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Friday, March 12, 2010

Hyperinflation Possible By Year 2015 Says NIA

The National Inflation Association, or NIA, says hyperinflation is "possible"by 2015 and Ron Paul is the "only hope to prevent US Hyperinflation." Below are some excerpts from the NIA website:
The U.S. government this week reported a record monthly budget deficit for February 2010 of $220.9 billion. Total tax receipts for the month were only $107.5 billion compared to outlays of $328.4 billion. The total U.S. deficit for the first five months of fiscal year 2010 was $651.6 billion, with tax receipts of $800.5 billion and outlays of $1.45 trillion. The deficit was up 10.5% for the first five months of fiscal year 2010 over the same period in fiscal year 2009.

We are now at a point where if the U.S. government taxed Americans 100% of their income, the tax receipts generated would not be enough to balance the budget.

Likewise, if the U.S. government cut 100% of its spending including defense, but kept paying Social Security, Medicare and Medicaid, we would still have a budget deficit.

NIA believes it will be impossible for the U.S. to have a balanced budget ever again.

If the Federal Reserve raises the federal funds rate up to just 2% during the next year, NIA believes the interest rate on our public debt could rise to 5% and our annual interest payments will likely rise to $500 million or 23% of projected 2010 tax receipts of $2.165 trillion.

We find it shocking that the White House is projecting an interest rate on our public debt in 2014 of only around 4%.

If the Federal Reserve doesn't raise the federal funds rate to above 5% in the short-term, in our opinion, an outbreak of double-digit inflation is inevitable.

NIA believes the real rate of U.S. inflation to already be approximately 5%.

By 2014, it is possible the Federal Reserve will be forced to raise the federal funds rate up to above 10% and the public portion of our national debt could exceed $15 trillion. Therefore, in 2014 we could see the interest payments on our national debt reach $1.5 trillion, about triple what is currently being projected and 43% of the government's projected tax receipts that year of $3.455 trillion.

NIA believes hyperinflation is possible by the year 2015. Besides the rising interest payments on our national debt, another major catalyst for hyperinflation will be social security payments, which adjust to the CPI-index. As the government's CPI-index rises, so will the social security payments that it owes. This could cause a death-spiral in the U.S. dollar. Inflation is still the last thing on the minds of most Americans, but soon it will be their primary concern.
For full articles, see the NIA website for
I should note that I don't agree with NIA that we will get hyperinflation (inflation over 10%) FOR SURE if Ron Paul is not elected president of the United States in 2012, but their concerns are worth paying attention. Even if Ron Paul is elected president as a third party Libertarian, the US House and Senate would still be controlled by democrats and republicans so we'd probably have gridlock where nothing would be done. We'd need to get Libertarians like Ron Paul into majority positions of both house and senate to break the cycle and I see the odds of this happening as near zero.

I also think we could avoid hyper inflation with something like "stagflation" were we get moderate to high (2 to 10%) inflation with low economic growth due to high unemployment and globalization keeping a lid on wages. Changes like delaying the age one can collect Social Security and higher taxes can also help but those changes will be painful to those who have not positioned their portfolios for this.

Make sure you read my other related articles:

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