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Video: Buckner Says Hyperinflation Could Come Soon in the US

Here’s David Buckner in conversation with Glenn Beck about how hyperinflation might hit the US. I don’t necessarily agree, but there are two important points made:

I don’t think hyperinflation is coming that easy, because dollars aren’t exactly flying out of the window right now.

But something he said piqued my interest:

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.

Effectively, China which runs a massive export surplus is using the excess dollars to buy US debt, which allows the US to have cheap financing of its own companies. If China wasn’t buying US debt, then the US would have to get its own banks or funds to buy them. (India forces banks to buy government bonds with 23% of all deposits, for instance) Doing that will make non-government – that is, corporate – debt more expensive since they have to fight for the money.

But if China were to tell India that we could pay in, say, rupees or even in Renminbi, and other countries decided that their “surplus” would not be kept in dollars (could be kept in other currencies or Gold), things could change for the US.

None of this is happening, even though Bucker says it is. China’s holdings of US treasuries are up 10% as of July 2013. Also China and India have territorial issues, and don’t trust each other enough. And there’s a massive buyer of US treasuries – the US Fed – that is printing to bridge their deficit.

The US still remains the most active consumer of the planet and no one else can easily take its place. You can’t have all countries (Germany, Japan, China) running big current account surpluses, without using a currency of a country that has an equivalently large deficit – and the only places that can qualify are: Euro (ex-Germany) and India. But that in my opinion will take a long time to transition, and India has to start opening up its currency to allow other countries to hold its bonds.

Rajan mentioned this in his first speech, but it is more important to have a government that is not batshit insane to make this possible. (We need a government that won’t change policies every few minutes, provide proper clarity and force faster litigation in international matters) Let’s hope the next one is better.

Hyperinflation could come eventually, if the US Fed is not be able to stop printing even when the economy shows signs of improvement. If they were able to cut printing and raise rates in time, they are likely to ride it through, thanks to the lack of will of other countries to use their own currencies for trading instead of the dollar.

  • Ravi Shankar says:

    Though I subscribe to the view of hyperinflation, I do not quite agree with the argument that if interest rates go up, USA would see hyperinflation. Quite the contrary if we see people interest rates go up the dollar will go up in value or strenghten. On the contrary when people start dumping USA IOUs (aka treasury bonds), that would lead to the collapse of the dollar. Janet Yellen would be last FED chairperson to preside. It will be the markets which will force the hand of the FED, to raise interest rates, which would be effected by a bond price collapse (lower bond prices –> higher yields). The markets would do it, not the FED. When? no one knows, should be in the coming few years. I find it strange that people who come on TV, do not understand anything about the monetary system and the way it is structured. For now, I see deflation when priced in gold, even deflation in nominal currency terms for a while, due to debt destruction/repudiation. End game hyperinflation!!

  • DJ says:

    Eeks… no offense but please don’t look for economic information on the Glenn Beck show.
    Glenn Beck has a stake in companies that sell gold bullion. He thrives on the fear trade and the hyperinflation trade. Even if he and/or his guest are right, which they might eventually be since even a broken clock is right at some point, they are not a good source for information.
    And, by the way, why in the world should anybody listen to David Buckner talk about hyperinflation? He seems to be a prof of social studies who teaches change management in organizations. What makes him an expert on hyperinflation?

    • Thanks – but that is all ad-hominem 🙂
      I don’t believe that a person’s antecedents should cause us to disbelieve his arguments. I see where you are on the Glenn Beck history, but the points he makes are interesting – and the specific one was about India buying from China in a currency other than the $.
      But good point about bringing up his goldline thingy – that should be fair warning to readers.
      On buckner: I can’t write off a person just because he has no degree in something – I don’t have any financial qualification, and yet I write about this stuff (and some of you read it 🙂 ) His arguments may not be a winner – hyper inflation isn’t necessarily something you will see within a few months, or are influenced by only those five factors he mentioned. But there is merit in his saying that should the world move out of buying US debt, and should the Fed taper, then there is a slight problem today.

      • DJ says:

        Yeah, it is ad-hominem and deliberately so.
        As long as readers are aware that Glenn Beck has a business model that benefits from fears of hyperinflation, its fine with me. I don’t care about institutional credibility. But, there has to be some basis for credibility.
        And, I didn’t find any of the “arguments” credible on their own. I think the market can absorb a dumping of 8% of the treasuries held by China, if at all it were to occur. And, it would cause inflation in the US, but unlikely that it would cause hyperinflation. The amount of treasuries held by China is the same as 15 months of QE3.
        Secondly, comparison with Weimar is just stupid. I think you will agree.
        Thirdly, Buckner made too much of the fact that when Bernanke spoke of taper, the market “just went down”. It went down 6%. How scary… The market actually priced in taper pretty well (in the US markets).
        So, no, I don’t find anything in there interesting and I did not find any merit in what Buckner said. And, his projections of chaos in 3 months after the first rate hike and hoarding and this and that is just stupid. If China stops keeping the yuan low, it would make things more expensive in the US, but it would also help other sectors of the US economy which suffer due to the depressed yuan. If Buckner wants a revival of US production, China refusing to buy US debt would be a good thing, not bad.
        Are there problems with extreme monetary policy in the US? Sure.
        Are there risks of hyperinflation in the US in the long run? Sure.
        Did I see any interesting arguments about these issues in these videos? No.
        Beck actually picks up some good issues worth talking about, from the conservative viewpoint, but he then proceeds to make a mess of them because of his stupidity or because of his reliance on fomenting fear to get more viewership (ad-hominem alert).
        In the interest of being economical with words, its easier to call out Glenn rather than discuss his poorly framed arguments.

  • Leo says:

    the problem is people who see hyperinflation dont get debt blow up. and the role of gold.
    sorry gold is when the govt cant pay .second the minute u have greece kinda situation say 5% of US rates the govt will blow up or say 8% . which on 17 trillion.
    so Debt blow is the real game here not hyperinflation. If hyperinflation happens (begins)see the bond mkt it will go up in smoke in no time. to create Powerful Deflation .
    BOND Mkt is 10 x or more than stock market.So if ur worried about hyperinflation buy a land learn how to grow food have some cows to give milk fresh water setup .
    Bond mkt rates are key to everything and even in india debt has expanded thanx to MMS .ECB has doubled in last 4 years why ? Rates above 9% they cant rig it will go out of control. So till then sit tight dont follow hyperinflation panic mongers.

  • Vincent Cate says:

    Deepak, if you define deflation in terms of money supply including credit, then at the start of every hyperinflation you will see deflation. Bonds crash, banks only do short term lending, and by this definition, the money supply will go down. However, prices will be shooting up, velocity of money shooting up, and base money shooting up. Most everyone will see hyperinflation, even when a deflationists definition is met.
    I think I have the best stuff on the net to really explain how hyperinflation works:
    — Vince