Dr Martenson is making much of his comparison of the Weimar hyperinflation and what is happening now. I struggle to find any similarity. The Weimar hyperinflation happened because the state printed money at an astonishing rate over and above taxation revenue and that money ended up in the hands of the German public. Nothing like that is happening today. The media talks about money "printing" when, in fact, nothing is being printed. Credit is being created via the double entry system that conjures money out of thin air and allows the Fed to buy assets off the commercial banks who then park the funds back with the Fed. The only money that escapes into the economy is that which the government spends from thre proceeds of Treasury note, bill and bond sales which is considerably more than the taxation revenue but not enough to create an inflation, judging by the most recent CPI figures, let alone a hyperinflation.
What we are going through is more like the 1930s but stretched out. Economists such as Milton Friedman later placed some of the blame for the length of the depression on the Federal Reserve for losing their nerve and allowing the money supply to fall. Murray Rothbard argued that the American population lost faith in the banks and began hoarding cash.
I think we will see a similar scenario again. I cannot see why it is taken as a given that the Fed will be creating more ledger credits to buy even more "assets" - the gap between worldwide borrowings and the reserves upon which those borrowings rest is just too far apart. While it is extraordinary that bonds have not sold off in a big way so far, it is also true to say that the interventions through 2008-10 each saw falling bond prices as the Fed made purchases. The media called them purchases but in reality they were sales by financial institutions off-loading to the Fed and prices dropped each time before rising again.
It is also wrongly assumed that the Fed drives interest rates - look at a graph of 3 month Treasury bill rates against Fed Funds and you will find that the Fed follows the market. Paul Volker has been credited with bringing the runaway inflation to a halt with his rapid escalation of rates in the early eighties. Actually, he was following the market.
The Fed will follow market rates up too and the market will sell off bonds and go into cash as it realises the deflation is real. The brains trust of Beernanke, Gethner et al may have misread just about everything over the last few years but they are not completely stupid. Their nerve is faltering - they seem most reluctant to engage in another round of QE. Wall Street and many pundits may wish for it but Bernanke would have totup the ante to an extraordinary degree to have any effect. He knows what the side effects of that would be so damaging that any gain interms of inflating debt away would be lost. It is highly debatable whether it would even be possible to inflate to the extenet required because the bond market would simply sell off thus reducing the money stock which would be deflation. I simply could not make sense of Paul Brodsky's article - a case of wishful thinking I guess. I can only say that you should be careful what you wish for.
Most people seem to expect gold and silver to climb while sharemarkets, commodities and the dollar are expected to fall. If precious metals climb then so will eqities and commodities while the dollar will fall. It is often forgotten that for the dollar to fall, the euro and other currencies must rise. The only situation in which you could get a complete collapse of a major currency is if all the majors were to collapse together. In other words, there was such a loss of faith that everyone suddenly wanted to barter real things like food, shelter, water, energy, labour etc. This also means that the internet as a medium of doing business also curls its toes and dies. Does anyone really think this will happen? It may well happen to try to prevent bank runs - the shifting of funds online to other safer institutions but by the time anyone does that it is way too late. We will continue to use money and we may get used to using a lot more cash rather than electronic transactions, at least for a while. I would advise people to take out sufficient cash to last 3-6 months. That may be far more useful than speculating in gold or anything else.
I have no doubt that we are in for a very tough period in which the nominal values of most things will be substantially lowered and relativities may change. I am also equally sure that people will organise and co-operate. It is actually what we are hard wired for. It is only those who became so gripped by the virus of cynicism and greed that infected the financial districts of the world who have totally lost the plot.
It is disappointing to see that Dr Martenson has changed the name of the site to Peak Prosperity. What a weasel word prosperity is - a product of the consumer culture of Madison Avenue.
"Insights for prospering as our world changes" - the irony in that statement appears to have been missed.
Prosperity is built on real wealth that comes from setting some seed corn aside which is the fruit of past endeavour. The modern version of prosperity is based on credit which is imaginary money drawn from the future.
