Saturday, August 08, 2020

Worst Case Scenario - Hyperinflation in United States in 2021

President Trump signed an executive order yesterday for expanding employment benefits, rent payments, student loan deferment, and $400 bonuses. This tells you what kind of condition this% of student loans are in forbearance. Everything is in some forbearance. 5.9% of the 1.34 trillion in auto loans. 80 billions dollars. Lenders are exposing themselves to greater losses. When they have to deal with delinquencies when the cars lose value. Loans grow as collateral declines. When banks repossess millions of cars in the future, they’re not worth what people owe. Wells Fargo reported 44 billion of customer loans were in deferral. 35 billion of those loans are mortgages. 12% of those first mortgages are in forbearance. 10% of their second mortgages are in forbearance. 7.8% of homes are in forbearance. Prepare for very dark times in the United States. If you have a $1200 stimulus check, don’t put it towards the Disney Channel or Netflix or Lattes or the videogames, the cartoons, put that money away in savings. The price of food is going up. This thing is going to be so hard hitting and drag out for so long that nobody is going to be 100% prepared for what is coming. Goldman sacks says there is going to be a dollar collapse. Gold hit $2000. Goldman sacks says clients should hang onto their gold. As the collapse worsens, the federal reserve prints more money, as more money is printed, inflation builds. At the same time, the government is racking up loads of debt. It will drive inflation in a uncontrollable upward spiral. As the dollar loses more value, inflation will climb even higher. The inflation rate is barely above 0 at 0.6%. People who go to healthcare provider or grocery store know the number isn’t even that Cherie. That money doesn’t get to American's pockets, instead it is held up in banks and institutions to support their struggling balance sheets. MZM which serves as a indicator of liquid money has reached 4.3 trillion in 2000 but in March 2020 it reached 21 trillion dollars and in August 2020 it reached 25 trillion dollars. The velocity of MZM has slowed to a crawl of 0.9. If the trillions of money printed isn’t spent, then the recovery won’t happen. The economy activity can’t return to per-pedemic levels by the end of 2020 or beyond. Inflation will see a spike with higher interest rates as well. The currency plummeting in value will increase the velocity of money. The federal reserve is able to push down interest rates artificially thus breaking all the rules of supply and demand. In a free market, elevated desire for credit should be met with increase interest rates that will force demand back down. The tactics of the federal reserve only works in the short term. Eventually artificial markets and prices will inflict serious damage on the financial systems that institutions are trying to preserve. Worst case scenario, the US will use rapidly increasing deficits and debts. The US dollar will sink lower and lower in value as other global fiat currencies will follow. Then the federal reserve will print more money unconcerned for the consequences despite failing businesses and households facing financial insecurity followed by increase payouts to Americans who loss their jobs or were furloughed. Eventually the government will introduce a universal basic income to support the public. With Universal basic income Americans won’t have to work to receive income so many won’t attempt to rejoin the labor force. When too much money has been printed, the lower worth of the US dollar, the federal serve cant control the inflation and pull strings of interest rates. The long end of the bond market will sell off. Then high long rates will drive short rates skyward. They have to pay for debt interest as percentage of GDP. Rates will be as high as 20%. The world will have to resort to more printing money. This leads to defaults. Universal Basic Income will push more money printing until banks start failing right when the money printing turns into the quadrillions and hyper inflation takes off. Then the financial system will go into total collapse.


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