So, hyperinflation is caused by (1) civil war, (2) a socialist regime, or (3) the Post Soviet Collapse. We have the beginnings of (2), which may precipitate (1). Yeah, no chance of hyperinflation here.
Posted on 05/26/2011 6:12:01 AM PDT by Kaslin
Interesting read.
Give a child an allowance for doing no work and see what happens....
There are a few items that the author does not delve into. The US has a staggering deficit of $14T. If every taxpayer were taxed at 100%, that would not even make a dent in reducing the deficit. GDP growth now comes from consuming, not manufacturing. One of the main reasons that the north won the civil war was because they had manufacturing on their side. We would not have succeeded in WWII without our manufacturing efforts.
Compound that with our parasitic dependence on foreign oil controlled by OPEC, a nuclear Iran, 47% of Americans not paying any federal income tax, a hostile business environment burdended by taxes, unfair subsidies, and over-regulation, and, yes, hyperinflation is a possible reality.
So, hyperinflation is caused by (1) civil war, (2) a socialist regime, or (3) the Post Soviet Collapse. We have the beginnings of (2), which may precipitate (1). Yeah, no chance of hyperinflation here.
The author is a hyperinflation “denier”.
(See, I can play the left’s game, too)
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What we have now is a new frontier not covered by that chart - a mass of entitlement obligations coming due and no way to pay for them other than monetizing debt. And we’re not the only ones with that problem.
Debt can be restructured, conceivably even defaulted on.
Unfunded liabilities cannot be restructured, and defaulting on them is generally held to be political suicide.
This is why the Fed will indeed happily print ever larger denominations of Ben Bernanke ClownBucks to meet liabilities. They will do anything to avoid the pain of amputation.
What the writer misses is that Hyperinflation is the easy way out. That's why it happens.
Appendix: I mentioned 'pay and pensions for Government workers' at the top because it was the Weimar Government's inability to cut away these liabilities that led to their disastrous money printing. For them, destroying the whole country was easier than a default on Government liabilities, and so that is what happened.
Not to pick nits, but I believe that this is covered by socialism.
"The problem with socialism is that eventually you run out of other people's money." - attributed to Margaret Thatcher.
Besides the fact that it’s just plain fun to wallow in doom-and-gloom rhetoric...
See http://www.usdebtclock.org/
Total US debt (national, state, personal, etc.): $55T
Total US debt per family: $675,476
Total savings per family: $6,564
Total assets per family: $963,567
Total legal obligations per family: $3,885,965
Ya see a problem there?
There was an excellent book written just before WWII called “You Can’t Do Business With Hitler” by an American businessman working in Germany. His observations included how the government there was in debt/obligations beyond sane resolutions. The only way out was (1) print money, (2) confiscate wealth of neighbors, and (3) kill creditors. Hence WWII and hyperinflation.
The Soviet Union collapsed in the end because they couldn’t pay employees. No money = no work.
The thing about bickering about whether we’re going to enter hyperinflation is that it’s like bickering over whether we’re going to fall off a cliff if we keep walking in a certain direction: if it’s going to happen, and you don’t prevent it, once it happens there is no turning back. Looking at the guy next to you saying “oh, you’re right, we DID fall off a cliff” is a bit late.
This is an aspect of socialism we have not seen yet. So it a way, it is a new manifestation many have been warning about for years - and now it is here.
I agree with your assessment.
Obligation to pay up more than is feasible. Same situation, albeit different cause.
Half of government spending operates by borrowing money. If would-be creditors do not believe the money will be paid back, they won't lend the money. When the money can't be borrowed, the money is printed. This is beginning, hence QEn. If other nations begin to collapse outright (see Greece), creditors will clam up - but the entitlement hordes will still demand their payouts, and bureaucrats will still expect paychecks, and both will threaten riots if not paid, so the money will flow from the printing presses.
There is a huge difference between "it's available, albeit expensive" vs. "it's not available". We can argue all we want about whether hyperinflation will happen, but so long as money can be borrowed it won't happen. The moment there's a bond sale and nobody buys, the presses fire up and the value of the dollar plummets.
Oh, BTW: keep in mind we live in a very sophisticated computerized age.
It won’t be “hyperinflation” per se.
It will be much more complicated than that, with lots of misdirection, smoke, and mirrors.
One thing those in power have learned is how to achieve a goal without doing it the canonical way. Think “no, we’ll never ban guns ... but we’ll make commerce in them so complicated that nobody will want to sell you one.” You’re right, there won’t be hyperinflation per se ... they’ll just conjure up something else which won’t be in name, but will be in effect.
Bears repeating. That day will come.....likely soon.
The flip side to the inflation coin is that it also deceases the value of productivity/hard work. Nobody EVER talks about that.
It reduces the middle class to subsistence levels. They work enough to eat and not much more because there is nothing more to gain.
Inflation is the devaluation of the currency. This can vary from none to a lot. 30% inflation is not Hyperinflation.
Hyperinflation is when holders of that currency have lost faith in that particular fiat. Thus when the world admits to itself we are not going to pay them back (QE3, forced renewals of maturing bonds, Forced public purchase of government debt, etc), everyone holding that fiat will head for the door trying to get into anything of value.
The author seems to ignore the fact that the federal reserve has been buying 50 to 75 percent of every debt auction for the last couple of years. This is a major sign we could be heading toward hyperinflation. It appears either no one wants our debt or there simply isn't enough available investment capital to finance the debtors anymore.
As to inflation, anyone buying the items that are necessary to live knows the current rate is around 10%. Yes the government lies. The author has to know the numbers from BLS are pure fiction put out for political reasons.
Yes, you can have deflation and inflation at the same time. When times are good and housing and stocks are going up while gas and food are going down no one seems to notice this fact.
So the question is:
Is the author ignorant or a liar?
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