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Welcome To Hyperinflation Hell: Following Currency Devaluation, Belarus Economy Implodes, Sets Blueprint For Developed World Future

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I visited Turkey in the early 90's for a month.

When I got there it was about 52'000 Lire to the pound.

When I left it was 64'000.

It was still sunny though.

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What is hyperinflation, but the destruction of all debt, and hence the matching savings, through depreciation in the value of a currency? It is a currency area wide debt jubilee.

And when the system has seized up, due to excessive debt, and an unwillingness of creditors to spend so that the debtors can pay the debt off, then a jubilee of this sort my be a good option. A bit like taking a laxative to free up the system. You are going to be immobile for a while, but then you will be somewhat more nimble on you feet after the event.

(just playing devil's advocate there).

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As ever ZH spreading the fear.It's hard to remain a deflationist sometimes.But I do.Hard to see the govts of developed countries opting for the chaos of hyperinflation.

There is no deflation and there never will be, the printing press is the ONLY thing keeping the USA ticking over right now, and wars, wars are inflationary. It is the path of least resistance so they will keep on printing and printing and printing. Demand destruction may occur but if people do not borrow or spend the government will borrow and spend on your behalf. Hyperinflation is the ONLY way out for many nations as a form of partial default, Russia several times to rid itself of the gigantic pensions liabilities which carried over from the USSR. I'm not saying this because I have tiny amounts of gold either. Even if I didn't have any gold I am pretty firm in that this is the only way out barring some discovery of something better than oil.

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ah, so what? If anything it might incentivise in-country production of all that can be produced and spark innovation in raw materials.

I really do not need to see bottled water imported from Turkey on a shelf in Gateshead. It is ******ing water!

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What is hyperinflation, but the destruction of all debt, and hence the matching savings, through depreciation in the value of a currency? It is a currency area wide debt jubilee.

And when the system has seized up, due to excessive debt, and an unwillingness of creditors to spend so that the debtors can pay the debt off, then a jubilee of this sort my be a good option. A bit like taking a laxative to free up the system. You are going to be immobile for a while, but then you will be somewhat more nimble on you feet after the event.

(just playing devil's advocate there).

Yup it will hurt a great deal, but this reset NEEDS to occur in one for or another.

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ah, so what? If anything it might incentivise in-country production of all that can be produced and spark innovation in raw materials.

Not it will stimulate exports as producers will export (if they have any incentive as government controlls will be used as a laughable attempt to control price increases) for hard currencies.

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Not it will stimulate exports as producers will export (if they have any incentive as government controlls will be used as a laughable attempt to control price increases) for hard currencies.

Well that's the idea, unless everyone else can make whatever you wish to export. Can't run an economy on Ferrari or Champagne alone.

I remember Ceausescu paid off the entire national debt in a couple of years in the '80s, through exporting pretty much all agricultural production. Didn't end up well, that.

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Yup it will hurt a great deal, but this reset NEEDS to occur in one for or another.

I wouldn't know whose unpaid for house to firebomb first.

I really wouldn't.

btw Ken, i resolved my differences with my client.

I remain freelance!!

Thanks for your input on the matter.

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Forgive me but why and how did Belarus devalue their currency by 50%?

I think the Belariusian Ruble was pegged to the US$ and they changed the conversion rate/peg.

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I admire your conviction ken.

But seriously tell me why I'm wrong, the whole nobody has any money = demand destruction doesn't fly. So consumers cut back due to hard times.....oops the UK just borrowed 2bn more to cover this short fall, all using the magic printing press.

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And "pooof" another economy implodes, and the same old solutions are rolled out.

How many more bowling pins are there left to keep pulling off this stunt?

The solutions are always the same, ah your policies were not "free market" enough! So you had better sell of the nations assets (to guess who!) and austerity measures for the "little people" while the wealthy specuvestors get bailed out (again by the IMF) whilst finding another country to wreck. The "host" country is of course left in chaos, and no doubt the "rulers" will be replaced if they don't comply with the subsequent black mail demands.

Doh!

Doh!

and double Doh!

Edited by Sir John Steed

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But seriously tell me why I'm wrong, the whole nobody has any money = demand destruction doesn't fly. So consumers cut back due to hard times.....oops the UK just borrowed 2bn more to cover this short fall, all using the magic printing press.

1. The banks are ultimately in command, not the govt. The banks are not interested in the value of the asset, they are interested in the yield generated. In hyperinflation both the value of the asset and the yield disappear.

2. Why hasn't hyperinflation occured already?

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Yup it will hurt a great deal, but this reset NEEDS to occur in one for or another.

Ken, there's lots of ways out of debt, hyper-inflation is one way but there are lots of others,

-moderate inflation for a longer period of time

-reduced spending (the austerity route)

-sale of state assets

-economic growth

-higher taxation

-currency devaluation

And of course you can have a blend of any of the above. Plus we don't have to get out of debt by next week, unlike Greece we have long dated debt which gives us years for a cure to occur. I know armaggedon's sexy, and theoretically possible, but muddling through with a bit of this and a bit of that is a lot more likely.

And that's where I think we're heading, a grey miserable future of lower home ownership rates, a long shallow decline in living standards, slowly growing inequality reducing the size of the middle classes...but no revolution, no hyper-inflation, no social meltdown. Just grey and grim for year after dreary year.

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1. The banks are ultimately in command, not the govt. The banks are not interested in the value of the asset, they are interested in the yield generated. In hyperinflation both the value of the asset and the yield disappear.

2. Why hasn't hyperinflation occured already?

#1 Post hyperinflation some people and interestings become very wealthy, if you held onto hard assets and still hold onto them after the reset. This can command a phenominal yield since you are a total monopolist now.

#2 The policy of all governments and banks is to loot and steal as much as possible before it all ultimately implodes, delaying the onset of hyperinflaton is beneficial so they can loot hard assets as above and steal as much as possible before it implodes. Like th Crystal Maze people play games to attain crystals to extend their time in the Crystal Dome.

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Ken, there's lots of ways out of debt, hyper-inflation is one way but there are lots of others,

Sure, but what are the methods which governments have chosen.... more debt! To solve a debt problem.

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#1 Post hyperinflation some people and interestings become very wealthy, if you held onto hard assets and still hold onto them after the reset. This can command a phenominal yield since you are a total monopolist now.

The problem is holding onto these things during the reset. I think hyperinflation is a possibility, but involves a complete loss of control. I really don't see how it is a cast iron certainty.

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I think the Belariusian Ruble was pegged to the US$ and they changed the conversion rate/peg.

This is correct. They devalued the Ruble by 56%!

Of course this has been absolutely devastating for your average Belarussian, they have seen more than half of their purchasing power from savings and earnings wiped out overnight.

However, for those lucky (read sensible and informed) Belarussian's invested in gold and silver, they're purchasing power has more than doubled. Now I'm sure some of you would agree they would have preserved their purchasing power, by holding gold and silver, because the value of gold/silver hasn't changed, only the value of the ruble, but doubled their purchasing power you blink in disbelief? Surely not? How?

It is because the devaluation is immediately reflected in the price of gold and silver, i.e. it now takes more than twice as many devalued rubles to buy an ounce of gold/silver after the devaluation, because the ruble is only worth half as much in terms of purchasing power. And due to this fact and how the local economy will behave in the immediate aftermath of the devaluation, they have not only preserved their purchasing power internationally (think imported goods), but doubled it locally.

For example, I have no idea how much a typical Belorussian house costs, but in the immediate aftermath of the devaluation a house in Belarus will still be the same nominal price in rubles as it was before. So, with the nominal price of gold in rubles doubling, the purchasing power of my money held in gold has actually doubled!

For example (the numbers are arbitrary, but illustrate the point perfectly):

Gold price before devaluation: 10,000 rubles per ounce

Gold price after devaluation : 20,000 rubles per ounce

House price before devaluation: 1 million rubles per ounce

House price after devaluation: 1 million rubles per ounce

Let's say I am Belorussian and have 50 ounces of gold. Before devaluation I can afford half a house if I sold my gold for rubles and bought a house:

50 x 10,000 = 500,000 rubles

However after the devaluation, while it appears at first that all I have done is protect my wealth I can in fact buy the entire house:

50 x 20,000 = 1 million rubles

Meanwhile for any hapless Belorussian holding rubles, while the cost of a house hasn't increased directly, the cost of many things he buys, especially if imported, will have doubled. Thereby impairing his ability to save for and buy a house relative to pre-devaluation, because he needs twice as much money from his earnings and savings to buy everything else he needs to get by now. The consequences of this is that despite the currency losing half it's value there is less money floating around the economy to maintain house prices and therefore house prices actually fall in real and nominal terms, despite everything else inflating in price (this has been observed in all major inflations/devaluations in the 20th century apparently). So if our gold/silver investor waits a little while longer, he'll purchase his house even cheaper than half price!!! :D

There it is in plain sight, meticulously typed out for even the thickest person to understand (while I could have been doing better things).

If there is not a clearer reason for some on here TO WAKE THE F4CK UP! Then I don't know what is. It was the same story in Iceland and it will be the same story when default visits these shores, and trust me, it will. <_<

Edited by General Congreve

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Ken, there's lots of ways out of debt, hyper-inflation is one way but there are lots of others,

-moderate inflation for a longer period of time

-reduced spending (the austerity route)

-sale of state assets

-economic growth

-higher taxation

-currency devaluation

And of course you can have a blend of any of the above. Plus we don't have to get out of debt by next week, unlike Greece we have long dated debt which gives us years for a cure to occur. I know armaggedon's sexy, and theoretically possible, but muddling through with a bit of this and a bit of that is a lot more likely.

And that's where I think we're heading, a grey miserable future of lower home ownership rates, a long shallow decline in living standards, slowly growing inequality reducing the size of the middle classes...but no revolution, no hyper-inflation, no social meltdown. Just grey and grim for year after dreary year.

Maybe, but if I remember correctly our government let the pound fall by 20% in the wake of the first round of the financial crisis. So perhaps we're not that different after all.

Edited by General Congreve

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...Note the parallels to Greece, which would follow the same fate if it were to make the choice of returning to the drachma.

Alas, there is nothing left to add: this is the future, and it is coming to a developed country near you.'

...

The report points out that Belarus' main export industries mainly depend on importing stuff first, assembling it, and then exporting it. So devaluation was never going to aid their economy - just reduce their debts. However the Greek economy may benefit from devaluation because it has a tourist industry.

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They also "doubled the value" of their teabags, loaf and carpet. ;p

Very good point.

They certainly do. So if our Belarussian citizen also happened to have traded his rubles for a warehouse of teabags, wheat or carpet, pre-devaluation, he would be able to perform a similar doubling of his purchasing power, provided his teabags stay dry, his wheat doesn't go bad and that style of carpet remains in fashion (probably does stay in fashion for decades in Belarus - so carpet is probably a good bet too).

Of course he could have also bought financial instruments like ETF's or stocks and shares that track the fortunes of these items instead (if he has access to these markets), which would probably be easier, providing the companies behind the funds and stocks are sound etc., so a little extra risk there too.

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They also "doubled the value" of their teabags, loaf and carpet. ;p

Strange you don't think there will be hyperinflation even though you've asserted this position since forever?

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Crisis Continues In Belarus,

Seeks Emergency Loan From IMF

Belarus has asked the International Monetary Fund (IMF) for an emergency loan of up to $8bn (£5bn; 5.6bn euros).

It comes a day after the government announced it was raising its main interest rate from 14% to 16%, and that it was freezing prices on a number of staple foods until 1 July.

Last week Belarus cut the value of the rouble against the US dollar by 36%.

The country faces high inflation and its most severe financial crisis since the collapse of the Soviet Union.

Prime Minister Mikhail Myasnikovich said the IMF programme could last for three to five years.

Stanislav Bogdankevich, former head of the National Bank, said: "This is an SOS signal from the Belarussian government, which is losing control of the situation."

On the other hand, those Belarussian women are becoming cheaper than ever.

Hmmmm . . .£1 = 8,158 BY roubles.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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