Is Hyperinflation in Our Near Future? Recent Developments Suggest It May Well Be

Nobody Loves You When You're Down and Out

Until very recently, countries around the world felt compelled to hold billions in US currency reserves because they've known that they must buy oil with US dollars. Here's a quick snapshot of how many US dollars countries around the world are holding right now, mostly in the form of US Treasury bonds which they are soon going to want to sell for whatever they can get:

China holds $1.24 trillion. Japan $1.23 trillion. Worldwide, foreign nations hold somewhere in the realm of $6.2 trillion in US dollars, stashed away in their accounts. But if it's no longer a requirement to buy oil with US dollars, then suddenly, none of those countries need all these Treasury-bond dollars anymore. Rather, they are going to need a whole lot of Chinese yuan instead.

Therefore, since every one of these countries can and will flat-out dump the dollar, they will thereby flood the market with all the US dollars they don't need. And once Saudi Arabia gives the go-ahead to replace the petrodollar, an immense surge of excess dollars will immediately begin pouring out of all major oil-buying countries, as their US Treasury bonds are put up for sale, so as to be replaced by Chinese petro-yuan. But where would those dollars end up? Answer: Right back here in the USA.

So how devastating would 6.2 repatriated trillions of dollars be, suddenly coming back into the US?

Consider that right now, all physical money in the US totals just $2.9 trillion. That means these foreign dollars have the potential to more than TRIPLE the money supply in the US. And what happens when growing numbers of dollars began chasing a limited number of goods? Prices go up, up, up. And a super-inflationary money shock of that magnitude would lead to a number of difficult consequences for America:

• The cost of food would rise very quickly, especially for imported fruits and vegetables.

• Our own gasoline might soar to over $6 a gallon.

• Imported cars, electronics, medical equipment, even many popular drugs and medicines would all become much more expensive.

• Exports would fall because fewer foreign nations would have dollars to spend on our goods.

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