Three lines crossed, now cross your fingers

"Peter Bernholz, professor of economics at the University of Basel, Switzerland, in his most recent book, Monetary Regimes and Inflation: History, Economic and Political Relationships, analyzes the 12 largest episodes of hyperinflations – all of which were caused by financing huge public budget deficits through money creation.

His conclusion is that the tipping point for hyperinflation occurs when the government’s deficits exceed 40% of its expenditures. The deficits being run by the Keynesians in Washington are now at that level, well beyond anything ever attempted in U.S. history."

So, there are a few things I want to say about this. Not only have we passed the 40%, we have crossed two other "death spiral" lines. The IMF says that once a country's fiscal deficit is above 90% of its GDP, it doesn't recover (done in 2009). Also, there is the Greenspan-Guidotti Line. Once you pass that line, where you owe foreigners more than you have in reserves (We flew past that line in 2009.), you don't recover.
I also had to include this hilarious graphic. Even the Heritage Foundations line on this chart accepts the ridiculous economic projections for growth. They are based on a gigantic improvement in the economy starting almost immediately and lasting for years without interruption. There's not an economist on the planet who thinks that will happen, not even Obama's boot licker Paul Krugman. Oh, by the way, this doesn't even take into account the looming disaster of socialized healthcare, or costs of fixing the other socialist programs like medicare and social security. Also, as I have pointed out before, based on actual numbers, the deficit this year will be far more that the gigantic $1.5 trillion they claim.

Some more commentary, original article:

“…An unsustainable trend will not be sustained. The national debt will not reach $25 trillion in 2019. Unless the current policies of the Federal Reserve and Obama administration are reversed, the U.S. economic system will collapse well before that. In a recent report, Société Générale, one of France’s biggest banks, noted the possibility for collapse:

"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse. The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Aging populations will make it harder to erode debt through growth. High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt. “

There is no foreign country willing to buy the $13 trillion of debt paying 1% we will need to issue in the next ten years. Obama and Congress are working on another stimulus program, clearly indicating that they are going to continue their efforts to spend the country out of crisis.

Trust in the American financial system and its leaders is dissipating rapidly. At some point in the not-too-distant future, the U.S. Treasury will attempt to sell debt and foreign buyers will boycott the auction. That will mark the point of no return. The unprecedented levels of debt propping up the American Empire cannot withstand higher interest rates. When it collapses under the weight of its massive debt, the dollar will crash and hyperinflation will result. People need to prepare for a future of turmoil and uncertainty. From an investment perspective, gold will retain its value as the dollar falls. Shorting U.S. Treasuries will ultimately prove to be a great investment…”

By James Quinn, March 5, 2010

Fantastic Article about US options to deal with debt