Why the stock market will crash here during hyperinflation by Sitting Bull

I have seen the argument made that hyperinflation here will drive the prices of stocks up just as it did for stocks in Zimbabwe during their hyperinflation period. There is a very significant reason why this will most likely not happen here in the U.S. Zimbabwe was a subsistence society. Most people lived in poverty. There was no retirement system and a very small percentage of the people had any money in savings or the stock market.

Also, there was not a significant elderly or aged population in the country. The age expectancy was and remains much shorter. There was no medicare or massive nursing home population or massive retiring baby boomer generation.

What I am alluding to is that the stock market in Zimbabwe was mostly like the stock market in the U.S. in 1929 and most stock markets throughout history, a gambling casino of sorts, a place for the very wealthy to fleece the poorer of the nation while conning them into believing that they were not having this done to them.

The stock market in the United States, despite being essentially the same sort of fleecing machine, as public markets have ultimately proven themselves to be throughout all of human history, has morphed, at least in the eyes of the average American, into something very different. Most people if questioned, believe their 401k money or IRA money to be some sort of a guaranteed money growth vehicle that will gain 10% a year into perpetuity. They are not speculating with the majority of their funds but letting them sit there to grow as their advisors have assured them that they will. They are there for retirement funds, not for profit seeking or gambling. They are using a gambling casino for their retirement savings and not knowing it, because their Edward Jones representatives and various other financial planner types have been filling their ears with their ridiculous spiel for the past several decades.

I mean, let’s face it...why do public markets exist in the first place? To let the little guy in on the action? Get real? Richard Russell summed it up best when he wrote last year, “The markets exist to separate the small investor from his money.” This has always been the case. I once researched Hallmark to find a way to invest in it. I figured, “How can somebody lose on this one? It has incredible brand recognition and sells a product for $5.00 that it costs 3 cents to make. It essentially has a monopoly tied to holidays and special occasions.” Guess what? The company is private. Why? It’s a great business. They don’t want your money and they don’t want to share their profits.

The only reason anyone wants your money is that they're not sure whether they’re gong to make it or not. It’s to help them out, not to help you out. They need to spread the risk around or they want to take a chance on expanding and need the help of someone like you. They’re not doing it to let you have a piece of the American Dream or to help you with your retirement. They either make it don’t make it, but once they do make it, and this or a similar purpose has been fulfilled and the stock runs up as a result and stabilizes, public shares become little else but squares on a roulette wheel. And you are the guy sitting at the table. This is especially true in an economic environment like we have now where no one is growing and everyone is just attempting to survive.

The situation in the US is entirely different than the situation in Zimbabwe. First of all the typical US citizen doesn’t understand the nature of money. In Zimbabwe it was relatively easy for a farmer to figure out that a piece of fruit he grew would buy more than a Zimbabwean dollar rather quickly. The idea that an apple could be valuable than a $100 bill in certain circumstances is a concept that the majority of Americans simply cannot grasp at this point.

The second thing that makes the US different is that unlike a place like Zimbabwe people here are counting on their retirement funds to live on in the future. When they start having trouble, they are not going to throw any extra funds into the stock market hoping they will grow, they are going to pull everything out of the stock market to buy whatever coffee, cigarettes and food they can. When this happens, the stock market will collapse in the face of hyperinflation. Of course the frightened people in government, seeing that this is happening will increase the money supply more in the hopes that people will start putting money back in, but this will not work here.

The mistake being made and that will continue to be made by our leaders involves their inability to adequately understand that in human behavior, fear trumps greed every time. People care about their neighbors and their communities until they start worrying about not having food or shelter, then all that goes out the window. It rapidly becomes “every man for himself.”

The only reason the market is rising or has been rising for the past year (It’s falling now) is that people still believe the crap about 10% returns on their money and retirement and all the made-up parts of the American Dream that are not going to come true.

I wrote three years ago that the big hit is going to be to 401k’s. All of that money is going to disappear. It will be lost forever. How do I know this, because it has already been lost. It never existed. Those who will mourn the loss of their retirement funds are no different than those who mourned the loss of their gold reserves in the wake of theBre-X Scandal or those who mourned the loss in value of their $4,000 Beanie Babies. They shouldn’t mourn, because the reserves were never there in the first place. The wealth that has seemingly been created over the past several decades is an illusion. The money they think they have in their retirement funds right now, simply is not there. It’s an illusion. If you don’t believe this, just wait until everyone tries to cash out at the same time. The results are going to be catastrophic for just about everyone.

There will be no hyper-inflationary run-up of the market as there was in Zimbabwe no matter what Bernanke and his cronies do, because people are going to start to panic in earnest in or around about September of this year. Get as much gold bullion as you can. Own things like Kimber and Esperanza and First Majestic and Agnico-Eagle. If the markets hold together, you’ll be some of the richest people around. If they fall apart, it won’t make any difference anyway, your lost 401k money will be the least of your problems.