What If Hyperinflation is the Plan?

I’m not much of a conspiracy theorist, but when I hear that the U.S. Federal Reserve Board voted 9-1 to print another 600 billion dollars I have to start wondering what they’re up to. The Fed., under Chairman Ben Bernanke’s leadership, has already injected over $2 trillion into the economy. All of this ‘quantitative easing’ is supposed to spur growth and economic recovery, but it hasn’t worked yet . . . at all. There’s no reason to think another 600 billion dollars will do the trick.

There’s a lot of funny stuff going on with the numbers. The Consumer Price Index and inflation rates are supposedly dangerously low, but who really thinks their cost of living has gone down or remained stable over the last two years? Anybody? Is it cheaper to gas up your car? Do your groceries cost the same? Oh, wait, fuel and food costs aren’t part of the CPI computations. I guess that’s not an important part of the real cost of living for the real people in this country. I guess those costs are irrelevant when making fundamental policy decisions that will impact the buying power of our national monetary unit.

But something dawned on me today. Bernanke, who was a big part of the Bush/Obama Bailout Bonanza, really pissed me off when he suddenly started sounding like a deficit hawk. I’ve questioned whether his policy ideas are the product of malice or stupidity. But maybe his policies are actually darkly brilliant. Maybe he really is a deficit hawk, and maybe these monetary policies are specifically and intentionally crafted to bring about massive inflation and devaluation of the dollar.

You see, inflation (and even hyperinflation) serves to reduce debts. Let’s say that I make $60,000 per year, have a house that’s worth $400,000, and owe $300,000 on a mortgage. If the Federal Reserve successfully cuts the buying power of the dollar in quarters with crazy inflation, well my salary will end up being $240,000 per year (though with the purchase power my $60,000 used to have), my house’s value goes to $1,600,000, but my mortgage stays fixed at $300,000 and my monthly payment doesn’t change.

Now double, triple, quadruple those inflation rates and before too long my debts are essentially gone . . . peanuts I can pay off with a day’s salary, which won’t make the debt owners happy. Now imagine that you’re a Federal Reserve Chairman in a country with a massive, crushing, and growing national debt. What would hyperinflation do? Amid the social chaos, the national debt (assuming it is held in dollars) evaporates—or at least becomes more manageable. Eventually a ‘new normal’ sets in, each of us trades thousands of dollars in for one ‘New Dollar,’ and life goes on.

We would, of course, have destroyed our credit rating and decimated our debt-holders’ trust, but an argument can be made that this would be better than defaulting or continuing to carry a debt of this scale ($13,713,087,906,377.36 as of 11/01/2010). I’m finding it hard to believe that 9/10ths of the Federal Reserve Board doesn’t have an Econ. 101-level understanding of money and inflation. Maybe they really do know exactly what they’re doing. . . .

Scott Bradford has been putting his opinions on his website since 1995—before most people knew what a website was. He has been a professional web developer in the public- and private-sector for over twenty years. He is an independent constitutional conservative who believes in human rights and limited government, and a Catholic Christian whose beliefs are summarized in the Nicene Creed. He holds a bachelor’s degree in Public Administration from George Mason University. He loves Pink Floyd and can play the bass guitar . . . sort-of. He’s a husband, pet lover, amateur radio operator, and classic AMC/Jeep enthusiast.