Hyperinflation: Consequences of Government Spending Policies

Hyperinflation is preferred by politicians to manage debt, avoiding drastic cuts that would harm their political survival.

### The Path to Hyperinflation: Understanding Economic Choices and Consequences
* 📉 The acceleration towards hyperinflation began with the **Great Financial Crisis (GFC) of 2007**, marking a **pivotal point in economic decisions** rather than the start of the issue.
* 💵 "The choice was made to **rescue that situation by inflating**, and now there's **no stopping it**," highlighting the **ease of debt repayment** in an inflationary environment.
* 🏠 For instance, if hyperinflation leads to a **1,000% increase in prices**, a $300,000 mortgage becomes easier to manage as incomes may rise, although not necessarily at the **same rate**.
* 📊 Politicians are unlikely to cut expenses significantly to prevent deflation, as it would **harm the wealth of the Uber Rich** who own most assets, making them **resistant to such drastic measures**.
* 👶 Many in Gen Z are recognizing the economic disparities compared to their parents, questioning if they are **worse off due to poor fiscal policies**.
* 💳 As the U.S. government continues to accumulate debt, the current trajectory suggests that **hyperinflation is approaching**, with predictions potentially **around 2040 or sooner**.
* 💰 "The government has a spending problem," with necessary cuts amounting to approximately **$2 trillion annually** to balance the budget, which is **politically unfeasible**.
* 📈 Ultimately, the preference for hyperinflation over deflation serves the interests of the wealthy, **exacerbating wealth inequality** and leaving the majority of Americans **behind**.

In my previous video, I explained to you how the national debt crisis will cause the great melt-up. In today's video, I'm going to explain to why the Federal Reserve and the US government have chosen hyperinflation rather than deflation. So, the purpose of this video is not to scare anyone. So, could this be a scary topic for some people? Yes, but that's not my intent. I would say it's like if you know a hurricane is coming, then what's the best thing to do if you have the information? It's to warn people so that they can prepare as best as possible. So, this information is very important because the way you defend yourself from hyperinflation is completely different compared to deflation. Okay, so let me tell you why the governments and the Federal Reserve prefer hyperinflation compared to deflation. So, I'm going to keep this as simple as possible. Let's start with this. So, what is the underlying problem here? Simply put, the politicians in the federal government, they have a spending problem. I can't say any more easily than

that so the federal government spends more than they make. They've accumulated all this debt. Everybody knows that they can't pay this money back. So consequently, the US government, along with the Federal Reserve, and they're working in conjunction, they have to print trillions of dollars. And of course, that is inflationary. But right now, we're at a point where the rate of deficits, the rate of borrowing to the debt accumulation, and the rates of interest payments are accelerating hard. And along with that, the rate of inflation. And right now, if you believe that the rate of inflation has cooled down, that the problem is solved, I'm just telling you that this is the Calm before the storm. So now that you have a better understanding of the situation, let's run some scenarios. So scenario number one, you have a situation where the politicians and the government, they can choose to cut spending massively and deflate. And then scenario number two, you have a situation where the politicians and the government, they can keep on doing what they're doing and that's

going to lead to hyperinflation, but let me tell you why the politicians and the US government will not choose deflation. Now, let's start with this, let's start with the political aspect. So, did you know in order for the government to balance their budget, they would have to cut expenses by about $2 trillion a year? So, the largest expense item right now for the federal government are Social Security payments. That's about $1.5 trillion a year. If you're looking at National Defense, that's about $900 billion for the year. So, just think about that. What kind of a politician is going to come out and say, Well, in order to balance the budget, let's reduce Social Security benefits to zero? I mean, that doesn't make sense because there's 72 million Americans on Social Security payments, 72 million beneficiaries, and most of them votes. So, I don't know what kind of a political campaign that would be for any politician. That would be political suicide, not to mention that if you reduce Social Security benefits down to zero, that still doesn't

solve the deficit problem, but you know what? That's an extreme example because I'm just singling out one category, Social Security benefits. But the reason why I did that is because that is the largest expense item for the US government. Okay, so let's run another example, and let's just say that, you know, to be more rational, let's cut expenses all across the board to be more fair. Okay, so if you're going to do that, you have to take into consideration that there are certain expenses that you can't just choose to cut. You know, for example, you can't cut, you can't decide to cut interest payments on government debt. Like, you have to pay those. So with that in mind, to balance the budget, the government would have to cut expenses all across the board by 40%. And that's just, I mean, that's horrible as well. 40% less for social security benefits, 40% less for Medicare, 40% less for National Defense, 40% less for Health Care, education, everything. Now I want you to think about that, how

popular would this idea be politically? I imagine not so much. That's why the politicians, they're not going to cut expenses in a meaningful way. So, that's why the politicians, they're not going to run this scenario of cutting expenses massively and deflating. Now, let's talk about the self-interest of the Uber Rich. So, let's just say that the government chooses to massively cut spending, and the Federal Reserve decides to not print money. Okay, in that type of situation, what happens? We get deflation and an economic depression. So, when you have an economic depression and deflation, what happens? The price of everything goes down. Stocks go down, properties go down, private equity investments go down, asset values crash. And who owns the majority of all those assets? It's the Uber Rich. Now, I want you to think about that. Why would the Uber Rich want to create an economic depression and cause a self-inflicted wound? When there's an economic depression, there's a reset. And why would an Uber Rich person want to reset the

game when they're winning. So, yeah, there's going to be certain rich people that they're going to have liquidity. They're going to be able to buy assets for dirt cheap. But there's going to be a bunch of uber-rich people that are going to be reset to zero, and that is their worst nightmare. Now, let me offer you a better alternative for the Uber Rich. This is in their best interest. If there's hyperinflation, if there's a melt-up in that type of situation, what happens? The stock market soars, property values soar, private equity investments soar, assets soar in value, and who owns the majority of those assets? Again, the Uber Rich. Now, in a melt-up, who gets left behind? It's the people with no assets, which is the major majority of Americans, and that's the problem. The wealth inequality gap will widen, the middle class will shrink even further, and then we're going to be left with a society where you're either really rich or really poor. And for the Uber Rich, here's another benefit about

hyperinflation or I'd say an advantage. So, in a situation of hyperinflation, you have the Federal Reserve printing trillions of dollars. It would be fair if everybody, all Americans, got an equal portion of that newly printed money, right? But as you know, I mean, obviously, that is not the case. The rich and powerful get first access to that money, and they also get the bulk of that money when we're talking about per person. So, just think about it. We've already seen this play out. We get a $1,200 stimulus check; they get a $5 million ERC tax credit or $20 million in PPP money. The average person just gets the crumbs. And think of hyperinflation from a political standpoint. If a politician says, We're going to give you more money, that buys votes. They don't tell you that going to print that money. There's a cost to it. It's called inflation. But you know, as long as you get elected, who cares, right? Give the people what they want. Okay, now I want you to think about

hyperinflation from the standpoint of our national debt crisis. So, with inflation, inflation or hyperinflation, whatever inflation, it's easier to pay back your debts. So, I'm going to give you an example. So, let's just say that right now you have a mortgage on your home. Let's just say your mortgage is $300,000. In the event of hyperinflation, it's going to be so much easier to pay off your mortgage. So, let's just say that inflation goes up by 1,000%. Let's just say overnight, you know that type of situation. A Big Mac would cost what, 60 bucks? A Honda Civic would cost what, $250,000? But if inflation goes up by 1,000%, your pay will increase too. Your income's going to go up. If inflation goes up by 1,000%, your income probably won't keep up. Let's just say that it goes up by 700%. So, in that type of situation, if your pay goes up by 7x, then

It's going to be so much easier for you to pay off your $300,000 mortgage, and it's the same concept with the government's debt load. Their pre-existing debt becomes more easy to manage. Now, I want you to imagine the situation of deflation. So, let's just say that we're in a deflationary environment. Let's just say overnight, boom, 50% deflation. So, in that type of situation, a Big Mac goes back down in price to what? A brand new Honda Civic is $112,000. But let's just say that you have that situation. You have a $300,000 mortgage, right? But you have to remember that your pay is probably going to go down by 50% as well. So, imagine trying to pay off your $300,000 mortgage when your pay is sliced in half. It's the same concept with the US governments and their debt load. Their pre-existing debts become more difficult to manage in a deflationary environment. So, listen, it is crystal

clear that hyperinflation is a better bad option for the Uber rich, and they are the decision-makers. So listen, we've been kicking this can down the road just constantly. Unfortunately, there's not much road left; it's just a cliff. And I hear these comments so often. Oh Brian, they've been seeing this doomsday scenario for decades. And honestly, I would say that those people were bad at assessing the situation. I'll tell it to you like this. So let me give you an example. In this example, let's just say that you're an average income American and that you currently individually have $40,000 of credit card debt. If you're in that type of situation, obviously, that's a bad situation. But honestly, you can probably keep on going. I'm sure that some company is going to give you more credit. But if you're in $80,000 of credit card debt, I mean, obviously, that's a more horrific situation. But honestly, you could probably keep on going, keep up the charade for a little bit longer if

you reach $11,000 of credit card debt. Then, I mean, you know that your end is drawing near. It's the same situation with the US government. It was premature to cry wolf back then, but right now, in this setup where we have accelerating rates of deficits, debt, and inflation, it's close to game over. But I'm going to be realistic with you. The situation of hyperinflation when we're in the thick of it, it's not going to happen overnight. It's not going to happen this decade. That's just too early. The most prestigious models, they're predicting by 2040, but I believe that it wouldn't be far-fetched to believe a few years earlier than that. Honestly, Social Security and solvency 2033, that's going to be an accelerator. But listen, this is very important. You can't say, Oh, this is going to happen next decade, then who cares? The reason why you should care is because we're not going to shift abruptly into a state of hyperinflation. No, inflation will progressively get

worse, leading up to the point of hyperinflation, and the standard of living during that trajectory will go down. And I want to point this out to you: a lot of Gen Z, they're seeing this, and they're realizing this. They're asking themselves, Wait a second, were my parents better off than me economically? They're looking at their parents, they're saying, Wait a second, my parents bought a house earlier than I did. My parents have more kids than I did. You know, kids are expensive. My parents are better off economically than I am. And if you have Gen Alpha children, you're probably concerned about a future with more challenging economic environments. Now, of course, there's going to be exceptions. If you're better off economically compared to your parents at the same age, then good for you. I mean, that is the American dream of any parents. But if you're worse off than your parents, then in my opinion, a lot of the blame has to go with bad monetary and fiscal policies. Now, I'm going to end

with this whole acceleration towards hyperinflation really started with the GFC, the great financial crisis of 2007. So, that is the acceleration, not the start, because I know that people are going to argue 1971 or 1944. But when the GFC happened, we really should have went through an economic depression. It's hard to find anybody that's going to argue with that. But the choice was made to rescue that situation. It was to inflate, and now there's no stopping it.

The Great Melt-Up: Why The USA is Choosing Hyperinflation (Episode 2)

ClearValue Tax

The US Government's Debt and Its Consequences

The US government is accumulating debt at an accelerating rate, leading to the need for printing trillions of dollars, which is inflationary.

Two potential scenarios emerge: massive spending cuts and deflation, or continuing current practices, which would make managing pre-existing debt easier.

Hyperinflation and a market melt-up would benefit the ultra-rich, widening the wealth inequality gap and leaving the majority of Americans without assets.

The US government would need to cut expenses by $2 trillion a year to balance the budget, with Social Security payments being the largest expense.

Reducing Social Security benefits to zero is politically unfeasible, as it would impact 72 million beneficiaries who are also voters.

A 40% cut across all government expenses is also impractical, as certain payments, like interest on government debt, are non-negotiable.

Hyperinflation leads to the Federal Reserve printing trillions of dollars, but the rich and powerful get the first and largest portions of that money.

This disparity is evident in stimulus checks versus large tax credits and loans for the wealthy.

The government's preference for hyperinflation over deflation is driven by a spending problem and the desire to buy votes through financial assistance.

Economic Challenges Facing Gen Z and Gen Alpha

Gen Z is recognizing that their parents were economically better off, leading to concerns about their own financial future.

The speaker attributes the economic struggles of the younger generation to poor monetary and fiscal policies.

The prediction of hyperinflation is made for around 2040, with the current trajectory of deficits, debt, and inflation indicating a looming crisis.

The Impact of the Great Financial Crisis on Hyperinflation

The Great Financial Crisis of 2007 accelerated the shift towards hyperinflation, as the choice was made to inflate the economy instead of allowing a depression.

Hyperinflation makes it easier to pay off debts, leading to a potential increase in income for individuals.

The self-interest of the wealthy class plays a significant role in resisting measures that would cause deflation and an economic depression, as they own the majority of assets that would lose value in such a scenario.