“And more devaluation is coming. Perhaps another 50 percent. The markets are convinced that the Fed is going to drop rates again on Halloween by another half percentage point. This means hyperinflation …”

McHugh has it exactly wrong. Do I mean that the dollar is not being devalued? No, the evidence is overwhelming that the dollar IS being devalued. The conclusion that hyperinflation will result is the non-sequitor. Dollar devaluation has caused increases in oil prices. Food prices are definitely up. What is NOT up is people’s ability to pay the increased prices. The pressure on the consumer is unbearable and will soon show up in horrible retail sales. Many are predicting this effect. How is this “hyperinfaltionary”? WalMart is already lowering prices. The only inflation we will see is in necessities like food where people have no choice but to buy, and in markets where we have foreign competition like crude oil. Foreigners find our stock markets cheap because of the weak dollar, but what happens when earnings drop? The devaluation of the dollar will make our products cheaper for foreign importers, but not enough cheaper. The devaluation of the dollar may make it easier to pay off debt but when have we ever done that? The pressure will continue until the consumers crack, until retail sales drop sharply, and interest rates have to be increased to attract foreign capital to fund government deficits. Want to tell me that that environment will be hyperinflationary? Crude oil imports would be so expensive that we couldn’t buy them. Is that hyperinflationary?

The history of hyperinflation is that debts are cleared, and new debt is very difficult to get because no one trusts your currency and you must make other guarantees to get financing. If that ever happens in the US, then we will be living in a different world with a different political system and different leaders (maybe even a different upper class).

I think that the collapse of the consumer is inevitable, and that the result will be a severe recession. I think that this recession will be so bad that we will actually have to change some of our bad habits, such as dependence on foreign oil. That sounds like a deflation is coming to me.