Follow along with the video below to see how to install our site as a web app on your home screen.
Note: This feature currently requires accessing the site using the built-in Safari browser.
There has been only one period of hyperinflation since the 1930s and that would be in the late 70s and 80s. At that time I shifted my portfolio heavily into bonds. I was able to purchase AA and AAA bonds with very high yields. A got a number of 10 yr corporate issue fixed yield 12.5% to 16% bonds, school district municipal bonds 10 yr and 20yr fixed yield 10% to 13%. If we went into hyperinflation, I would be looking for high yield AA and AAA bonds.
it is only a minor part of what interest rate defines or influences.You are going to be disappointed which is a good thing as the impending doom you think is coming will not happen. Interest rates are raised and lowered to influence borrowing and investment and manage the value of our currency. At times of economic hardship and high unemployment rates are lowered. At times of high inflation they are raised.
it is only a minor part of what interest rate defines or influences.
in your situation of giant overdentedness the most important effect of the interest rate is, as you said, but without proper elaboration - to influence borrowing.
there is certain limit, a % of income/profit that a borrower can spend on debt and interest payments.
as I descrived above, you may pay the same sum having 10 times bigger debt if the interest rate is 10 times smaller.
exactly this way Central bank can reduce or promote business activity - via regulation of amount of money one has at his disposal after he pays debt and interest. - what you mention.
but when your debt is giant the issue is not about extra investment, bit about survival.
for example, let us see how much insolvent the United States of Ametica is.
for the year 2021
receipts 3,581 trillion
outlays - 7,249 trillion
deficite - 3,669 trillion
Deficite is bigger than receipts, obviously the US is an absolute bankrupt in principle, if it loses ability to finance this deficite.
The US lost its ability to finance its deficite borrowing in the market, the Fed has to print money and to borrow it to the Treasury.
This can go on only until Dollar is the World trade and reserve currency and you can trow off this excess of dollars to the rest of the World, otherwise these, dollars would have created hyperinflation already, like in Zimbabwe or Venezuela.
And since China becomes the biggest World economy in 2027, since it introduced digital Yuan in 2021 - within next several years the US Dollar will lose its World currency ststus. The US will lose ability to finance all kinds of debt just printing money...
though, it's sidestepping..
Now, In November 2021, the public debt of the United States was around 28,91 trillion US dollars.
I don't want to spend timd to find out exact composition of US public debt by terms, let us consider it to be all 7 years Treasury notes, the yild is around 1,5%.
So, if the interest rate grows by just 1 per cent, it adds 28,91 :100 x 1 = 290 billion dollars a year of extra outlays.
to curb inflation the Fed has to raise the interest rate to at least 8% ( now, next month inflation will be higher, by March it will be not less than 10%), but ok, let's make some concessions, let us take 10%.
If the Fed is serious about curbing inflation the US government will have to spend about 2,9 trillion dollars more to pay just the interest rate!!!!
to remind,
receipts 3,581 trillion
outlays - 7,249 trillion (+2,9 trln)
deficite - 3,669 trillion (+2,9 = 6,57 trln)
deficite will be 184 % of US receipts.
The US is as a bankrupt as Zimbabwe. Fundamentally and indisputably. If the US hykes the rate the Fed has to print another 2,9 trln dollars accelerating inflation despite it hyked the rate just to finance the budget deficite. And mist US economy will go bankrupt.
If it doesn't hyke the rate inflation will keep accelerating...
And all American business and households have the same situstion.
Do you undersyand now to what an abyss the US economy is heading?
with all respect it was not hyperinflationThere has been only one period of hyperinflation since the 1930s and that would be in the late 70s and 80s. At that time I shifted my portfolio heavily into bonds. I was able to purchase AA and AAA bonds with very high yields. A got a number of 10 yr corporate issue fixed yield 12.5% to 16% bonds, school district municipal bonds 10 yr and 20yr fixed yield 10% to 13%. If we went into hyperinflation, I would be looking for high yield AA and AAA bonds.
The problem with jumping out of the market is knowing when to jump back in. If you are right, some event will touch off a market fall in which it might fall 10 or 15 or maybe even 20 thousand points within days followed by market recoveries and falls. At some point when the news is at it's very worst, market gurus are advising to put everything in gold which has gone through the roof, and soothsayers are predicting the end of everything, there will be a market recovery and the market will rise rapidly while fundamentals are terrible and by the time fundamentals are looking good the market will have recovered most of it's loses and in a few years the market is back where it was. This is a pattern that been going on since stocks were traded on a street corner on Wall Street.p. s. And last 50 years (since elimination of the golden standard) can be considered as one type of experience - the growing bubble.
all your experience is within one economic cycle, while now we are antering a breaking point between cycles. Like the one of 1929, but this one is much, much bigger and will be accompanied with hyperinflation, which the US has never experienced.
so, more caution and new approach is required, different from previous 5 decades..
Interesting, so China is about to take over as the worlds currency which must mean they are more effectively running their economy. I’m curious. Do you know what Chinas debt to income ratio is? How does it compare to ours? Thoughts?it is only a minor part of what interest rate defines or influences.
in your situation of giant overdentedness the most important effect of the interest rate is, as you said, but without proper elaboration - to influence borrowing.
there is certain limit, a % of income/profit that a borrower can spend on debt and interest payments.
as I descrived above, you may pay the same sum having 10 times bigger debt if the interest rate is 10 times smaller.
exactly this way Central bank can reduce or promote business activity - via regulation of amount of money one has at his disposal after he pays debt and interest. - what you mention.
but when your debt is giant the issue is not about extra investment, bit about survival.
for example, let us see how much insolvent the United States of Ametica is.
for the year 2021
receipts 3,581 trillion
outlays - 7,249 trillion
deficite - 3,669 trillion
Deficite is bigger than receipts, obviously the US is an absolute bankrupt in principle, if it loses ability to finance this deficite.
The US lost its ability to finance its deficite borrowing in the market, the Fed has to print money and to borrow it to the Treasury.
This can go on only until Dollar is the World trade and reserve currency and you can trow off this excess of dollars to the rest of the World, otherwise these, dollars would have created hyperinflation already, like in Zimbabwe or Venezuela.
And since China becomes the biggest World economy in 2027, since it introduced digital Yuan in 2021 - within next several years the US Dollar will lose its World currency ststus. The US will lose ability to finance all kinds of debt just printing money...
though, it's sidestepping..
Now, In November 2021, the public debt of the United States was around 28,91 trillion US dollars.
I don't want to spend timd to find out exact composition of US public debt by terms, let us consider it to be all 7 years Treasury notes, the yild is around 1,5%.
So, if the interest rate grows by just 1 per cent, it adds 28,91 :100 x 1 = 290 billion dollars a year of extra outlays.
to curb inflation the Fed has to raise the interest rate to at least 8% ( now, next month inflation will be higher, by March it will be not less than 10%).
Let us consider the hyke to reach 11,5% (so, US government to pay extra 10% on debt) .
If the Fed is serious about curbing inflation the US government will have to spend about 2,9 trillion dollars more to pay just the interest rate!!!!
to remind,
receipts 3,581 trillion
outlays - 7,249 trillion (+2,9 trln)
deficite - 3,669 trillion (+2,9 = 6,57 trln)
deficite will be 184 % of US receipts.
The US is as a bankrupt as Zimbabwe. Fundamentally and indisputably. If the US hykes the rate the Fed has to print another 2,9 trln dollars accelerating inflation despite it hyked the rate just to finance the budget deficite. And most US economy will go bankrupt.
If it doesn't hyke the rate inflation will keep accelerating...
And all American business and households have the same situation.
Do you understand now to what an abyss the US economy is heading?
That depends on the bonds and the hyperinflation. You do realize that you are talking about a collapse of the world economic system and with it the collapse of many nations, the US being one of them. I suggest you allocate some of your funds to a bomb shelter well stocked with food, water, and firearms. For me, I'll stick with my current allocations and check back with you in a few years.with all respect it was not hyperinflation
hyperinflation is when prices double every 3 months, or in smaller period...
take 100% a year at least...
during hyperinflation bonds will be just pieces of paper.
China's debt is awful, as well as money printing.Interesting, so China is about to take over as the worlds currency which must mean they are more effectively running their economy. I’m curious. Do you know what Chinas debt to income ratio is? How does it compare to ours? Thoughts?
you are still thinking within your current paradygm, not paying attention to what hyperinflation is.The problem with jumping out of the market is knowing when to jump back in. If you are right, some event will touch off a market fall in which it might fall 10 or 15 or maybe even 20 thousand points within days followed by market recoveries and falls. At some point when the news is at it's very worst, market gurus are advising to put everything in gold which has gone through the roof, and soothsayers are predicting the end of everything, there will be a market recovery and the market will rise rapidly while fundamentals are terrible and by the time fundamentals are looking good the market will have recovered most of it's loses and in a few years the market is back where it was. This is a pattern that been going on since stocks were traded on a street corner on Wall Street.
IMHO, we are well are overdue for a major correction. That does not mean we dump all our stocks and wait for a good place to jump in again. The current uptrend could well continue for another 10,000 points before the market comes tumbling down. Simply reducing exposure to stocks and moving into more defensive stocks is IMHO the best route if you have not already done it.
yes, I understand the scale of collapse, shit happens. Great empires fall, civilizations disappear...That depends on the bonds and the hyperinflation. You do realize that you are talking about a collapse of the world economic system and with it the collapse of many nations, the US being one of them. I suggest you allocate some of your funds to a bomb shelter well stocked with food, water, and firearms. For me, I'll stick with my current allocations and check back with you in a few years.
What does being the world factory have to do with the economics we are talking about? The US GDP is still 30% more than Chinas and China has a far worse debt ratio and track record of honestly managing their currency. That doesn’t add up to them taking the dollars spot. And this all certainly isnt going to lead to a bubble burst in the next year or twoChina's debt is awful, as well as money printing.
the difference is China is still the World factory and the US is not.
and China can tolerare hardships more, Xi will just shoot a couple of millions and China will keep being stable and working.
While the US is heading to civilwar even without economic collapse
being the World factory means that you can accept only own currency, and not Dollars.What does being the world factory have to do with the economics we are talking about? The US GDP is still 30% more than Chinas
did Pelosi relay that info to you ?12:42, tomorrow afternoon?
just don't look upThe problem with jumping out of the market is knowing when to jump back in. If you are right, some event will touch off a market fall in which it might fall 10 or 15 or maybe even 20 thousand points within days followed by market recoveries and falls. At some point when the news is at it's very worst, market gurus are advising to put everything in gold which has gone through the roof, and soothsayers are predicting the end of everything, there will be a market recovery and the market will rise rapidly while fundamentals are terrible and by the time fundamentals are looking good the market will have recovered most of it's loses and in a few years the market is back where it was. This is a pattern that been going on since stocks were traded on a street corner on Wall Street.
IMHO, we are well are overdue for a major correction. That does not mean we dump all our stocks and wait for a good place to jump in again. The current uptrend could well continue for another 10,000 points before the market comes tumbling down. Simply reducing exposure to stocks and moving into more defensive stocks is IMHO the best route if you have not already done it.
A giant bubble in the stock market is ready to explode.
Capitalisation of stock market/GDP = 250%, it is twice as much as it was in 2004-2007 and 50% higher than in 2012-2019.
While historic average is about 100%.
P/E index is also 30-70% higher than in mentioned periods.
Stock market grows only on QE, which is going to be finished by March.
As well the Fed is going to start hyking the interest rate and it will make giant debt unsustainable. Mass bankruptcies will start, it will be much, much worse than the Great Depression.
And the Fed cannot but to hyke the rate, because inflation has already started to accelerate, in a year it will become hyperinflation.
And much earlier, when inflation gets two digits, capital flow from the US (including stock market) will start.
Making everything even worse...
So, name the month of 2022 when US (and World) stock market is goint to collapse.
my choice - April
