Wired.com
Do You See a Pattern Here?
By any measure, the late 1990s was a time of extraordinary growth and prosperity in much of the world - and yet, the global financial system still managed to lurch through six crises: Mexico in 1995; Thailand, Indonesia, and South Korea in 1997 and 1998; Russia in 1998; and Brazil from 1998 to 1999. The Indonesian crisis was especially severe: The country's quarterly real GDP plummeted 18.9 percent, and its currency fell into a hole 526 percent deep. Each of these upheavals spread to most parts of the globe, destabilizing currencies, knocking gaping holes in bank balance sheets and, in many cases, causing a wave of bankruptcies. The fact that each country recovered and the global economy roared on again is testament not to good financial management but to good luck.

Prices surged three percent on Wednesday after a U.S. government report showed a fifth fall in as many weeks in heating oil inventories at a time when stocks would normally be building.

Heating oil supplies are also running low in other key demand countries, such as Germany and Japan.

"The recent rise in oil prices has thus been large enough to constitute a significant shock to the economic system," said U.S. Federal Reserve Board Gov. Ben Bernanke in a speech on Thursday.

WHAT IS TO COME
It is my belief that we are now embarked on a journey that will take us into a hyperinflationary depression. There may be brief deflationary spurts that punctuate this journey along the way, but an examination of history leads me to conclude hyperinflation is much more likely than deflation. Unlike the U.S. economy during the 1930s or Japan in the 1990s, the U.S. economy is no longer self sufficient in capital, manufacturing, and energy. And unlike the 1930s, our currency is no longer backed by gold. The U.S. is now the world’s largest debtor nation versus the world’s largest creditor nation as we were in the 30’s. We are no longer self sufficient in energy as we were during the last depression. We import 60 percent of our energy needs, a percentage that is growing each decade. We must also compete with other nations for the world’s last remaining barrels of oil as we enter into the twilight of the oil age. During the 30’s the U.S. created the Texas Railroad Commission to regulate oil and prop up prices because of the abundance of oil in this country. In contrast to the 1930s, U.S. oil and natural gas production decline each year. This forces the U.S. to import more of its energy needs, energy we pay for with dollars. When the world no longer accepts those dollars as payment, the full impact of inflation will hit home.

I would like to end with a quote from Jens O. Parsson’s book “Dying of Money.” It perhaps explains best where we are today and where we are headed.

“Everyone loves an early inflation. The effects at the beginning of inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays. That is the early part of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the latter effects, but the latter effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and ineffectiveness of al traditional remedies. Everyone pays and no one benefits. That is the full cycle of every inflation.”