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Troy Jensen
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Troy Jensen currently is Co-Founder, CEO & Senior Managing Director of Müller Jensen Capital Partners Ltd, an innovative Private Investment Management & Proprietary Trading Firm based in New York City. Müller Jensen Capital's operations include Private Equity, Venture Capital, Real Assets,... More
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Müller Jensen Capital Partners Ltd
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solventusenergy.com
  • Where Is This Default And Hyperinflation Everyone Has Been Telling Me About For 25 Years Now?? 1 comment
    Jun 21, 2013 10:16 PM

    In 1988, back in highschool, my economics teacher called my out in front of the whole class (not that anyone but I was listening - economics and business were my passion since I was 12 years old) and said I had absolutely no understanding of economics, and good luck with life. He assured me that the US would default on their sovereign debt by 1995 at the latest - I would be graduating college into an inflationary economy, and the world would no longer be lending to America....I got an F. And I was pissed, first because I knew I was right, and second because I knew I was right.

    In college in the early 90's, I again had an economics teacher go over the edge after I finished reading my hypothesis on why America's National Debt truly didn't matter in the scheme of the Global Economy. This time I was wrote a much sharper paper, and I really emphasized the New World Order post-Soviet era, and the geopolitical ramifications as well as the very strong but unpopular theory of American debt not really mattering having tied to our historically unmatched military power globally. Again, I asked the question that if the stuff really hits the fan at some point, really hits the fan, do I want a shiny rock, and by virtue of being a physical earthly object - gold is a shiny bloody rock - is that where I want to store my wealth to keep it safe? Or would I rather have my wealth in the form of United States Federal Reserve Notes, also known as US Dollars, as well as United States Treasury Bonds (which are essentially a US Dollar Equivalent) issued and backed by the most power nation in the history of the world? My answer - I'll take the American Dollar and lots of US Treasury Bonds, as gold is finite - so, courtesy of the Velocity of Innovation and Technology in today's world, some kid at MIT may develop technology that finds three times the world's current total known gold reserves in a mountainous area of Arizona, sinking its value immediately (its value would drop more than a third - this kid just got started, he will be traveling the world and leasing his "Gold-o-Finder" to a dozen major corporations, so expectations are there may be 50X or more the amount of the world's known gold than we thought...gold would be quickly turning into the pretty, shiny rock that it is...but at that point, outside of being utilized for trinkets like pretty jewelry, would be fairly worthless. A last factor is portability of wealth - it is much easier to carry with me $500,000 in US Dollars and Treasury Bonds than it is to carry the equivalent amount in the form of gold (around 27.1 pounds as of yesterday's closing price, for example - but it is the weight plus the bulk that makes gold a difficult - but granted absolutely not impossible - commodity to serve as a store of wealth).

    Now back to my dollar...where is America going? Is it finite? If a World War breaks out with an intensity never seen before in history, whose promissory note do I want to be holding? The American Dollar, because there is nothing finite about our projection-of-power militarily speaking, and it is obvious who will be left standing after this horrific event is over. And the certainly won't be France, or Russia even, or China, nor India. It would be America. And so my paper dollar still retains value, thanks to the promise from the powerful nation ever known.

    I really got a blast from that teacher, who again reassured me the our next generation of Americans would not be able to borrow a dime. We will by printing money like never before (kinda like since 2008!), hyperinflation will take hold, but eventually will we default on our nation's debt...his last word on the subject was about my thinking about another major, I simply did not understand the monetary system and economics as a whole. He was cool though, I did get a D, mostly for how well-written it was, and it was sourced very well. But...I was still pissed, because, you guessed it, I KNEW I was right.

    It is now 2013. We have expanded our monetary base to historic levels never seen in history. We are now running a deficit of a TRILLION dollars a year, no more billions for America. Every single day I try to explain the reasons why our Nation's Treasuries are at historically low yields, why there is a never-ending demand for our debt, that the US Dollar accounts for approximately two-thirds of the world's foreign exchange reserves...etc. etc., I can go on forever. The bottom line is the United States Dollar is the world's default flight-to-safety play in times of great upheaval - and the worse the upheaval, the more US Dollar (as well as US Treasury Bonds) are purchased. The United States Dollar is recognized as the de fact world currency, with most international transactions continue to be conducted with the US Dollar.

    About halfway through my explanation is usually the time everyone tells me I just don't understand economics (Somehow, I do work managing a Startup fund within a Financial Services Firm that manages six Private Equity Funds, a Wealth Management Firm, and has almost a billion under management - I MUST know a little bit, damn it I MUST!). And a smaller but prevalent subset of the folks in public I am talking with regarding this subject tell me with total sincerity to head for the hills, that the end is near, very soon hyperinflation will take hold - the Fed has gone way too far (again - they have gone way too far for 50 years, that is fact, I have researched economic "expert" opinions going back 20 years - no, really, I did one day on a Bloomberg Terminal at the office to make a point!), and we are so far in debt that any day now, the world will turn away completely from purchasing US Treasuries. At that point I'm trying to make an exit - again I have failed and this time, instead of a teacher yelling at me, I have a lunatic going on about the type of assault rifles that won't jam in a crunch situation!

    And the rest, they typically say to me with a knowing smirk that maybe I should get back into Digital Media. They then sigh, pick up the phone, and for the fifth time in the past 20 years they are calling their broker to make a BIG bet against the Yen - THIS TIME there is no way out, the Japanese are sunk (another topic for another day...goodness).

    I wasn't pissed anymore. I am right, I work in the Financial Industry and I have done very well for myself financially. And I never, ever bet on America experiencing runaway inflation, nor defaulting on our sovereign debt. Why?

    Because the National Debt Really Doesn't Matter...

    Troy Jensen

    Visit Troy Jensen's LinkedIn Profile Page at: www.linkedin.com/in/troyjensen

    Troy Jensen currently serves as CEO of V2 Venture Group, as New York City based Venture Startup Advisory and Funding Solution. Troy has spent over 15 years in the Digital Media Industry, and has started three Venture Startups during his time in the segment. Troy has spent the past five years as a Venture Startup Consultant and Funding Advisory. V2 Venture Group was launched in 2012, and Jensen also serves as Co-Managing Director of a subsidiary Private Venture Startup Fund, V2 Velocity Ventures. Troy graduated from Northern Arizona Univeristy with an MBA in Finance, and is a frequent contributor to several Digital Technology and Financial Publishers.

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  • Vincent Cate
    , contributor
    Comments (215) | Send Message
     
    Of course the Yen is going to go down. To really understand hyperinflation just read this:

     

    http://bit.ly/Xrsxgw
    27 Jun 2013, 03:26 AM Reply Like
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