Debt to GDP Vs. Stock Market Stagflation

Whenever the Debt to GDP level goes above a certain point (>120%), stagflation occurs. Stocks will stagnate, while inflation goes higher.

In the case of Japan, debt to GDP went over 120% in 2000.

From year 2000 onwards, the Nikkei started to stagnate, while the gold price in yen started to skyrocket. The scenario will be exactly the same for the U.S.A., which is now approaching 150% debt to GDP ($25 trillion debt / $17 trillion GDP).

Deficit to Outlay Ratio

This page is created to monitor the U.S. Deficit to Outlay Ratio.

It measures how much of the government spending (outlays), comes from borrowing of foreign money (deficit).

A deficit to outlay ratio above 40% indicates that there is a high probability of hyperinflation.

Today (2014) we have a deficit to outlay ratio of 15%.

James Turk: 100% Chance of Hyperinflation in the U.S.

James Turk is 100% sure of Hyperinflation in the U.S. A very bold prediction.

Goldonomic.com: About Hyperinflation

Just found an interesting site that gives information about the correlation between hyperinflation and money velocity.

=> http://www.goldonomic.com/inflation.htm

The key measure to follow is money velocity of the broad measures of money supply M3 or MZM (which resembles M3). When money velocity spikes, hyperinflation has set in as people scramble for tangible assets.

Froom Goldonomic.com:
"Hyperinflation starts when the public is unwilling to hold the money for more than the time it is needed to trade it for something tangible to avoid further loss. A good indicator that Hyperinflation has started will be a sudden increase in the Velocity of Money. [ P = M x V ]. This alone can increase the general level of prices. Even with a falling M3!"


So be warned, when the following graph spikes up, it's time to get into real tangible assets! You can see that in 1980 we had the hyperinflationary crisis where gold spiked into a bubble when everyone feared inflation.

Chart 1: MZM Money Stock

The road to hyperinflation

Today president Obama disclosed the projected US budget deficit for 2012.

The projected deficit would reach $US 1.33 trillion in fiscal year 2012. While in December 2011 the trade deficit widened to $US 48.8 billion. For full year 2011 the deficit was $US 1.3 trillion.

Here's what the government forecasted previously (Chart 1). They forecasted a smaller deficit in 2012 of only $US 1.1 trillion. Clearly they got it entirely wrong because the deficit in 2012 is projected to be larger than 2011, namely $US 1.33 trillion. To see what this means go to: The road to hyperinflation.