The following is an article I wrote for one of my previous web sites it still applies today and with continued dedollarization I think it could begin in the near future.
Things to look for - it is beginning today!
Timeline and event sequence is approximate, one should not make make exact predictions regarding a dynamic macro economy like the U.S.. "It will go something like this"
Let's skip the Orwellian Newspeak of QE and stick to the Oldspeak – printing money - 600 Billion of it. QE1, the first round of money printing was a bond buying blitz of about 2 Trillion over 2 years. QE2 is about one-third the size, delivered in one-third the time. They will also reinvest the principal of maturing bonds they own into new government debt increasing QE2 by as much as another $300 billion. The Fed will own more US Treasuries than China.(868 Billion) We are buying our own debt with money printed out of thin air. So, they have continued to print the hell out of money at the same pace and an additional 300 bill for good measure. On top of that, this year, the Fed will buy $40 billion of investment banks toxic mortgages every month. The Fed has shown now, through past history, they will print as much money as necessary to avoid a deflationary depression. The final debasement of the dollar has begun and hyperinflation is the United States future.
The prices of nearly all agricultural commodities have been moving up. In the past, cotton prices are up 54%, corn prices are up 29%, soybean prices are up 22%, orange juice prices are up 17%, and sugar prices are up 51% "you get the point, there is a lot more". The year over year price of pork is up 60%. This may be the year consumers notice that consumer commodity prices are moving up or the size of the packing is decreasing while maintaining the same price. These higher commodity prices will continue reaching the marketplace, monthly CPI will be at an annualized rate of at least 5%. ( Real CPI, not the fudged ones the FED uses as not to raise interest rates or raise Social Security payments as index to inflation. " I have not figured that one out yet, the old folks have had their interest on their savings accounts stolen by the FED for years to recapitalize banks. Moreover increased Soc Sec payments have been squirmed out of with false inflation numbers, and accordingly, the sheepish baby boomers say nothing". Food prices will continue to move up and other higher commodity prices will begin to reach the market place. Meanwhile consumers pay checks will remain stagnant due to large corporate, government and small business cuts to maintain profitability from increased commodity prices, budget constraints and government regulations, such as Obama Care and EPA restraints.
The Obama administration, the Fed, and the majority Keynesian economics pundits will be singing the praises, "our consumption economy is back, people are spending again, the economy is moving in the right direction, look!, the market is at an all time high!". That won't be the case, forced consumption spending through inflation, money printing and conversely, voluntary exchange are much different as are high U.S. stock market prices and the value of the U.S. dollar. Zimbabwe had the best performing Stock Exchange in the world, but the worst paper currency. Really," The Fed’s unending quantitative easing (money printing) has acted like a stimulant drug on the market. The Fed buys $40 billion of the investment banks toxic mortgages every month and some of that money has found it’s way into the stock market. Without the Fed the market would still be thousands of points lower". (Lou Scatigna The Financial Physician) Soon, the American people will begin to catch on. Real Annualized CPI could be pushing 10%. But, the so-called quantitative easing will have pushed the value of the dollar much lower. Perhaps the race to the bottom currency war, could devolve into a trade war. With the commodity prices already rising sharply, a trade war would force import prices up also.
Remember, at the end of the year we still probably have a weak economy (1st Qtr GDP -2.9%) and still have emergency .25% interest rates that don't seem to be sparking growth & investment for the past couple of years. Assuming this is correct, this will deter the Fed from raising rates if need be. There will also be a U.S. fiscal deficit that is close to 10% of GDP annually, which is probably unsustainable—especially considering that the total U.S. debt, including off budget items, is well over 100% of Gross Domestic Product . QE (money printing) plus debt & deficits is already making the markets nervous. Wait till you see what happens when the average American get nervous about the U.S. Economy and the U.S. Dollar.
The Austrian Economists have predicted, the U.S. dollar should have already hyperinflated, meanwhile the financial media have laughed at them. What the Austrians, who are correct, have missed or what they fail to mention is the fact that the United States exports a large portion of their dollars as a result of the petrodollar system set up by Henry Kissinger in the early seventy's when they closed the gold convertibility window. Basically, the dollar went from being backed by gold to being backed by an increasing demand for world energy priced in U.S. Dollars An ever increasing demand for energy dollars allows the U.S. to continue printing for an extended period of time before hyperinflation sets in.
Moreover, as of right now Iran is trading oil in a basket of currencies and the U.S. has pissed off Russia and China so bad they have certain deals to trade oil and natural gas in their own currencies. This can lead to a decrease in demand for energy dollars and in turn they come flooding back to the U.S. in the form of a currency crisis. The FED is scared to death of any deflation. They must inflate the debt away. In my opinion, without the corresponding Geopolitical and foreign policy of the U.S. to maintain the petrodollar system it will lead to hyperinflation and eventually a deflationary depression. Conversely, other economist's consider the fact that interest rates will eventually be forced up by the markets and the U.S. will no longer be able to afford the interest payments on the national debt and deficits. This is also a possibility.
However, the U.S. will face a crisis or at least a semi crisis in the next 5 days to 5 years. No country or empire in the history of the world has managed to get out of this type of fiscal condition without one. Semi crisis may be an event like the great depression and crisis could be a hyperinflation currency collapse followed by a deflationary depression.
Sources
Gonzalo Lira - http://gonzalolira.blogspot.com
Jerry Robison - http://ftmdaily.com/
Lou Scatigna - http://thefinancialphysician.com/2013/03/stock-market-hits-record-high-as-the-economy-struggles/
