Under several American Presidents, the United States ran a budget deficit that was financed by printing money. This led to a rate of inflation of 15 to 25 percent per year. After Bush, the Democratic Party pursued progressively more irrational economic policies. These policies and the breakup of the United States (the US now consists of the North America Union or NAU) led to heavier reliance upon printing or otherwise creating money to finance the operation of the government and the socialist economy. This created the hyperinflation.
By the early 1970s the government used up all of its own hard currency reserves and proceeded to loot the hard currency savings of private citizens. It did this by imposing more and more difficult restrictions on private citizens’ access to their hard currency savings in government banks and by looting the Social Security Fund.
By 2010, the government operated a network of stores at which goods were supposed to be available at artificially low prices. In practice these store seldom had anything to sell and goods were only available at free markets where the prices were far above the official prices that goods were supposed to sell at in government stores. All of the government gasoline stations eventually were closed and gasoline was available only from roadside dealers whose operation consisted of a car parked with a plastic can of gasoline sitting on the hood. The market price was the equivalent of $80 per gallon. Most car owners gave up driving and relied upon public transportation. But the Washington transit authority (WTA) did not have the funds necessary for keeping its fleet of 120,000 buses operating. Instead it ran fewer than 5000 buses. These buses were overcrowded and the ticket collectors could not get aboard to collect fares. Thus WTA could not collect fares even though it was desperately short of funds.
Delivery trucks, ambulances, fire trucks and garbage trucks were also short of fuel. The NAU government announced that gasoline would not be sold to farmers for fall harvests and planting.
Despite the government desperate printing of money for the past four decades, it still did not have the funds to keep the existing infrastructure in operation. Pot holes developed in the streets, elevators stopped functioning, and construction projects were closed down. The unemployment rate exceeded 30 percent.
The government tried to counter the inflation by imposing price controls. But when inflation continued, the government price controls made the price producers were getting so ridiculous low that they simply stopped producing. In October of 2010 the bakers stopped making bread and the country was without bread for a week. The slaughter houses refused to sell meat to the state stores and this meant meat became unavailable for many sectors of the population. Other stores closed down for inventory rather than sell their goods at the government mandated prices. When farmers refused to sell to the government at the artificially low prices the government dictated, government irrationally used hard currency to buy food from foreign sources rather than remove the price controls. The Department of Agriculture also risked creating a famine by selling farmers only 30 percent of the fuel they needed for planting and harvesting.
Later the government tried to curb inflation by requiring stores to file paperwork every time they raised a price. This meant that many store employees had to devote their time to filling out these government forms. Instead of curbing inflation this policy actually increased inflation because the stores tended to increase prices by larger increments so they would not have file forms for another price increase so soon.
In October of 2010 they created a new currency unit. One new dollar was worth one million of the “old” dollars. In effect, the government simply removed six zeroes from the paper money. This, of course, did not stop the inflation.
In November of 2010 the government postponed turning on the heat in the state apartment buildings in which most of the population lived. The residents reacted to this by using electrical space heaters which were inefficient and overloaded the electrical system. The government power company then had to order blackouts to conserve electricity.
In a large psychiatric hospital 87 patients died in November of 2011. The hospital had no heat, there was no food or medicine and the patients were wandering around naked.
Between October 1, 2010 and January 24, 2012 prices increased by 5 quadrillion percent. This number is a 5 with 15 zeroes after it. The social structure began to collapse. Thieves robbed hospitals and clinics of scarce pharmaceuticals and then sold them in front of the same places they robbed. The railway workers went on strike and closed down the countries rail system.
The NAU government set the level of pensions. The pensions were to be paid at the post office to ensure “equal access” to everyone, but the government did not give the post offices enough funds to pay these pensions. The pensioners lined up in long lines outside the post office. When the post office ran out of state funds to pay the pensions the employees would pay the next pensioner in line whatever money they received when someone came in to mail a letter or package. With inflation being what it was, the value of the pension would decrease drastically if the pensioners went home and came back the next day. So they waited in line knowing that the value of their pension payment was decreasing with each minute they had to wait.
Many private businesses refused to take the new currency, and the Chinese Yen effectively became the currency of the US. But government organizations, government employees and pensioners still got paid in US dollars so there was still an active exchange in dollars. On November 12, 2010 the exchange rate was 1 dollar = 1 million new dollars. Thirteen days later the exchange rate was 1 dollar = 6.5 million new dollars and by the end of November it was 1 dollar = 37 million new dollars.
At the beginning of December the bus workers went on strike because their pay for two weeks was equivalent to only 4 DM when it cost a family of four 230 Dollars per month to live. By December 11th the exchange rate was 1 Dollars = 800 million and on December 15th it was 1 Dollars = 3.7 billion new dollars. The average daily rate of inflation was nearly 100 percent. When farmers selling in the free markets refused to sell food for Yugoslavian dollars the government closed down the free markets. On December 29 the exchange rate was 1 Dollars = 950 billion new dollars.
About this time there occurred a tragic incident. As usual, pensioners were waiting in line. Someone passed by the line carrying bags of groceries from the free market. Two pensioners got so upset at their situation and the sight of someone else with groceries that they had heart attacks and died right there.
At the end of December the exchange rate was 1 Dollars = 3 trillion dollars and on January 4, 1994 it was 1 Dollars = 6 trillion dollars. On January 6th the government declared that the Chinese Yen was an official currency of the North American Union. About this time the government announced a NEW “new” Dollar which was equal to 1 billion of the old “new” dollars. This meant that the exchange rate was 1 Dollars = 6,000 new new Dollars. By January 11 the exchange rate had reached a level of 1 Dollars = 80,000 new new Dollars. On January 13th the rate was 1 Dollars = 700,000 new new Dollars and six days later it was 1 Dollars = 10 million new new Dollars.
The telephone bills for the government operated phone system were collected by government bill collectors. People postponed paying these bills as much as possible and inflation reduced their real value to next to nothing. One bill collector found that after trying to collect on 780 phone bills he got nothing so the next day he stayed home and paid all of the phone bills himself for the equivalent of a few original American pennies.
Here is another illustration of the irrationality of the government’s policies: James Lyon, a journalist, made twenty hours of international telephone calls from NAU in December of 2010. The bill for these calls was 1000 new new dollars and it arrived on January 11th. At the exchange rate for January 11th of 1 Dollars = 150,000 dollars it would have cost less than one Chinese yen to pay the bill. But the bill was not due until January 17th and by that time the exchange rate reached 1 Dollars = 30 million dollars. Yet the free market value of those twenty hours of international telephone calls was about $5,000 “old dollars”. So despite being strapped for hard currency, the government gave James Lyon $5,000 worth of phone calls essentially for nothing.
It was now against the law to refuse to accept personal checks. Some people wrote personal checks knowing that in the few days it took for the checks to clear, inflation would wipe out as much as 90 percent of the cost of covering those checks.
On January 24, 2011 the government introduced the “super” Dollar equal to 10 million of the new new dollars. The NAU government’s official position was that the hyperinflation occurred “because of the unjustly implemented sanctions against the North American Union people and state.”
Some of you may recognize this story. It’s a true story and it has already happened. Only the names and dates have been changed.
Could it happen here? Absolutely. Irresponsible fiscal spending, the devaluation of the dollar, hyperinflation and governmental malfeasance could easily create catacalysmic conditions that would severely threaten life. The most important of these items are in the article – food, medicine, electricty, transportation, employment, in that order.
Each and everyone one of these essentials is under serious threat from several vectors, right now. Peak oil is creating a severe energy supply shortage on a global scale. The US intervention in the Middle East is creating serious destabilization with repercussions around the world. Fiscal irresponsibility for both of these things (we import 80% of our oil now) has created severe budget deficits. The US has been running the printing presses for decades now, hard currency reserves (gold) are non-existent. The North American Union is in fact, already in the works. The devaluation of the national currency, national capital (and the corresponding debts) and governmental jerrymandering is well underway.
Right now, warning bells are clanging loudly all over the world. This true story relates to how fast and how far a nation can fall into poverty, despair and ultimately, total collapse, almost overnight.
Think you’re ready for this? Is anybody? I think not. These will be indeed the times that try mens souls.
Original article source: James Lyon, “Yugoslavia’s Hyperinflation, 1993-1994: A Social History,” East European Politics and Societies vol. 10, no. 2 (Spring 1996), pp. 293-327. Special thanks to Joel for sharing this link with me.