David Buckner, the founder and CEO of Bottom Line Training and Consulting, an adjunct professor at Columbia University, and the author of "Permission to Think," explained on the Glenn Beck Program Wednesday why America hasn't yet seen hyperinflation -- but why it could be just around the corner.
Buckner said that in discussing hyperinflation, people often refer to the Weimar Republic, Zimbabwe, and Bolivia, but say "it could never happen here" because a "certain kind of layering has to occur" that America hasn't seen.
That layering, he said, or the "recipe" for hyperinflation, is:
1) Economic Implosion
2) Collapse in tax revenues
3) Raise taxes
4) Lenders unwilling
5) Austerity or print
Beck seemed shocked by the list, saying all five have occurred.
But Buckner said some still squabble about certain points in the list -- and regardless of whether we satisfy the recipe, people still say three things in America are "different," and set us apart from the standard formula.
First, it is said that "everyone wants to buy our debt," and no one will ever stop wanting to do so. But Buckner countered that China is already quickly shifting our debt quickly to gold, and analogized the situation to a restaurant where China, the chef, lends the United States money to eat at its establishment. Pretty soon, he said, there will be other customers, like India, who can pay outright.
Second, some also claim that "we're not printing money" because "we're exchanging an asset - a bond - for cash."
"What they're not saying is where that bond's coming from - treasuries. As soon as the government puts it out there, the Fed comes and takes it," Buckner said. "It's circular, it's absolutely circular. So we are printing money."
The third factor that many say differentiates America is that we are a "productive" country, but Buckner said he disagrees there, as well.
What exactly does America produce these days, he asked? We have Apple, but the products are primarily manufactured overseas. We have a good financial sector, but can we depend on that in tough times? Others cite the country's many innovators as something we "produce," but Buckner noted that innovators are "produced" elsewhere, also.
"And everybody says, well you're not seeing hyperinflation," Buckner said, but that's because, "the interest rates are so low, nobody's putting that cash back into investments in the United States. But they are putting it into desperate countries in Europe. They're putting it into other investments. And the money's going out there, so the second Bernanke raises the interest rates, all of the sudden the money sucks back into the United States and we have hyperinflation."
Beck asked Buckner if we need an "event" of some sort to trigger such a meltdown.
"We've had an event, but...we've become comfortably numb," Buckner said. "So there's been a lot of hidden stuff that's going on. The treasuries continue to go out, and Bernanke continues to buy debt. [But] anytime he starts to back off the markets freak out, because they know. The markets know. But we don't, the people don't. People who are retired, pensioners, elderly, people who are holding money are going to be devastated."
When Beck asked for a timeline, Buckner said that by January of 2015, if not by October in 2014, we are likely to see "an increase in interest rates which will start the domino."
"When Bernanke announced that there would be a tapering, the markets just dropped because they knew that even if the interest rates changed one infinitesimal amount, it was the beginning of the domino," he said.
"How fast do the dominoes go down?" Beck asked.
"Three months," Buckner replied without hesitation. "You listen to many of the economists -- within three months. And it's going to be perception more than real price. You're going to see hoarding, you're going to see fear. It's not the actuality. So if they can put a glaze over everybody...it's may slow it down. That''s the problem, is we're dealing with an illusion. It's an illusion of what is real. We don't have the money. So the interest rates go up, you're going to see a domino."
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