Is this the start of a hyperinflation period?

[Minerva]

Robert, Kiyosake, author of "Rich Dad, Poor Dad", suggests hyperinflation may soon be here. His argument is that during a recent treasury auction there were not enough bidders to cover the offering so the Treasury Department purchased 50B worth of it own treasury notes.

If this is accurate, I'm betting it is a result of China and other nations selling of the US notes they own in retaliation to tariffs imposed by the current US admin.

The market is flooded, the Treasury will have to raise the interest rate it is offering in order to secure the funds required.

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www.financialexpress.com

 

[aociswundumho]

No. We've got a very long way to go before that becomes a possibility.

 

[Isidore]

Understanding Hyperinflation​

Inflation is measured by the Bureau of Labor Statistics using the Consumer Price Index (CPI) to measure the dollar's purchasing power. The CPI is an index of the prices for about 94,000 commodities and services; around 8,000 rental housing unit quotes; and prices for airline fares, apparel, household goods, prescription drugs, used automobiles, and postage.​

​

Generally speaking, the Federal Reserve strives to maintain what it calls a healthy inflation rate of around 2% over the long term. Hyperinflation is an extreme case of inflation, not just a high case. Inflation higher than 5% is considered high inflation. Inflation of 50% or more per month is considered hyperinflation.​

​

https://www.investopedia.com/terms/h/hyperinflation.asp​

 

[JohnfrmClevelan]

Robert, Kiyosake, author of "Rich Dad, Poor Dad", suggests hyperinflation may soon be here. His argument is that during a recent treasury auction there were not enough bidders to cover the offering so the Treasury Department purchased 50B worth of it own treasury notes.

If this is accurate, I'm betting it is a result of China and other nations selling of the US notes they own in retaliation to tariffs imposed by the current US admin.

The market is flooded, the Treasury will have to raise the interest rate it is offering in order to secure the funds required.

Loading…

www.financialexpress.com

Bond auctions are not the place to look. People put way too much emphasis on them. As long as people accept the USD in payment, there will be people buying bonds.

What has me a bit worried is trump's U.S.-vs-The World trade war. If he keeps this stupidity up (and nobody in his party is willing to stop him, yet), we will be heading for a deep recession, possibly worldwide. Smoot-Hawley 2.0

Hyperinflation is always the result of steep drops in production, real or de facto. You see it in warring countries where trade is upended, and you see it with political upheaval, as in Zimbabwe. Venezuela got hit when the price of oil took a dive, because their economy was (is) overly dependent on oil exports. Mature, diversified economies aren't in much danger, because they can produce most or all of what they really need. Things don't get too crazy when there is enough food available.

 

[bongsaway]

Robert, Kiyosake, author of "Rich Dad, Poor Dad", suggests hyperinflation may soon be here. His argument is that during a recent treasury auction there were not enough bidders to cover the offering so the Treasury Department purchased 50B worth of it own treasury notes.

If this is accurate, I'm betting it is a result of China and other nations selling of the US notes they own in retaliation to tariffs imposed by the current US admin.

The market is flooded, the Treasury will have to raise the interest rate it is offering in order to secure the funds required.

Loading…

www.financialexpress.com

Uh huh but I do know one thing, when Biden was president, a recession was just around the corner, we heard it for months and all we really got was a soft landing, so disappointing, no?

 

[aociswundumho]

Generally speaking, the Federal Reserve strives to maintain what it calls a healthy inflation rate of around 2%

Apparently, it’s “healthy” to erode your money’s value by 2% every year. Healthy for whom? Certainly not for anyone trying to save money in the bank.

 

[ALiberalModerate]

Bond auctions are not the place to look. People put way too much emphasis on them. As long as people accept the USD in payment, there will be people buying bonds.

What has me a bit worried is trump's U.S.-vs-The World trade war. If he keeps this stupidity up (and nobody in his party is willing to stop him, yet), we will be heading for a deep recession, possibly worldwide. Smoot-Hawley 2.0

Hyperinflation is always the result of steep drops in production, real or de facto. You see it in warring countries where trade is upended, and you see it with political upheaval, as in Zimbabwe. Venezuela got hit when the price of oil took a dive, because their economy was (is) overly dependent on oil exports. Mature, diversified economies aren't in much danger, because they can produce most or all of what they really need. Things don't get too crazy when there is enough food available.

You can also get hyper inflation if people lose all confidence in a nation’s currency. I don’t see that happening with USD though.

 

[Fletch]

Robert, Kiyosake, author of "Rich Dad, Poor Dad", suggests hyperinflation may soon be here. His argument is that during a recent treasury auction there were not enough bidders to cover the offering so the Treasury Department purchased 50B worth of it own treasury notes.

If this is accurate, I'm betting it is a result of China and other nations selling of the US notes they own in retaliation to tariffs imposed by the current US admin.

The market is flooded, the Treasury will have to raise the interest rate it is offering in order to secure the funds required.

Loading…

www.financialexpress.com

Hasnt the FED been buying US treasuries for years?

 

[multivita-man]

Robert, Kiyosake, author of "Rich Dad, Poor Dad", suggests hyperinflation may soon be here. His argument is that during a recent treasury auction there were not enough bidders to cover the offering so the Treasury Department purchased 50B worth of it own treasury notes.

If this is accurate, I'm betting it is a result of China and other nations selling of the US notes they own in retaliation to tariffs imposed by the current US admin.

The market is flooded, the Treasury will have to raise the interest rate it is offering in order to secure the funds required.

Loading…

www.financialexpress.com

It's not so much China selling; it's that there are fewer buyers. Why buy a long-term bond when you know this country isn't serious about its debt obligations? There aren't buyers. Worse, US domestic buyers (e.g., JP Morgan and others) have an agreement in which they essentially eat the bonds if there are no buyers.

 

[multivita-man]

Hasnt the FED been buying US treasuries for years?

Not the way it works. Fed's buying less. We need foreign or other buyers. If not, then primary dealers, which are are required to bid at auctions, end up buying the unsold bonds.

 

[Ishm]

You can also get hyper inflation if people lose all confidence in a nation’s currency. I don’t see that happening with USD though.

I don't think we are anywhere near hyper inflation, but if Japan, China, and other large bond holders keep heavily selling down their positions, and other countries aren't picking up the slack, then we can get into a nasty position where we have to print lots of money, and there is no obvious answer to that problem in sight. Add in Trumps latest push to widen the deficit even further, and things could get really nasty quite quickly as interest rates rise through lack of demand on ever larger deficits. Requiring even more money printing in an economy that is already massively in debt. There is no good news in that scenario.

With Trumps tariff war and unstable, moronic approach to international relations, we could easily see other countries following those who have already dropped the USD as their default trading currency. For many countries who might now see the US as being as much of a threat as an ally, weakening the US economy by not trading in USD where it can be avoided, may become a very legitimate strategy. Don't forget that Trumps longer term intention is to reduce US trade by producing more in the US. That itself puts a serious dent in how many USD's countries outside the US need to hold, even if they do still trade in USD's. The high value of the USD is a bit of a weak underbelly to the US economy, and Trump is busy exposing that underbelly to the world in an incredibly careless way. I bet if someone tried to explain this to Trump he would just say that he had to run off to a golf game. This type of stuff is way beyond his current mental capacity, and was probably always beyond his ability to think beyond his own thoughts.

 

[JohnfrmClevelan]

You can also get hyper inflation if people lose all confidence in a nation’s currency. I don’t see that happening with USD though.

That "loss of confidence" always happens when there isn't any food on the shelves to buy. There's always an underlying reason.

 

[Gimmesometruth]

Robert, Kiyosake, author of "Rich Dad, Poor Dad"

Krugman and Barry Ritholtz talk about the halo effect and why guys who are not economists shouldn't give predictions on economics. They specifically talk about your guy at the 14:30 mark:

A Conversation With Barry Ritholtz

Fun with bad investing ideas

paulkrugman.substack.com

"Robert Kiyosaki wrote Rich Dad Poor Dad, arguably the best selling personal finance book of all time. 32 million copies. Insane. And ever since the financial crisis, pretty much couple of times a year, he predicts a market crash, a real estate crash, an economic crash. And another guy on Twitter who runs a research shop brought the receipts and he pulled every one of Kiyosaki's tweets and put them in chronological order. And he's been nothing but wrong for 15 years. My favorite was 2018. “Get out of US real estate, residential real estate.

There's never been a better time to sell real estate.” Well, I guess that's true if you're a real estate agent, but 2018, other than 09, could be the best time in modern history to buy real estate. Everything doubled over the next five years following the pandemic."

 

[JohnfrmClevelan]

Hasnt the FED been buying US treasuries for years?

The Fed buys (and sells, from their own portfolio) bonds in order to adjust reserve levels. It's a normal operation.

That said, they are also the buyers of last resort if bond auctions don't go as planned. The Treasury and the Fed work together to make sure that there is a market for those treasuries. They try not to sell too many at once.

 

[ALiberalModerate]

That "loss of confidence" always happens when there isn't any food on the shelves to buy. There's always an underlying reason.

Not always. In Argentina, the loss of confidence happened during it's financial crisis of 2001. In the 90s, Argentina pegged the value of its currency (Argentine Pesos) to USD. Whatever a dollar was worth was what an Argentine peso was worth. There was a bank run, and the Argentina government stopped pegging their currency to the dollar and just printed a ton of money to honor the withdrawals. As a result, when people withdrew their savings, the value was a tiny fraction of what it was when they deposited it. The citizenry lost all confidence in their currency, and hyper inflation resulted. The country is still dealing with the aftermath. Argentina has always produced far more food than it needs, the problem was not brought on by a lack of items on the grocery shelf.

When I traveled there in 2023, the currency was so worthless that you got twice the official exchange rate on the black market, and there was no concern about whether the Argentina pesos you received were counterfeit or not as they spent and lost value just the same. The challenge was to exchange for enough currency to get you by while there, but not to have to exchange any back for USD because you would lose a ton of money if you did so.

Currency is a human construct, it only has value because we collectively believe it does. When people stop believing a currency has the value it should, hyper inflation can result.

 

[JohnfrmClevelan]

I don't think we are anywhere near hyper inflation, but if Japan, China, and other large bond holders keep heavily selling down their positions, and other countries aren't picking up the slack, then we can get into a nasty position where we have to print lots of money, and there is no obvious answer to that problem in sight. Add in Trumps latest push to widen the deficit even further, and things could get really nasty quite quickly as interest rates rise through lack of demand on ever larger deficits. Requiring even more money printing in an economy that is already massively in debt. There is no good news in that scenario.

We did just that in a few rounds of QE, to no big effect. Banks ended up holding lots of "excess" reserves, so the Fed switched from controlling the overnight rate by maintaining a thin layer of excess reserves via bond sales to paying interest on reserves. Nobody noticed, because it doesn't affect us. Interest rates came down, as planned, and banks were recapitalized. Excess reserves aren't a problem, because banks have no choice in the matter; the only transactions that change the total number of reserves are Fed<->private sector transactions.

With Trumps tariff war and unstable, moronic approach to international relations, we could easily see other countries following those who have already dropped the USD as their default trading currency. For many countries who might now see the US as being as much of a threat as an ally, weakening the US economy by not trading in USD where it can be avoided, may become a very legitimate strategy. Don't forget that Trumps longer term intention is to reduce US trade by producing more in the US. That itself puts a serious dent in how many USD's countries outside the US need to hold, even if they do still trade in USD's. The high value of the USD is a bit of a weak underbelly to the US economy, and Trump is busy exposing that underbelly to the world in an incredibly careless way. I bet if someone tried to explain this to Trump he would just say that he had to run off to a golf game. This type of stuff is way beyond his current mental capacity, and was probably always beyond his ability to think beyond his own thoughts.

Bond sales will always be there as long as people, and other countries, accept USD in payment. If you collect a bunch of USD from your trade surplus with the U.S., there isn't much else you can do with them besides buy bonds, or trade them with other countries that are all in the same boat.

The problem is that our international trade is going to suffer big time. There will be a lot less USD moving around, and GDP will suffer. trump was betting on the world's biggest customer being able to set the terms, but he's going to lose. He needs to admit defeat and reverse course, but I don't see that happening.

 

[JohnfrmClevelan]

Not always. In Argentina, the loss of confidence happened during it's financial crisis of 2001. In the 90s, Argentina pegged the value of its currency (Argentine Pesos) to USD. Whatever a dollar was worth was what an Argentine peso was worth. There was a bank run, and the Argentina government stopped pegging their currency to the dollar and just printed a ton of money to honor the withdrawals. As a result, when people withdrew their savings, the value was a tiny fraction of what it was when they deposited it. The citizenry lost all confidence in their currency, and hyper inflation resulted. The country is still dealing with the aftermath. Argentina has always produced far more food than it needs, the problem was not brought on by a lack of items on the grocery shelf.

When I traveled there in 2023, the currency was so worthless that you got twice the official exchange rate on the black market, and there was no concern about whether the Argentina pesos you received were counterfeit or not as they spent and lost value just the same. The challenge was to exchange for enough currency to get you by while there, but not to have to exchange any back for USD because you would lose a ton of money if you did so.

Currency is a human construct, it only has value because we collectively believe it does. When people stop believing a currency has the value it should, hyper inflation can result.

Argentina has a long history of mismanagement. Pegging your currency to probably the world's strongest currency couldn't end well. Plus, Argentina had a lot of debt in foreign currencies, the changing values of which they have no control over. It's like a loan with a (highly) variable interest rate that you can't refinance. So again, there were real, underlying economic problems that affected the value of their currency.

Currency is indeed a human construct, but it gets its value from the economy. As a general rule, you pay for your imports with your exports, so if your currency isn't allowed to float, there is no mechanism to account for the relative values of the currencies involved, and the pegging country will always lose out. Add to that the increased difficulty of doing business when interest rates are high, and it becomes more and more difficult to produce within the economy. The sad thing is that Argentina has all the resources they need to have a thriving economy, if not for the mismanagement.

 

[Minerva]

I don't think we are anywhere near hyper inflation, but if Japan, China, and other large bond holders keep heavily selling down their positions, and other countries aren't picking up the slack, then we can get into a nasty position where we have to print lots of money, and there is no obvious answer to that problem in sight. Add in Trumps latest push to widen the deficit even further, and things could get really nasty quite quickly as interest rates rise through lack of demand on ever larger deficits. Requiring even more money printing in an economy that is already massively in debt. There is no good news in that scenario.

This is the tailspin I keep reading about.

 

[JohnfrmClevelan]

This is the tailspin I keep reading about.

If it makes you feel any better, sovereign debt is nothing like household debt. Bonds never need to be extinguished; they are basically a form of money, created and spent into the economy by the government and not taxed away. It's just another way that a government with its own currency creates and spends its own currency. Governments have this power.

 

[Minerva]

If it makes you feel any better, sovereign debt is nothing like household debt. Bonds never need to be extinguished; they are basically a form of money, created and spent into the economy by the government and not taxed away. It's just another way that a government with its own currency creates and spends its own currency. Governments have this power.

I've been listening to a podcast the dwells deep into the background and causes for WWII. They spent some time going over the hyperinflation that Germany went through from 1921-23. While we are not saddled with the crippling war reparations Germany had, some of the other issues such as ever increasing debt servicing costs give me concern.

 

[JohnfrmClevelan]

I've been listening to a podcast the dwells deep into the background and causes for WWII. They spent some time going over the hyperinflation that Germany went through from 1921-23. While we are not saddled with the crippling war reparations Germany had, some of the other issues such as ever increasing debt servicing costs give me concern.

Well, Germany was forced to pay war reparations, in gold, then in production. That took money out of the active economy that would normally go to labor and investment. If your business has half of its gross taken away, you would be hard pressed to stay in business. In short, their debt to the victors was very real.

As I understand it, Germany, chafing under reparations, started to print money and pay those reparations in increasingly depreciated money. If you print up a bunch of money and don't spend it into the economy, where it should lead to increased production, it's going to lose value.

Germany recovered from the Depression faster than other European countries by deficit spending on arms production. They built up their domestic economy, and were no longer paying reparations. Sovereign "debt" is just another way for the government to create and spend money. It's a mistake to just give it away when there is no extra production to buy, but it's smart to invest in your economy like they did.

During WWII, the U.S. and U.K. governments both basically took over industry to build tanks and planes. Private sector investment, already low from the Depression, went down further, but was replaced with government deficit spending. The government paid for the labor and the materials, and stuff got made. There wasn't much for people to spend money on anyway. After the war, the government scaled back on spending and private sector investment took off, and things were back to normal. And all of that deficit spending didn't get "paid back," the bonds remained as savings, or people cashed them in and bought cars and houses.

Debt service looks bad, but it's just money going to bondholders. It doesn't disappear unless you run a tax surplus, and there's no good reason to extinguish those bonds anyway.

 

[Taylor]

Robert, Kiyosake, author of "Rich Dad, Poor Dad", suggests hyperinflation may soon be here.

He's been predicting doomsday and the downfall of the economic system for years now.

 

[pedex]

Hasnt the FED been buying US treasuries for years?

Yes. And operating under its emergency clause since 2008 from which it has no way out.

 

[Gardener]

Germany experienced such inflation during the Weimar era that it cost millions of Marks for a load of bread.

Let me know when we get there, k?

 

[Lutherf]

Robert, Kiyosake, author of "Rich Dad, Poor Dad", suggests hyperinflation may soon be here. His argument is that during a recent treasury auction there were not enough bidders to cover the offering so the Treasury Department purchased 50B worth of it own treasury notes.

If this is accurate, I'm betting it is a result of China and other nations selling of the US notes they own in retaliation to tariffs imposed by the current US admin.

The market is flooded, the Treasury will have to raise the interest rate it is offering in order to secure the funds required.

Loading…

www.financialexpress.com

Absolutely! Core inflation is projected to be 135% by June 1st and the USD is expected to be worth less than the ZWL by the 1st of July. Face it, we're all gonna go broke and die.