In my last 2 pieces I tried to explain how hyperinflation is a monetary event as opposed to an economic one and that only a few conditions need be persist for its onset  First the currency must be fiat and un-backed, the economy must be weak and the debt ratios must be high and rising.  The central bank must be creating more currency in the quest of kick starting the economy  Confidence, or lack of will take care of the rest and begin the panic out of the currency when the time is ripe.

I have maintained all along that once the ultimate panic begins, it will happen very fast and span a very compressed time frame for a couple very simple reasons.  One being computers.  Computers are fast, very fast. Computers allow for “instant knowledge” and also allow for “instant action” as in instant trades.  In today’s world, in many cases there are computers that trade without humans  They are “programmed” and then set in motion which is why we have seen “flash crashes” and other strange anomalies over the past several years.  In my opinion, even if the underlying fundamentals were not broken we would only need wait for an accident aided by computers to happen.

“Fear” is a greater emotion than “greed” which is why markets, all markets, go up slower than they go down.  This is natural, if you have ever seen a horse go after a carrot or towards its feed (or a stallion toward a mare in heat) and compared that to how fast they move when they’re scared, then you understand.  Even when “greedy”, investors “think” before they push the button but when they are truly scared they “push the exit button” first and only then ask questions… after the fact.  If you remember 1987’s crash, that is a prime example where people wanted out and it did not matter at “what price.”  One more thing about computers, they are also the reason that the system has lasted as long as it has.  Without computers, the Fed and Wall St. could never have piled on as much debt and derivatives as they have.  The pile of worthless paper crap could never have been piled so high nor reality obscured as well or as long.

For some 30 years now we have lived through a period of “greed” with only intermittent “fear”.  So much greed that the system from top to bottom was saturated with debt.  The “boat” has been fully loaded with nearly all investors on the side of the boat expecting “growth”.  The problem is that once debt saturation occurs, there can be no more growth or at least very little and certainly not enough to pay off the accumulated debts which is where we are today.  What used to take $1 in the past to get $5 of growth now takes $10.  The “drug” of easy money is no longer working and investors have been waking up to this fact slowly and in greater numbers.  This is evidenced by lower volumes on the stock markets and Treasury auctions going unattended.  What is amazing though is that a mass entrance into the “safety” of the bond markets has occurred over the last few years.  I guess it makes sense though because “mass delusion” (aided by the central bank) always occurs before mass panic.  It is this “debt saturation” level that once hit means the central banks must turn the printing presses full force just to tread water.  It is at this point that conditions become fully ripe for hyperinflation.  In any case, our “leaders” will steer this Titanic as far as she’ll float, they have no other choice because to do otherwise would be admission that the system was flawed (fake).

Many look back at the Weimar experience and believe that that 5 year experience means that we “will have time” to act and protect ourselves today.  I don’t think so.  In fact, I think that the clock started ticking back in 2007 when the Fed first started easing and lowering rates to zero.  My belief is that with the aide of computers and paper derivative products of all sorts, “inflation” has been somewhat masked.  A great “divide” has grown over this time frame between “perception and reality”.  It is this “divide” between what our financial masters want us to perceive and the reality of Mother Nature that will “even out”… over time.

In my opinion the entire event (not including the painful aftermath) may be as protracted as just one really bad week leading up to a weekend.  A weekend where “the money” is changed and assets get “re set.”  This may be too simplified but some sort of re set must occur because it is becoming too obvious that there is too much debt and this debt is given “too much” value as evidenced by the mass entrance to its “safety.”  (Think about how screwed up this is, investors are flocking in droves (unlike anything ever previously seen) into the IOU’s of governments that are clearly broke… for safety!)  Please understand that bonds are a promise to pay… more of the same pieces of paper currency units and nothing else.  If these currency units are part of the problem then how do they (no matter how many) become part of the saviour?  They don’t.  This is the realization that will start and fuel a “run” OUT of currencies (hyperinflation).  Also please understand that a “re set” where you lose purchasing power of your currency over night or over a weekend is effectively a hyperinflation.  A “managed” one but a hyperinflation nonetheless.

One last thought, as interconnected as everything is today, how can any mass movement (panic) occur slowly or even isolated?  It cannot.  We await the perfect currency crises which because no currency today exists as non fiat, will catch fire to everything.  All bank accounts, all insurance products, all bonds whether they be corporates, munis, sovereigns or Treasuries, all currencies including money under your mattress.  Nothing will be spared and if you can understand the fear that will be rampant then you can understand the potential speed at which this can and probably will occur.

This of course leads to the common sense answer as to “WHY” everything, everywhere in the financial world is manipulated with false and even laughable values.  “Confidence” must at any and ALL costs be maintained or… it is broken and the Ponzi scheme to end all Ponzi schemes will come down in a heap and expose “reality.”  “Reality” being a pricing re set of all things real versus currencies of all shapes, colors and nationalities!