100%, then 1,000%, etc., until the real value of the currency is utterly destroyed. Beyond that point, the currency ceases to function as a currency and becomes litter, good only for wallpaper or starting fires. Many investors assume that the root cause of hyperinflation is governments printing money to cover deficits. Money printing does contribute to hyperinflation, but it is not a complete explanation. As I mentioned above, the other essential ingredient is velocity, or the turnover of money. If central banks print money and that money is left in banks and not used by consumers, then actual inflation can be low. This is the situation in the U.S. today. The Federal Reserve has expanded the base money supply by over $6 trillion since 2008, with over $3 trillion of that coming since last February alone. But very little actual inflation has resulted, or at least very little official inflation. This is because the velocity of money has been decreasing. Banks have not been lending much, and consumers haven’t been spending much of the new money. It’s just sitting in the banks. Money printing first turns into inflation, and then hyperinflation, when consumers and businesses lose confidence in price stability and see more inflation on the horizon. At that point, money is dumped in exchange for current consumption or hard assets, thus increasing velocity. As inflation velocity spikes up, expectations of more inflation grow, and the process accelerates and feeds on itself. In extreme cases, consumers will spend their entire paycheck on groceries, gasoline and gold the minute they receive it. They know holding their money in the bank will result in their hard-earned pay being wiped out. The important point is that hyperinflation is not just a monetary phenomenon — it’s first and foremost a psychological or behavioral phenomenon. Hyperinflation doesn’t affect everyone in a society equally. There are distinct sets of winners and losers. The winners are those with gold, foreign currency, land and other hard assets. The losers are those with fixed income claims such as savings, pensions, insurance policies and annuities. Debtors win in hyperinflation because they pay off debt with debased currency. Creditors lose because their claims are devalued. Hyperinflation doesn’t emerge instantaneously. It begins slowly with normal inflation and then accelerates violently at an increasing rate until it becomes hyperinflation. This is critical for investors to understand because much of the damage to your wealth actually occurs at the inflationary stage, not the hyperinflationary stage. The hyperinflation of Weimar Germany is a good example of this. In January 1919, the exchange rate of German reichsmarks to U.S. dollars was 8.2 to 1. By January 1922, three years later, the exchange rate was 207.82 to 1. The reichsmark had lost 96% of its value in three years. By the standard definition, this is not hyperinflation because it took place over 36 months and was never 50% in any single month. By the end of 1922, hyperinflation had struck Germany, with the reichsmark going from 3,180 to one dollar in October to 7,183 to one dollar in November. In that case, the reichsmark did lose half its value in a single month, thus meeting the definition of hyperinflation. One year later, in November 1923, the exchange rate was 4.2 trillion reichsmarks to one dollar. History tends to focus on 1923 when the currency was debased 58 billion percent. But that extreme hyperinflation of 1923 was just a matter of destroying the remaining 4% of people’s wealth at an accelerating rate. The real damage was done from 1919–1922, before hyperinflation, when the first 96% was lost. If you think this can’t happen here or now, think again. As I also mentioned above, something like this started in the late 1970s. The U.S. dollar suffered 50% inflation in the five years from 1977–1981. We were taking off toward hyperinflation, relatively close to where Germany was in 1920. Most wealth in savings and fixed income claims had been lost already. Hyperinflation in America was prevented by the combined actions of Paul Volcker and Ronald Reagan, but it was a close call. Today the Federal Reserve assumes if inflation moves up to 3% or more in the U.S., they can gently dial it back to their preferred 2% target. But moving inflation to 3% requires a huge change in the behavior and expectations of everyday Americans. That change is not easy to cause, and once it happens, it is even harder to reverse. If inflation does hit 3%, it is more likely to go to 6% or higher, rather than back down to 2%. The process will feed on itself and be difficult to stop. Sadly, there are no Volckers or Reagans on the horizon today. There are only weak political leaders and misguided central bankers. Inflation will accelerate, as it did in the U.S. in 1980 and in Germany in 1920. Whether hyperinflation comes next remains to be seen, but it can happen more easily than most people expect. By then, the damage is already done. Your savings and pensions will mostly be gone. The assets you need now to preserve wealth in the future are simple and timeless. Gold, silver, land and select tangibles in the right amounts will serve you well. Mutual funds designed specifically to protect against inflation should also be considered. Recommended Link [World’s Second-Richest Man’s Latest Bombshell]( [Read more here...]( His first BOMBSHELL shook the retail industry and completely turned it upside down. And now the man is targeting another $2 trillion industry with his latest BOMBSHELL. It could bankrupt household name companies. It could disrupt established industries... It could make folks like you a fortune. The fuse has already been lit... and on Jan. 29th I believe he’ll reveal a few more details. If you missed out on taking advantage of the Amazon success story... don’t miss out again. [Click Here Now]( Hugo Stinnes is practically unknown today, but this was not always the case. In the early 1920s, he was the wealthiest man in Germany, at a time when the country was the world’s third-largest economy. He was a prominent industrialist and investor with diverse holdings in Germany and abroad. Chancellors and Cabinet ministers of the newly formed Weimar Republic routinely sought his advice on economic and political problems. In many ways, Stinnes played a role in Germany similar to the role Warren Buffett plays in the U.S. today. He was an ultra-wealthy investor whose opinion was eagerly sought on important political matters. He exercised powerful behind-the-scenes influence and seemed to make all the right moves when it came to playing the markets. If you’re a student of economic history, you know that from 1922–1923 Germany suffered the worst hyperinflation experienced by a major industrial economy in modern times. Yet, Stinnes was not wiped out during this hyperinflation. Why was that? Stinnes was born in 1870 into a prosperous German family that had interests in coal mining. Later, he inherited his family’s business and expanded it by buying his own mines. Then, he diversified into shipping, buying cargo lines. His own vessels were used to transport his coal from his mines abroad and within Germany along the Rhine River. His vessels also carried lumber and grains. His diversification included ownership of a leading newspaper, which he used to exert political influence. Prior to the Weimar hyperinflation, Stinnes borrowed vast sums of money in reichsmarks. When the hyperinflation hit, Stinnes was perfectly positioned. The coal, steel and shipping retained their value. It didn’t matter what happened to the German currency; a hard asset is still a hard asset and does not go away even if the currency goes to zero. Stinnes’ international holdings also served him well because they produced profits in hard currencies, not worthless reichsmarks. Some of these profits were kept offshore in the form of gold held in Swiss vaults. That way he could escape both hyperinflation and German taxation. Finally, he repaid his debts in worthless reichsmarks, making them disappear. Not only was Stinnes not harmed by the Weimar hyperinflation, but his empire also prospered, and he made more money than ever. He expanded his holdings and bought out bankrupt competitors. Stinnes made so much money during the Weimar hyperinflation that his German nickname was Inflationskönig, which means Inflation King. When the dust settled and Germany returned to a new gold-backed currency, Stinnes was one of the richest men in the world, while the German middle class was destroyed. Stinnes saw the German hyperinflation coming and positioned accordingly. Hyperinflation may or may not arrive in the U.S., but you can be certain that inflation eventually will. You might not become ultra-wealthy like Stinnes, but by owning hard assets like silver and gold, you can actually prosper from the coming inflation while millions of Americans see the value of their savings destroyed. But you can’t wait until serious inflation arrives. By then it’ll be too late. Make sure you have your gold and other hard assets beforehand. There’s no time like the present. Regards, Jim Rickards for The Daily Reckoning P.S. Gold is perhaps the ultimate inflation hedge. It can protect your wealth while others see their savings decimated. But there’s [something highly unusual happening in the gold market right now]( that you need to be aware of. Unfortunately, shocking details about this rare occurrence are being ignored by the media. What exactly is going on, and how could it impact you directly? A [“Gold Window”]( is opening. And I’ve found a little-known investment play that [moved 21 times higher on average than the price of gold bullion itself during the last Gold Window!]( And my publisher is investing $1,000,000 over five years to give you a chance to do the same. This might be the most important information I’ve ever released. I think you’ll agree when you [go here to see it.]( --------------------------------------------------------------- Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [James Rickards][James G. Rickards]( is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He is the author of The New York Times bestsellers Currency Wars and The Death of Money. Add feedback@dailyreckoning.com to your address book: [Whitelist us]( Additional Articles & Commentary: [Daily Reckoning Website]( Join the conversation! Follow us on social media: [Facebook]( [LinkedIn]( [Twitter]( [RSS Feed]( [YouTube]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press delivering daily email issues and advertisements. To end your Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [unsubscribe here.]( Please read our [Privacy Statement](. For any further comments or concerns please email us at [feedback@dailyreckoning.com](mailto:feedbackdailyproof@dailyreckoning.com). If you are having trouble receiving your Daily Reckoning subscription, you can ensure its arrival in your mailbox [by whitelisting The Daily Reckoning.]( [Paradigm Press]© 2021 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We expressly forbid our writers from having a financial interest in any security they personally recommend to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Email Reference ID: 470DRED01