Tag Archives: Joe Salerno

Victor Sperandeo on the Inevitability of U.S. Hyperinflation

Why we are doomed



Update on Hyperinflation Talk Presented 2010 by Victor Sperandeo,

EAM Partners L.P.                                                                May 13, 2013

On February 16, 2010, I first gave a speech titled “Hyperinflation: A Statistical Inevitability” at a charity event in Dallas, Texas. In essence, the talk was a “warning” that unless the growth of the nominal debt versus nominal GDP changed to a more normal balance, the US would “eventually” suffer from hyperinflation.

Hyperinflation is a debt problem whose root cause is when a country’s level of debt rises to a level that when its economy goes into a deep recession (or depression) the country cannot borrow money or raise enough taxes to cover its expenditures, and therefore it is forced to print money to cover a greater percentage of its expenditures than the markets and investors think is sustainable. This concludes in the country’s inability to pay the interest on its debt, which progressively consumes its overall budget, causing the country to continue to print money to pay its ever increasing debts and interest thereon, which ultimately leads to a loss in confidence in its currency, ending with hyperinflation as the result.

Editor: Note the difference between inflation and hyperinflation (hyperinflation is NOT just an ultra-high rate of inflation) See links below.

Where the U.S. Stands Today

My original speech was based on the 2010 Congressional Budget Office’s Budget and Economic Outlook Fiscal Years 2010-2020. At the time, total US debt was growing at an unsustainable rate of 11.90% compounded from 2006 -2010 (fiscal years) while gross GDP was growing at a nominal rate of 2.75%. Debt was increasing at 4.3 x’s higher than growth. Clearly, this was an unsustainable situation.

Further, the reason that I state hyperinflation will occur “within” the next 10 years has a logical basis. If one takes the position that the net debt will grow at 5% a year, total U.S. debt will be $27.324 trillion in 10 years (not including current off-balance sheet items or unfunded liabilities). As the CBO does not project total U.S. debt, only public debt, the $27.324 trillion figure is based on my projection.

Now, what will interest rates be in 10 years? The CBO says an average yield is 4.6% (CBO 2/13 Report page 5), but let’s assume it reverts to the mean for bills and bonds of the last 52 years, or from 1961, which was 6.01%. Assuming that spending increases 5.08% a year from 2014-2023 (CBO 2/13 Report page 3), they say annual spending will be $5.082 trillion in 2023 net of annual interest.

However, annual interest in 2023 on my projected $27.324 trillion total U.S. debt (using the historic average interest rate of 6.01%) will be $1.642 trillion, or 32% of projected 2023 annual spending without interest and 24% of projected 2023 annual spending with interest. Today, interest is 6% of the budget. Therefore, one has to ask the question, where does the approximately 20% difference come from? I believe U.S. bond holders will sell what they own, the U.S. dollar will decline, and the Fed will print money at a rate that will make today’s Fed look like they are Shaolin Monks.

See full article here:Hyperinflation by Victor Sperandeo

A history of hyperinflation in pre-revolutionary France: Fiat_Inflation_in_France_by_White


Children fiatburn fiatth

An Austrian economist, Joseph Salerno discusses in nineteen minutes the theory of hyperinflation (High School Lecture) http://youtu.be/xVDZVhdT2gY

I am interested to hear from readers how the U.S. will AVOID hyperinflation assuming our current trends continue. What will politicians try to avoid default.  What do YOU think?

Two short, six minute videos discussing Market Wizard, Victor Sperandeo: http://youtu.be/OBkb69tvVqs and http://youtu.be/8XfSz3MT3Xg



Yamana valuation to be posted Friday.

Happy New Year! Review.


The author of this blog when he lived with cannibals in Irian Jaya (Western Papua New Guinea). How this picture came to be is a long, long story told over several beers. I urge readers to think of these skulls as representing investors who did NOT read the proxies and financial footnotes of the companies they bought. Be careful and always think for yourself. Please! A moment of silence for the many who did not survive.  More on cannibals here: http://www.smithsonianmag.com/travel/cannibals.html.

Bernanke’s money printing is certainly having his intended effect in the stock market today. The joys and inevitable sorrows of manipulation. Eventually, the Fed will have to stop having its foot on the monetary gas pedal. This blog has been updating you on the 8% to 9% money growth and you are all aware of the current negative real interest rates ( a war on savers).


Irrational Behavior

Don’t forget to improve by signing up for A Beginner’s Guide to Irrational Behavior (Dan Ariely). “In this course we will learn about some of the many ways in which people behave in less than rational ways, and how we might overcome these problems.” https://www.coursera.org/course/behavioralecon

A Special Situation

A Leveraged Stub Stock Remember to do your own work and if you invest, size your position accordingly in a company that could either pay down debt and turnaround or be crushed by debt. The author of the blog below addresses many of the issues that need to be thought about.  One key is to look carefully at maintenance capital expenditures (“MCX”) because if management skimps on MCX to pay down debt, then the company really is in liquidation and the asset values may not be there to support the turnaround. You can learn as much about investing/companies that you analyze and pass on as the ones you invest in. You just need to keep track of your omissions and see if your thought process was correct. I bet you 10 to 1 that not 1 in 100 professional money managers do that on a systematic basis. What a chance to learn, but you have to be diligent.


Other Good Investing Blogs

Review 2012: http://www.oldschoolvalue.com/blog/




If you find interesting articles on investing don’t hesitate to alert me.

Fundamentals of the Austrian Business Cycle (Banking and ABCT)

Book:Money Sound and Unsound by Salerno


Debate about the efficacy of the Austrian Business Cycle

This debate is somewhat similar to the debate of efficient market theory. How can entrepreneurs be fooled time and time again by the Fed’s market manipulations that consistently lead to booms and busts. What about rationality?

Blind Business Man


Discarding the Wheat While Saving the Wheat

Reply to Discarding the Wheat by Block

Why the Austrians are Wrong about Depressions

What is Wrong with ABCT_Caplan

Why Entrepreneurs are caught in ABCT

Comment on Why Austrians Are Wrong About Depressions

ABCT in light of Modern Macroeconomics by Garrison


Third Avenue Fund Letter: TAVF Oct 2012 Year End

What is Money? A Three Part Series of Video Lectures

We have the best government that money can buy. –Mark Twain
Three excellent videos on money–highly recommended for learning.

Part 1: What is Money by Joe Salerno:


Part 2: What is constitutional money by Dr. Viera:


Mr. Viera says, “We have an irredeemable paper (electronic) currency coming out of a private banking cartel for which the American people are on the hook for some type of bailout. Of course, the banking cartel will always go to the public and say we made terrible mistakes–that if you don’t bail us out, the result will be total collapse. And by the way, next time will be worse. This cycle just perpetuates until the end—a hyperinflationary collapse of 50% monthly depreciation of the U.S. dollar. Ugly.

A summary of Viera’s book, Pieces of Eight on Constutional Money: http://mises.org/books/rozeff_us_constitution_and_money.pdf

An alternative to disaster? Rid the nation of legal tender laws and let states use different monies. Move away from the fiat dollar.

Part 3: What is it about Money that Causes Financial crisis by PEter Schiff