Liberty Pile - Libertarian News

First, let me say I am no more prescient than anyone else. Helicopter Ben could have been one of my professors and he does not know what he is doing

What you need to understand is that both inflation and deflation leave behind devastation and huge shifts of wealth. Those shifts are only partially predictable. What we face are titanic shifts on all levels and this time we face seemingly chaotic shifts because inflation and deflation do not shift wealth to the same people. This time we face both debt deflation and hyperinflation, so that initial winners will get wiped out too.

The "purpose" of all this, if one wants to attribute systemic collapse to some lurking intelligence, is to create a level playing field. American Unions will resist, but until there is global wage leveling the collapse will not be over. That could mean either Chinese and Indian wages rise by a factor of 10, or our wages drop by a factor of 10, of some combination. This can occur if prices drop precipitously in the US, and they might, or if they rise in China with rapid inflation, or if exchange rates make the adjustment and overwhelm all political resistance. A level playing field also could mean that all debts, and with all debt all financial assets, are wiped out. A voluntary Jubilee might make the landing softer, but wipe out is the end result of both debt deflation and hyperinflation.

Shifts imply winners as well as losers.

The initial losers will be the debtors who lose their property. The US itself is the world's largest debtor. But the initial losers also include the creditors whose debtors go belly up. China's reserves are largely dollars. When the US defaults those reserves become worthless. There will be a great number of unhappy people when those who now flee to T-Bills, as well as the Central Banks around the world, find themselves holding useless paper. The winners in the early stages may be losers later on.

I do see the shift moving in favor of people who have skills. Skills do not go bankrupt even if you lose your tools in bankruptcy. Skills are not wiped out by hyperinflation, though your savings might be.

What can anyone do to protect oneself?

For the moment it looks as if holding hard assets, free and clear, is the most prudent course. But keep in mind that markets for hard assets can become illiquid very quickly, and that an ounce of gold may ultimately be a store of wealth but that in the meantime a pack of cigarettes may be what you need to buy loaf of bread.