Copyright 2012 by John T. Reed
Whenever anyone says anything about John T. Reed—that’s me—on the Internet, I get a Google Alert about it. I also get them whenever anyone says anything about hyperinflation or deflation and about some of my book titles. Also others to apprise me of troubles with the foreign currencies I hold. You can and should do the same for anything you are interested in.
Got a funny one about me today. Lady sent this to fraud detector web site:
My husband is buying into John T. Reed's opinion and advice about a coming hyperinflation in the US. Can this guy be trusted? My gut is screaming NO!, but my husband is hooked!
The fraud detector answer was nothing but one-size-fits-all cynicism, mainly, to ask was I making any money off my advice.
I can answer that real quick. I make money if you buy my book on hyperinflation/depression or other books.
But I do not make any money from any other advice I give on that subject. For example, I urge you to stock up on stuff you are going to buy anyway eventually. Everyone in America will be doing that with or without my advice the day they perceive prices are skyrocketing. It’s common sense. What is not common NOW is the realization this is going to happen. So if you follow my advice, you beat the rush and high prices.
For example, I said to stock up on your favorite shampoo, e.g., Head & Shoulders. Enough for a lifetime or at least until the “best by” date if there is one.
I do not get kickbacks from Procter and Gamble for that.
Nor do I get kickbacks from the Canadian, Australian, or New Zealand governments for urging you to follow my example and open saving accounts in those countries in those currencies.
In other words, if the lady whose gut is screaming took a minute to read my advice to her husband, she could calm herself down without needing to go to her own outside adviser.
Secondly, neither her nor her husband should rely on my opinions—or anyone else’s. I am not a soothsayer or clairvoyant. I have no crystal ball. If I could talk to the woman, it would go like this:
Has your sedative had time to kick in?
Good. Did you read how I came to the conclusion that we will probably have hyperinflation in 3 to 5 years?
Something about the bond market no longer buying our government bonds and Congress having no choice except inflation?
Why did I say the bond market would stop buying our bonds?
We have too much debt.
Have you ever heard of anyone being turned down for a loan because they already had too many loans?
Do you understand that our debt-to-GDP ratio is now approaching that of Greece, Spain, Italy, and so on?
Are those guys having trouble borrowing and needing to get bailouts from the IMF and ECB?
I read something about that, yes.
Congress does have another choice: cutting federal spending about 45% at the moment. What they do NOT have is a politically-palatable choice other than hyperinflating. Politicians do not cut spending, especially entitlements, and those are the bulk of federal spending now. Do you think Congress has another choice?
Tax the rich?
Nope. Not enough of them. Plus they are already paying far more than their share and they can, and would, change their behavior to avoid the higher tax rates. They did not get rich by being stupid.
End the recession and grow our way out of it?
Nope. The recession already ended years ago. A recession is two consecutive quarters of negative growth. Growth has been positive since June 2009. Do the numbers. Even a 5% growth rate, which is quite high, would only generate 5% x $15.1 T (current GDP) = 755 billion in additional growth in the economy. According to Hauser’s Law, not mine, that will generate 19.5% tax revenues for the U.S. government or 19.5% x $755 B = $147.2 B more tax revenue. The current deficit is $1.3 T. It’s gonna take ten years of 5% growth—maybe unprecedentedly high in all of U.S. history—to wipe out a $1.3 T deficit. Since we will have another $1.3 T or more deficit in each of those ten years…!!!!! that’s not gonna git her done.
Can we sell the national parks and all the empty GSA buildings?
Drop in the bucket. See the book The Coming Generational Storm which has the numbers on that.
Let me take another tack. I urged your husband to move rainy-day savings to savings accounts in Australia, Canada, and New Zealand as I have done.
That makes your gut scream? Are you aware that 22.9 million people in Australia have Australian bank accounts with Australian dollars in them? And the same with 34 million Canadians and 4.3 million New Zealanders? Do the wives in those countries have screaming guts over their husbands putting money in those currencies?
But they live there.
Would you like to go with me to my local bank here in the U.S. and watch how fast I can withdraw U.S. cash from my foreign bank accounts? Matter of fact, let’s have a race. You go to one ATM and withdraw U.S. dollars from your U.S. account and I will go to the adjacent ATM and withdraw U.S. dollars from one of my foreign accounts. We’ll say “ready, set, go ” and see who gets their cash faster. I have already tested it. I predict we will tie at about 15 seconds.
Finally, suppose your husband buys a lifetime supply of Head & Shoulders shampoo at my advice, and hyperinflation somehow does not occur? What’s the harm? You have clean hair for the rest of your life—no flakes—and your shopping bags are lighter in the future. If there is ANY inflation, you smirk because you got your shampoo at the cheaper older prices.
Suppose you put $100,000 in the four best foreign currencies in the world—Australia, Canada, New Zealand, Switzerland in my opinion and my web articles say how I drew that conclusion so you can do your own analysis. Further suppose the U.S. somehow escapes U.S. dollar hyperinflation. What’s the harm? You had money in those currencies. Australian and New Zealand pay some interest (because they have inflation to cancel out). If and when you bring it back into U.S. dollars, you will have lost the currency conversion costs and you may have a small gain or loss overall because the currencies fluctuate against the U.S. dollar.
My original cost of my foreign money was Canada, $.97; New Zealand, $.83; and Australia, $1.05. Those are the amounts I paid for the dollars of those countries. I bought them at various times over the past nine months. If I bought those currencies today I would have to pay CAD, $1.01; NZD, $.81; and AUD, $1.05. In other words my “investment” in Canadian dollars went up a little; in New Zealand dollars, down a little; and Australian dollars, unchanged. Will it always be that way? Not known, but these are the strongest currencies in the world, much stronger than the U.S. dollar in terms of debt-to-GDP ratio.
So the downside of my various pieces of advice on preparing for hyperinflation is little or nothing.
And what about the upside?
Spectacular. In 1914, four German marks bought a U.S. dollar. In 1923, it took four trillion German marks! So if a German had somehow known my 2012 advice in 1914, and used 400,000 marks to buy 100,000 U.S. dollars (back then I would have been urging Germans to buy U.S. dollars not the other way around), he would have had 4T x $100,000 = a hell of a lot of marks—quintillions or some such.
A more practical way to state it is the German would have had a $100,000 1923 U.S. dollars (worth about $1.3 million today) when all his fellow Germans lost their entire life savings due to hyperinflation in Germany.
I may write an article titled “Soap” just about all that Anna Eisenmenger said about the cost of soap, value of soap, and difficulty of getting soap in hyperinflated Vienna Austria in the early 1920s. If you followed my advice to stock up on soap and shampoo, maybe getting more than you need for barter, you will be wealthy just in terms of soap. In barter, you typically get things that cost far more when they were purchased pre-hyperinflation than you paid for the soap pre-hyperinflation.
Indeed, in early 1920s Austria and Germany, failure to have foreign currency and stockpiled food and fuel killed many people and cost millions more their health. 95% of children were malnourished and not growing as much as they should have.
So the downside of following my hyperinflation advice is minimal to non-existent. You’re not going to go bankrupt because you stocked up on shampoo or because you put your money in the currency with the lowest debt-to-GDP ratio in the creditworthy world. (I oppose your getting cute like investing in foreign currency on margin or buying futures contracts in a leveraged manner—that can get you hurt.)
The upside, on the other hand, is financially spectacular and maybe a matter of life and death.
It is good your husband is hooked on John T. Reed’s research, and a bit nutty that your gut is screaming about it. How’s about getting your head, not just your gut, involved and reading what John T. Reed said and then researching what others say about the same subject. I just saw U.S. Senator Tom Coburn of OK on Charlie Rose last night pushing his new book The Debt Bomb. He is leaving the senate to devote his life to trying to save the country from the same thing I am warning against.
Memo to the husband who is hooked on my hyperinflation analysis: Get a copy of Anna Eisenmenger’s diary Blockade through your local library. They will probably have to search for it and get it from another library. You cannot buy a copy. (Go ahead and try if you must. Everybody I tell that to does.)
Then get she of the screaming gut to read it. Her gut ain’t seen nothing til she reads that diary. Non-fiction. 100% true. Written at the time by a woman who never dreamed anyone but her and her family would ever read it. And make sure your wife has a box of tissues when she reads it. I needed one and I am an airborne ranger Vietnam vet. More people died in Eisenmenger’s family—3—from the ordeal of hyperinflation than in my units in Vietnam—2.
Hollywood has been crazy to not make a made-for-TV movie or miniseries about it. In addition to making sure she has a box of Kleenex, make sure you do not stand between her and the local Costco. After she reads that book she will be running to the car to go buy pallets of soap and food not to mention booking a flight to Canada to open a bank account.
There was probably a housewife in Massachusetts in 1776 saying, “My husband is hooked on Paul Revere but my gut is screaming NO!”
The British really were coming. And what happened is history. If you ignore all the warning signs of impending hyperinflation, you, too, may be history, or at least your life savings.
Speaking of life savings, that book I make money on is titled How to Protect Your Life Savings from Hyperinflation & Depression, 2nd Edition.
I make money if you buy it. $34.95 plus shipping (sales tax if you are in CA).
You, I believe, save your life savings if you buy and follow it. Seems like a fair trade to me.
One other thing, the fraud detector web site appears to be operated by a young lawyer. I am not a young lawyer. I am an old Harvard MBA. What the hell does a fraud specialist lawyer know about monetary stability and investments? I could see the wife checking with an economist maybe. But a lawyer!?
John T. Reed