Until the 1970's, most goods consumed by the US were actually made there. Americans were proud of this fact – and rightfully so. Although many items were imported from other countries, the bulk of goods were produced in the US. Hondas and Volkswagens were still referred to as “foreign cars.”
Then (to my best recollection), whenever I visited the US in the 80's I noticed that many goods that had traditionally been American-made were beginning to be show labels that read, “Made in Taiwan”, “Made in Korea”, and, increasingly, “Made in China.” Not all Americans seemed completely comfortable with this, but I didn't notice a major revolt against it either. After all, the prices were low.
Then, in the 90's, the doors were thrown open completely. It seemed that every type of article was being made in Asia, and “Made in USA” was becoming a thing of the past. Americans appeared to be somewhat concerned, but the mighty Walmart changed everything.
It seemed that everything that Americans needed could be found in Walmart. Nearly all of it came from China, and it was all incredibly inexpensive. At that point, it looked as though America collectively tossed aside the stars and stripes and drove down to Walmart to fill up the shopping cart. Any remnant of a belief in “Buy American” was dispensed with.
“Coming to a country near you: Hyperinflation”
America is riding a runaway train away from productivity and toward dependency on other countries for the great majority of its products. In the meantime, it is rapidly inflating its currency through QE1, QE2 and, inevitably, QE3. Yet very few Americans seem to understand the significance of this.
One can almost picture the advertisements: “Coming to a country near you: Hyperinflation”. Yet, Americans that I talk to firmly state that there is no chance of hyperinflation occurring because… (are you ready for it?)… “They could never let that happen. It would ruin the country.”
Yes, it would ruin the country – they've got that right. However, hyperinflation is all but unavoidable at this point. And when it does occur, those $15 dress shirts at Walmart are going to rise to $30, then $60, then…? Bed linen that sells for $50 will double to $100, then redouble to $200.
Where will it stop?
Quite honestly, I haven't a clue where it will stop and I don't think I'm alone. The US is in for a wild ride in the near-term to medium-term future, and no one truly knows just how wild a ride it will be.
The Fed's policy to inflate dramatically is a major factor, but not the only one. China is also inflating, particularly with regard to wages. This will be felt in the cost of their export goods. The train is clearly speeding up, not slowing down.
One thing is certain: the chain stores that you see in every mall across the country that are now selling dress shirts starting at $50 will have long closed by the time dress shirts are $50 at Walmart.
Along the way, wages in the US may decline, may stay the same or may increase slightly, but it is unlikely in the extreme that they will keep pace with hyperinflation. That will mean that Americans will increasingly leave Walmart with fewer items in their carts, then, no items in their carts, and possibly may stop going altogether, as the price of gasoline will also be on the rise.
We can predict that hyperinflation in the US is quite likely, but we cannot predict its degree. Surely, it is possible that Americans may reach the point that Walmart will become the only affordable place to shop. But at least the country may still function on these terms. The real danger would be whether hyperinflation would become so extreme that Americans cannot afford Walmart.
Is this Chicken Little talking?
No, I'm afraid not.
Tornado on the Horizon
The great majority of people in any country have difficulty understanding the nature of hyperinflation, since very few have experienced it. They somehow imagine money as coming from a tap that the government may turn on or shut off. It is not. Hyperinflation, once created, takes on a life of its own and is by no means controllable. Like a tornado, it can't be stopped once it exists; you simply have to wait until it dies a natural death.
Based on the likely timeline of the above, we can say that a tornado is already on the horizon and is therefore a very real threat. Americans should now be bringing in the lawn furniture and closing the window shutters. It is not yet time to get the family into the storm cellar, but that eventuality is likely very soon.
Any American (and, for that matter, anyone presently living in the First World who is reading the warning signs) would be well-advised to sort out a safe place to weather the storm. Once the storm is on the doorstep, it will be too late to prepare.
[Two places worthy of serious consideration to “weather the storm” are Uruguay and Malaysia. As a member of the International Man Network, you'll receive in-depth reports on both of these locales. To claim your IM membership, click here.]