Prepare for Hyperinflation in America 

Bread Could Cost as Much as a Tank of Gas…

If it ain’t broke… it probably means you’re about to shoot yourself in the foot. 

Forgive the mixed metaphor. But it works quite well for today’s dispatch. 

See, there is an emerging, decidedly non-mainstream notion that the U.S. dollar is in serious decline… that we’re watching in real-time as a global reserve currency loses its title as King. 

I happen to share that view, because, well, the evidence is as clear as the black swans found in Australia in 1697. Up until then, the rest of the world believed only white swans existed. They couldn’t fathom that somewhere else in the world, life might be different. 

That’s the mainstream take on the dollar’s decline today: “black swans don’t exist.” They’re just white swans who dirtied themselves by frolicking in a muddy pond… One day the rain will come and wash away the mud, and all will be right with the world.  

In other words, people cannot accept that the world is changing… 

To be fair, this is a common problem. This affliction has a name in psychological circles: the “Status Quo Bias”—the belief that every tomorrow will pretty much resemble today and every recent yesterday.  

Though this is mentally convenient, it’s a shortsighted and destructive way of seeing the world. 

Life changes all the time. 

The woman who never expected her husband to leave her for the secretary wakes up on day to find her status quo is upended. The turkey who lives his life at peace wakes up one morning in November to find his status quo is terminally different. 

That’s what’s going on right now with the dollar. 

The mainstream media is trapped in a version of the Status Quo Basis that we’ll call “dollar hegemony”—the idea that the dollar rules the world and always will.  

For the last 100-ish years, the world has used the dollar for everything from buying TVs in South Korea… to buying soy in Uruguay… to buying barrels of oil from Saudi Arabia. 

That arrangement, however, is now rubbing a lot of the world the wrong way. 

First, it gives the U.S. an enormous advantage. We don’t have to pay currency-conversion costs, since everything is priced in dollars already. 

Second, much of the rest of the world is bent out of shape by the fact that, over the last six or seven years, the White House and Congress have been using the dollar as a political weapon. They’re cutting countries’ access to dollars, thereby crushing those countries’ abilities to trade globally, thereby crushing the local economy and harming local people who have nothing to do with what their government is up to. 

And, so, the world is actively looking to shift away from the dollar. 

Which means American families are in trouble because… we could face hyperinflation.  

Now, I understand if it seems a big, big leap from the declining use of the dollar to bread that costs the same price as a tank of gas. But let’s connect the dots… 

We can all agree that America is insanely burdened by debt—some $32.6 trillion and rising. 

And I also feel confident no one will argue with the idea that politicians are never going to seriously cut spending. The only viable cuts you could make are to Social Security, Medicare, and defense spending. But cutting those would anger the voters who keep the clowns employed, and it would anger the lobbyists who keep the clowns fat and happy financially. So… no way the budget deficit is seriously addressed anytime soon. 

Which means… that path from de-dollarization to hyperinflation is a short, nine steps: 

1. Use of the dollar in global trade declines (quickly or over time). 

2. Since countries have less need to trade in dollars, demand for U.S. Treasury debt falls, since buying debt is how sovereign nations secure dollars for their national reserves and international trade. 

3. Because Uncle Sam is rolling over his debt every month, he has to sell more—and more and more—debt to the world. 

4. But if the world doesn’t need his dollars to the same degree, then the only way for Uncle Sam to entice buyers of his debt is to offer higher interest rates on the debt as a sweetener. 

5. Higher interest rates, however, lead to higher repayment costs for the U.S. 

6. And because the U.S. runs a budget deficit every single year, it will have to sell more and more debt just to afford the higher repayments. 

7. That pushes America into a debilitating debt cycle, in which more and more debt is needed to meet ever-higher debt repayments. 

8. Interest rates, meanwhile, keep rising to entice borrowers who aren’t stupid and realize the U.S. is facing a monetary and fiscal hurricane. 

9. At some point, the Federal Reserve loses control of the boat amid tsunami conditions. Inflation morphs into hyperinflation because so much money is sloshing around… and the country flounders.  

Will this definitively happen?  

That I cannot say. But I also cannot see what changes will come along to prevent any of those nine steps.  

I’m not saying we will absolutely see hyperinflation. 

Nevertheless, all the ingredients are in the mix at this point. 

All I can offer you is that before this cake goes into the oven, you’re going to want to protect your lifestyle and your wealth by owning exposure to nondollar assets including gold, Swiss francs, and bitcoin. 

The voyage to Australia is underway. And the sailors are about to discover that black swans do indeed exist.