I envision us looking back at this statement with great sadness. Let it not be said that no one tried to prevent what is about about to happen.

I’m glad I was able to find a transcript of Congressman Ron Paul’s statement. Youtube videos sometimes vanish. I’m storing the transcript here.

What he describes is a specific occurrence of the Austrian Business Cycle Theory — artificially low interest rates causing unsustainable booms.

Peter Schiff’s economic analysis continues to be spectacular:

Here’s the Jim Roger’s statement Peter Schiff alludes to:

Hey guys. Pay attention to this. The talking heads on Television will probably try to spin stories like this one to disguise the demise of the dollar. Europe’s inflationary policies do not help us, but they serve as a red herring for the propagandists.

The euro tumbled as debt woes spread around the euro zone from Greece, where pledges of austerity and fiscal rigor failed to stem growing fears that the Continent’s economic recovery could be derailed.

The euro fell as low as $1.4505 on Tuesday, its lowest level since early October. New worries about Austrian banking also roiled markets, with rumors of trouble at an Austrian lender with shaky investments in Eastern Europe following Monday’s surprise nationalization of another Austrian bank at the behest of the European Central Bank. (Read more from online.wsj.com)

Patrick Barron’s comments:

The Fed and the ECB are trying the old “beggar thy neighbor” policy, whereby each tries to cheapen its own currency in order to spur exports to its neighbor. Great plan. Now both currencies can crash together. Misery loves company, I guess.

This and other wonder charts are from ShadowStats.com.

The term hyper-inflation itself is interesting. It is a word which seems to universally mean the sudden, dramatic drop in the value of money (ie. the sudden, dramatic rise in prices). The word inflation is more contested.

The government prefers to consider inflation a rise in prices. Why? Because government measures inflation by the heavily manipulable consumer price index, which can be twisted to ignore food and fuel costs. The government hates bad economic news. It also adjusts its many redistribution of wealth according to the CPI, so having control over it helps.

Followers of the Austrian School (me) use the term inflation to mean, simply, an increase in the monetary supply. Price increases are merely a consequence of inflation, as is the wage/price spiral so many economists enjoy obsessing over. So when government, and government minions scrutinize about what they call inflation, my friends and I think they are paying attention to the sideshow of prices, and avoiding the real issue: the printing of money out of thin air.

We do lack a word, however, for the sudden, dramatic drop in the value of money (rise in prices), hence we rely on hyper-inflation.

What does it look like?

Here is a note for a hundred trillion Zimbabwean dollars. I don’t think it’s worth the paper it’s printed on. Initially, governments like printing money, because it transfers wealth more subtly than taxation, but eventually you get this:

Turkey to use national currencies in trade with Iran, China
Turkey is switching to national currencies in trade with Iran and China, ending dependence on the U.S. dollar and the euro for about 20% of its commodity turnover, local media reported on Wednesday.

Turkey has already switched to settlements in national currencies with Russia amid weakening confidence in the greenback as the world’s major reserve currency. The move was initiated by Turkish President Abdullah Gul during his visit to Moscow in February. (Read more from rian.ru)

Bernanke reassures markets on dollar
The Federal Reserve is monitoring currency markets “closely” and will conduct policy in a way that will “help ensure that the dollar is strong”, Ben Bernanke said on Monday in rare comments on the US currency.

In remarks apparently aimed at reassuring markets and foreign governments that the central bank is not indifferent to the fate of the US currency, the Fed chairman said “we are attentive to the implications of changes in the value of the dollar”. (Read more from ft.com)

Stopping the dollar’s demise means stopping Congresses endless spending on war, healthcare, bank bailouts, etc. Not very likely.

“The business site Bloomberg is running a story today titled Yuan Deposes Dollar on China’s Border in Sign of Trade’s Future. [Interestingly, after being up for over an hour, this story suddenly went away between 1 and 2 am. Before coming back in what seemed like a slightly less hard hitting form.]

When Treasury Secretary Geithner spoke on June 1st to students at Peking University and claimed that America was in good shape and China’s dollar investments were safe. His assurances were greeted with loud hoots of laughter from the assembled students, many of them the sons and daughters of China’s elite. Geithner humiliation was barely reported in America, but it seemed to resonate much more strongly elsewhere around the globe. Spawning many stories similar to the story running today at Bloomberg.com about how people are digging up that jar full of dollars and replacing them with gold or border traders switch from dollars to other currencies. The disbelieving laughter of China’s students may well mark a sea change. The begin of the end for the dollar’s reign as the world’s reserve currency. With America’s politicos planning to spend approximately double what they expect to collect in taxes this year, it is easy to see why the students were amused by Geithner posturing. But the chaos that will ensue if a dollar crisis were to suddenly force America’s politicos to start living within America’s means won’t be funny.” (from humods.com)

“The US administration has been saying it sees the first green shoots of economic recovery. However consumer spending remains low in America, and some experts argue the signs are misleading.

What can you get for a dollar? Not much these days.

Its value dropped considerably at the end of June � and this is despite the Obama administration announcing signs of an economic rebound.

Experts think these are false claims of hope. They see a gloomy future for the dollar and say the $787 billion stimulus package passed earlier this year is only making things worse.” (Read more from geraldcelentechannel.blogspot.com)

I’ve long been interested in legal tender laws and the notion of competing currencies. Ron Paul gave a great overview before the US House of Representatives, February 13, 2008:

“At this country’s founding, there was no government-controlled national currency. While the Constitution established the Congressional power of minting coins, it was not until 1792 that the US Mint was formally established. In the meantime, Americans made do with foreign silver and gold coins. Even after the Mint’s operations got underway, foreign coins continued to circulate within the United States, and did so for several decades.

On the desk in my office I have a sign that says: �Don’t steal � the government hates competition.� Indeed, any power a government arrogates to itself, it is loathe to give back to the people. Just as we have gone from a constitutionally instituted national defense consisting of a limited army and navy bolstered by militias and letters of marque and reprisal, we have moved from a system of competing currencies to a government-instituted banking cartel that monopolizes the issuance of currency. In order to introduce a system of competing currencies, there are three steps that must be taken to produce a legal climate favorable to competition.

The first step consists of eliminating legal tender laws. Article I Section 10 of the Constitution forbids the States from making anything but gold and silver a legal tender in payment of debts. States are not required to enact legal tender laws, but should they choose to, the only acceptable legal tender is gold and silver, the two precious metals that individuals throughout history and across cultures have used as currency. However, there is nothing in the Constitution that grants the Congress the power to enact legal tender laws. We, the Congress, have the power to coin money, regulate the value thereof, and of foreign coin, but not to declare a legal tender. Yet, there is a section of US Code, 31 USC 5103, that purports to establish US coins and currency, including Federal Reserve notes, as legal tender.

Historically, legal tender laws have been used by governments to force their citizens to accept debased and devalued currency. . . . If people are free to reject debased currency, and instead demand sound money, sound money will gradually return to use in society. . . .

The second step to reestablishing competing currencies is to eliminate laws that prohibit the operation of private mints. One private enterprise which attempted to popularize the use of precious metal coins was Liberty Services, the creators of the Liberty Dollar. Evidently the government felt threatened, as Liberty Dollars had all their precious metal coins seized by the FBI and Secret Service this past November.

. . . .

The final step to ensuring competing currencies is to eliminate capital gains and sales taxes on gold and silver coins. Under current federal law, coins are considered collectibles, and are liable for capital gains taxes. Short-term capital gains rates are at income tax levels, up to 35 percent, while long-term capital gains taxes are assessed at the collectibles rate of 28 percent. Furthermore, these taxes actually tax monetary debasement. As the dollar weakens, the nominal dollar value of gold increases. The purchasing power of gold may remain relatively constant, but as the nominal dollar value increases, the federal government considers this an increase in wealth, and taxes accordingly.” (Read the whole speech at dailypaul.com)

Schizophrenia is a euphemism. Hypocrisy and/or idiocy is more apt.

“As Hulsmann explains, the ‘leadership of the U.S. Federal Reserve is aware of this situation.’ (Page 233) OK. That’s reassuring. But if U.S. officials are concerned about the terrible consequences of a POSSIBLE dumping of dollars on the U.S. market, why are they UNCONCERNED about the consequences of their own efforts to stimulate the economy, which involves the same mechanism that they so fear from foreign actions; that is, massive expansion of the money supply?

The government has taken two actions that will expand the money supply every bit as much as possible foreign actions to dump the dollar–expansion of the monetary base by the Federal Reserve Bank and the Obama administration’s spending spree.” (Read more from patrickbarron.blogspot.com)