Hyperinflation Is Coming, but You Still Have Time to Prepare (Video)
Gordon T. Long explained to USAWatchdog why he sees hyperinflation coming to America in the future and how investors should prepare for an escalated war on cash. While Long agrees with analysts like Peter Schiff and Marc Faber that the world is facing a debt crisis and major currency upheavals, he believes the world is still in the early stages of this massive transformation. Long said, “Even though it’s the biggest problem, [the dollar] will be the last to fail.”
However, when it does fail, he predicts the dollar could be officially devalued by 80% or more. For that reason, Long is extremely bullish on the precious metals in the long-term. Long is a well-known and respected economic analyst who worked for decades as a senior executive with IBM and Motorola.
Highlights from the interview:
“They have to go to a cashless society to get to negative rates. We have had negative real interest rates for quite some time. That’s the whole premise of paying down the government debt by effectively debasing it. You run up against a wall, and we’ve run up against that wall. Clearly quantitative easing isn’t working. Matter of fact, back in late-1999, 2000, when we went into the dot-com bubble and we were looking for solutions, there were a number of papers that were out saying [there were three steps] of what we’d have to do… One of them was quantitative easing. The second was the possibility of helicopter money-drops, which we really haven’t done, but is a possibility. The third would be negative rates. Not negative real rates, but negative nominal rates…
“We’re still early in the second or third innings of what’s to come… A simple way of thinking of this is with quantitative easing, we’re bringing demand forward. Debt is nothing but future demand… So we’re really pushing at demand… But we can’t bring any more forward. Real disposable income is falling. People don’t have the money to spend. Jobs aren’t there… The issue is over supply. Cheap money doesn’t just allow you to buy something, it allows producers to produce…
“Never underestimate the ingenuity of a trapped politician and central bankers to come out with new policies and new ways to extend this. We’re going to see some pretty violent volatility and corrections. It’s my opinion that we’re going to be in there guaranteeing collateral. The issue is we have a shortage of high-volume collateral… When you take out debt, you only get it if you post some kind of collateral… One of the issues with this is the Fed’s quantitative easing basically sucked all of the bonds out of the market. They’re all sitting over at the Fed. There’s a shortage of them. So we have a major liquidity problem…
“Any kind of default in Greece has profound implications. You will have something equivalent to shouting fire in the theater and everybody looking for the exit. This time, it’s not going to be a matter of everyone jammed at the exit. The doors are going to be locked. The only way out is for you to exchange your seat with somebody who is outside the theater. And who is going to do that? There’s not enough liquidity out there. This is the kind of market where it’s better to be six months early than six minutes late…
“The next crisis is going to be sovereign debt, and it’s going to be in the bond market. I personally think it will stem out of the insurance and pension problems, where they can’t fund, and credit is going to begin to collapse around muni bonds who are using money to pay pensions…
“Clearly, there’s many countries preparing for [a financial disaster this fall]. The BRIC countries: China, Russia, Brazil, South Africa, etc. A lot of the emerging markets, whether they’re buying gold… Look at the creation of the Asian Industrial Infrastructure Bank… They see something coming that is very troubling to them. Right now, if China were to back its currency with gold, even in a small proportion, the currency cartel would implode… 95% of the global currencies are basically trading on four currencies: the dollar, the euro, the pound, and the yen. And which four currencies are being debased the most with quantitative easing and printing? If you’re not in that cartel, what are you doing? You’re getting inflation. You’re getting hammered in the currency wars. So what do you start to do? You’ve got to protect yourself…
“[Hyperinflation] is coming, but not next. You have to remember, hyperinflation is a currency event. It’s not about prices going up, it’s about your currency going down, which means things are more expensive to you. When hyperinflation happens, it’s very quick and very short. It can be a matter of a few weeks or six months, and the currency implodes… It’s a matter of a lack of confidence…
“I suspect we’ll be guaranteeing things we never thought we’d guarantee. I think there will be issues in ETF markets… There will be mutual funds. There will be all sorts of things we’ve never guaranteed before that they’ll be forced into doing to keep this system liquid. It’s just not a matter of cheap money anymore. That runway is over. It’s a matter of guaranteeing the flows, which is collateral. The bonds…
“I’m very bullish on gold and silver, but not quite yet… A little bit more time. Right now, the paper market in gold is clearly being, I’ll use the word manipulated for lack of a better word… The actual physical is very, very hard to get. The key here is where it’s stored. Who holds it, from a geographical standpoint, and under which country do you have it? … It’s nothing more than an insurance policy…
“Everybody’s talking about gold not going anywhere. It’s because everybody is denominating in US dollars. There’s many places gold has been great this year. If you bought it in yen, and had a short on the yen, you’ve done really, really well. Gold has been a good move. In many cases, gold has been good move…
“We consume vastly more than we produce as countries. You can’t keep sustaining that, so you need an adjustment. What you have is change trying to happen right now on a global basis. We’ve had major shifts. That rebalancing needs to happen…”
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