Are we headed for hyperinflation?

[Attic]

The direction this thread is heading illustrates the problem with the economic 'winter'.

If you were in indexed stocks in 2000, you are up about 20% in 14 years. But, in terms of buying power, you lost. If you were in cash only, you lost even more. Commodities did very well, but per my previous post - commodities are the last domino to fall, and it appears to be falling now.

If that's correct and the last domino is falling, there will be no reliable place to make positive value return. People in the past tend to chase markets back and forth, losing all the way. The most you can hope for is to preserve value. The smart move is likely to be highly diversified in type of investment, ie stocks, bonds, cash, and hard assets like land.

In other words, it becomes a game of finding the asset that loses the least value.

This is a solid look at the issues folks face when looking forward at investments and building retirement.

The bolded part is what I've seen as well. How not to lose value of existing wealth. Problem is that current actions by government and the Fed have the direct effect of working against the value of the dollar. Pretty much have to be diversified and really though it's been said, why fight the fed here. Get into RE and equities, the Fed has clearly decided to back those markets. Relative to other options of protecting against value loss there is not much else with such a huge backing.

The previous point about few folks surviving a 15 year downturn, absolutely correct. The truly wealthy survive it and the few other wise investors without the backing of large wealth can. The boom and bust works as a massive transfer of wealth because of this. The Fed clearly fuels boom and bust cycles. Can't have many people amassing large sums of wealth without destroying the system, if you can't see the system breaks down there then you are at square 1.

 

[OverVolt]

This is a solid look at the issues folks face when looking forward at investments and building retirement.

The bolded part is what I've seen as well. How not to lose value of existing wealth. Problem is that current actions by government and the Fed have the direct effect of working against the value of the dollar. Pretty much have to be diversified and really though it's been said, why fight the fed here. Get into RE and equities, the Fed has clearly decided to back those markets. Relative to other options of protecting against value loss there is not much else with such a huge backing.

The previous point about few folks surviving a 15 year downturn, absolutely correct. The truly wealthy survive it and the few other wise investors without the backing of large wealth can. The boom and bust works as a massive transfer of wealth because of this. The Fed clearly fuels boom and bust cycles. Can't have many people amassing large sums of wealth without destroying the system, if you can't see the system breaks down there then you are at square 1.

Actually in a worse enough downturn its the young who survive because we still have working years left. You really think all the boomers can retire at once and keep their standard of living? The 1% make all their money from financial assets and if that dries up they can only burn through assets and sell off their wealth, but they won't be building any more of it.

 

[Attic]

Actually in a worse enough downturn its the young who survive because we still have working years left. You really think all the boomers can retire at once and keep their standard of living? The 1% make all their money from financial assets and if that dries up they can only burn through assets and sell off their wealth, but they won't be building any more of it.

True. Personally i'm certain the financial markets will grow/inflate further. This is yet to be seen, if financial markets collapsed then retirees (especially recent or soon to be) are screwed.

It is difficult for folks not already heavily invested in the markets to get in if all their income is eaten up by necessities. Really QE just keeps the status quo in line after the GFC would have abolished it without massive intervention. The intervention as far as I can tell saved the rich because everybody else will be alright so long as the rich get theirs first. I don't necessarily buy that, but I can see how a reset would be difficult for everyone while what we currently are doing is really only hard on those with no wage growth who are chasing higher food/energy/health care/housing costs and whom would have benefited from an asset devaluation. These same poor/middle class folks are now being set on the curb for taking advantage of any of that as the Fed blows bigger and bigger bubbles in RE and equity markets where those with money do great and those without are left out and put further back. The trail of easy money is fairly clear from beginnings to it's current state, those who are not early to get it are put further behind in the game of gaining economic prosperity/freedom.

 

[ElFenix]

Are we headed for hyperinflation?

no

 

[fskimospy]

I sometimes wonder how many years of wrong hyperinflation predictions it will take until people stop predicting it.

So far we're on year five and counting; no sign of abatement yet.

 

[Chiropteran]

Buy bitcoins.

 

[Moonbeam]

I sometimes wonder how many years of wrong hyperinflation predictions it will take until people stop predicting it.

So far we're on year five and counting; no sign of abatement yet.

I believe it was on Fox News so you can bet the word hyperinflation is now engraved on the inside of every Republican's ass to be shit out on command whenever the economy is mentioned.

 

[brycejones]

No

 

[dank69]

I sometimes wonder how many years of wrong hyperinflation predictions it will take until people stop predicting it.

So far we're on year five and counting; no sign of abatement yet.

How many years? How many years of wrong end of the world predictions will it take until people stop predicting it? The answer is the same.

 

[Anarchist420]

hyperinflation will eventually happen here, no one really knows when.

the problem is that keynesians dont realize that world reserve currencies dont last that long and they never last forever... they just dont realize that "life is a crazy ride and nothing is guaranteed". keynesians also make no sense because if there is a surplus accumulated in "good times", then there should be no need for deficit spending and inflation once a recession hits (because there would be a surplus on the eve of every recession if keynesian economic theory wasnt self-contradictory).

something else that isnt right is that there is a school named after him when he theorized about economic policies that were in place since even before hamilton. so hamilton should get credit for that shit, not keynes... in other words, a smart person would simply close general theory of interest once theyve gotten far enough to understand that he approves of the discredited mercantilists (like hamilton) and their policies in it.

 

[fskimospy]

How many years? How many years of wrong end of the world predictions will it take until people stop predicting it? The answer is the same.

At least in those end of the world cases the predictions are explicitly religious. They by definition are unfalsifiable.

Predictions of hyperinflation are very easily tested, and Austrian economics has been proven wrong about as conclusively as any economic theory can be proven wrong. The people claiming hyperinflation is on the way are the same people who claim to be using science and claim to be grounded in reality. It's bonkers.

 

[crashtestdummy]

At least in those end of the world cases the predictions are explicitly religious. They by definition are unfalsifiable.

Predictions of hyperinflation are very easily tested, and Austrian economics has been proven wrong about as conclusively as any economic theory can be proven wrong. The people claiming hyperinflation is on the way are the same people who claim to be using science and claim to be grounded in reality. It's bonkers.

They're actually not that different. Predictions of the apocalypse are indeed falsifiable. When they don't happen, though, they find some explanation for why things were "misinterpreted" that time, but there's now a new date for the end times! It's the same thing for the hyperinflation folks. No matter how many times they get the prediction wrong, you have to figure that there will be some day, some time in the future where a currency will collapse, and the doomsayers will proclaim that they were right all along (even though they were wrong for decades or more).

 

[sm625]

So now we're in a situation where QE inflation is causing countries to abandon the US dollar, but we can't stop QE because stopping QE would make interest rates go up and make the interest on our national debt consume the entire federal budget. How the hell do we get out of this?

That's why you dont get into it in the first place. You expunge unpayable debts from the system rather than debasing the currency by stuffing those bad debts on the Fed balance sheet. But we've known from the beginning that QE will never end. It only ends when the bottom 99% are destitute and broke enough that they have nothing to lose and will elect someone who will claw back all that stolen wealth from the criminals who knowingly put us in this situation. The problem is that these aforementioned criminals will have read the writing on the wall, so they will already have "their guy" running for election under the premise of giving the people what they want. And that guy will just continue more of the same, only on a larger scale. And on and on it goes until the whole world is plunged into war and the war kills off those millions of people who were too stupid to see all of this coming when they actually had a chance to prevent it.

 

[destey]

Printing money really doesn't do anything except destroy savers. It doesn't produce anything, it doesn't cause anything to be produced.

Printed dollars entering circulation devalue all the other dollars currently out there. Many of these dollars will be used to buy products. When the demand is strong for a certain product, the price is able to be raised according to how elastic. When prices rise, that is inflation.

For example, If the USA printed trillions and gave it out as another stimulus, say $5000 to each person. If you are selling a product on ebay, say xbox360s, then notice all of the sudden every xbox sold out, and all your competitors are selling out, you'd raise prices. This is what flooding the market with printed money does.

 

[Moonbeam]

They're actually not that different. Predictions of the apocalypse are indeed falsifiable. When they don't happen, though, they find some explanation for why things were "misinterpreted" that time, but there's now a new date for the end times! It's the same thing for the hyperinflation folks. No matter how many times they get the prediction wrong, you have to figure that there will be some day, some time in the future where a currency will collapse, and the doomsayers will proclaim that they were right all along (even though they were wrong for decades or more).

This is pretty much the case. The issue is the fear caused by self hate. What these folk have done is with their feelings of worthlessness is to give themselves a sense of self importance by feeling certain they know something disastrous and secret they can warn you about and save you. They have very important information to give that can save you. It puts covers up their feelings of unimportance by putting themselves in the center of things. In the case of Armageddon, they are the special ones who will be saved.

 

[shady28]

Printed dollars entering circulation devalue all the other dollars currently out there. Many of these dollars will be used to buy products. When the demand is strong for a certain product, the price is able to be raised according to how elastic. When prices rise, that is inflation.

For example, If the USA printed trillions and gave it out as another stimulus, say $5000 to each person. If you are selling a product on ebay, say xbox360s, then notice all of the sudden every xbox sold out, and all your competitors are selling out, you'd raise prices. This is what flooding the market with printed money does.

The point really was that printing money doesn't actually increase production, nor does it increase trade, or demand, for goods. If you give everyone a 10% raise, then of course costs will go up 10% all else being equal. GDP will also go up by 10%. But, you're still buying / selling the same stuff.

Increasing money supply is actually more dangerous, because it tends to get 'stored up', and at some point it gets 'released'.

If you read up on the Wiemar Republic, that's exactly what happened. Print money a couple of years, not much effect; wow we'll just print more. When the dam breaks, there's a rush for the doors, and all that pent up cash runs.

Real standard of living increases are a product of increases in productivity, ie how much is produced per person, not how much fiat currency you can print.

 

[werepossum]

The point really was that printing money doesn't actually increase production, nor does it increase trade, or demand, for goods. If you give everyone a 10% raise, then of course costs will go up 10% all else being equal. GDP will also go up by 10%. But, you're still buying / selling the same stuff.

Increasing money supply is actually more dangerous, because it tends to get 'stored up', and at some point it gets 'released'.

If you read up on the Wiemar Republic, that's exactly what happened. Print money a couple of years, not much effect; wow we'll just print more. When the dam breaks, there's a rush for the doors, and all that pent up cash runs.

Real standard of living increases are a product of increases in productivity, ie how much is produced per person, not how much fiat currency you can print.

I agree with all that, but the Fed is really, really good at fighting inflation. That is pretty much its original purpose, preventing the federal government from printing money and causing inflation while still providing a flexible currency supply. I do wonder how correct is the conventional wisdom, since banks now make more income from fees and penalties than from interest and accordingly have less to fear from inflation. However, banks are also heavily invested, and hyperinflation is devastating on investments. Therefore I doubt we'll see hyperinflation, even if we have to have a severe recession to stop it. Yes, it's dangerous, but so is stagnation.

 

[Attic]

Hyperinflation is already here if you consider the timeline from the Feds inception, 1913.

Since that time the cumulative rate of inflation is 2300%. Try to find 100 year rates that high in other 100 year windows where the currency didn't fail. This is a 20th century phenomenon and it's directly related to the advent of strong central banks that arose during the last 100 or so years.

Spread over time inflation can steal wealth with less notice, but it's still as destructive to the dollar regardless. The main problem we face now is stagnant wages in the face of inflation. But stealing the value of yesterdays dollar is a game that benefits the ultra rich who are first to benefit from the printing presses, and that benefit is extracted by spreading the expense to everybody. It is mainly the poor and middle class who can never get ahead or off the treadmill here as their earnings and previously earned dollars never quite keep up with the theft.

If you're interested you can search for the cumulative rate of inflation during the previous 100 years before the Fed was created. Feds purpose and inflation are, as we know, tied at the hip. The argument is if it's for the better or worse and for whom.

 

[shady28]

I agree with all that, but the Fed is really, really good at fighting inflation. That is pretty much its original purpose, preventing the federal government from printing money and causing inflation while still providing a flexible currency supply. I do wonder how correct is the conventional wisdom, since banks now make more income from fees and penalties than from interest and accordingly have less to fear from inflation. However, banks are also heavily invested, and hyperinflation is devastating on investments. Therefore I doubt we'll see hyperinflation, even if we have to have a severe recession to stop it. Yes, it's dangerous, but so is stagnation.

As long as we remain the reserve currency, I agree. So with that caveat, yes hyperinflation against the reserve status would be very difficult to see.

That said, it's also unlikely we will remain the reserve currency of the world.

The deal that made the USD the reserve currency used for most international trade was Bretton Woods. Moreover, the US reneged on an important part of it when we took the dollar off the gold standard; no one really even has an ethical reason to abide by it, since we did not (Nixon refused to give gold to France in return for dollars, a keystone of Bretton Woods).

Today, we are in a 13 year slump in reserve usage of the dollar. The Euro, and 'Other' (probably mostly yuan) are starting to squeeze the dollar. This curve will not stay a slow gradual decline, the dam will eventually break. Of course, that could be 20 years from now. It could also be tomorrow.

 

[fskimospy]

The point really was that printing money doesn't actually increase production, nor does it increase trade, or demand, for goods. If you give everyone a 10% raise, then of course costs will go up 10% all else being equal. GDP will also go up by 10%. But, you're still buying / selling the same stuff.

Increasing money supply is actually more dangerous, because it tends to get 'stored up', and at some point it gets 'released'.

If you read up on the Wiemar Republic, that's exactly what happened. Print money a couple of years, not much effect; wow we'll just print more. When the dam breaks, there's a rush for the doors, and all that pent up cash runs.

Real standard of living increases are a product of increases in productivity, ie how much is produced per person, not how much fiat currency you can print.

Almost none of this is accurate. Looser money definitely affects aggregate demand as does inflation. One of the big reasons why deflation is so devastating is that it suppresses demand because people would rather hoard their money because it is becoming more valuable. When you do that, enormous quantities of useful productive force sit idle, which is a direct impediment to the standard of living.

The Weimar Republic experienced hyperinflation because it attempted to pay off foreign currency denominated debts with its own currency. That is self defeating. Their experience and ours is entirely different.

If you look at things since 2008, hard money hawks have been consistently predicting large scale inflation. The monetary base has increased 300% at this point and yet inflation is very low. It has been half a decade now. At what point do you reconsider your ideas in the light if new evidence?

 

[dank69]

As long as we remain the reserve currency, I agree. So with that caveat, yes hyperinflation against the reserve status would be very difficult to see.

That said, it's also unlikely we will remain the reserve currency of the world.

The deal that made the USD the reserve currency used for most international trade was Bretton Woods. Moreover, the US reneged on an important part of it when we took the dollar off the gold standard; no one really even has an ethical reason to abide by it, since we did not (Nixon refused to give gold to France in return for dollars, a keystone of Bretton Woods).

Today, we are in a 13 year slump in reserve usage of the dollar. The Euro, and 'Other' (probably mostly yuan) are starting to squeeze the dollar. This curve will not stay a slow gradual decline, the dam will eventually break. Of course, that could be 20 years from now. It could also be tomorrow.

Well that isn't vague at all.

 

[fskimospy]

Well that isn't vague at all.

Saying that you know how the world economy works but can't predict when something will happen even within a multi-decade timeframe means that you don't understand how the world economy works.

Paul Krugman had a pretty good blog post about this the other day, simply asking for people to offer a predictive model of what will happen and when. If the 'dam is going to break' then what will cause it to break, when, and with what effects? You don't have to be 100% specific, but you should be able to at least offer a broad idea. They can't.

After having been burned so many times by previous wrong predictions, hard money people have mostly retreated to vague pronouncements that can't be proven wrong because they don't actually predict anything.

 

[Anarchist420]

After having been burned so many times by previous wrong predictions, hard money people have mostly retreated to vague pronouncements that can't be proven wrong because they don't actually predict anything.

you're seeming to not understand why hard money people like hard money... it's because it's honest, it's not the tool of special interests, and it can limit govt if it's done right, even though it cant under the Constitution. it doesnt necessarily mean price decreases (because of human action naturally being decentralized, there is no way anything could be 100% stable if one can even measure stability), but it is just as stable because the market would choose to trade things of intrinsic value. govt should be limited to borrowing gold by weight for their few and defined expenses and then decentralizing that debt based upon population... the central govt should be confederal and have no power of central taxation, no power to establish a central govt mint, no monetary treaty, and no creating legal tender necessary and if the States refuse to pay the debts, then the central govt's functions obviously arent worthwhile to the people.

Almost none of this is accurate. Looser money definitely affects aggregate demand as does inflation. One of the big reasons why deflation is so devastating is that it suppresses demand because people would rather hoard their money because it is becoming more valuable. When you do that, enormous quantities of useful productive force sit idle, which is a direct impediment to the standard of living.

i dont consider all the finance jobs on wall street due to govt-protected fractional reserve banking to be productive since they provide nothing of intrinsic value... they just create new waste, recycle it, then create more new waste, and so on.

i also dont consider any of the military contractors productive... in fact, theyre downright destructive.

 

[dank69]

you're seeming to not understand why hard money people like hard money... it's because it's honest, it's not the tool of special interests, and it can limit govt if it's done right, even though it cant under the Constitution. it doesnt necessarily mean price decreases (because of human action naturally being decentralized, there is no way anything could be 100% stable if one can even measure stability), but it is just as stable because the market would choose to trade things of intrinsic value. govt should be limited to borrowing gold by weight for their few and defined expenses and then decentralizing that debt based upon population... the central govt should be confederal and have no power of central taxation, no power to establish a central govt mint, no monetary treaty, and no creating legal tender necessary and if the States refuse to pay the debts, then the central govt's functions obviously arent worthwhile to the people.
i dont consider all the finance jobs on wall street due to govt-protected fractional reserve banking to be productive since they provide nothing of intrinsic value... they just create new waste, recycle it, then create more new waste, and so on.

i also dont consider any of the military contractors productive... in fact, theyre downright destructive.

Greed is what is destructive. You are operating under the false assumption that government is the source of greed and limits to government will limit greed. It will not. Greed will exist with or without government. Sometimes, the only thing keeping greed in check is the government.

 

[OverVolt]

Almost none of this is accurate. Looser money definitely affects aggregate demand as does inflation. One of the big reasons why deflation is so devastating is that it suppresses demand because people would rather hoard their money because it is becoming more valuable. When you do that, enormous quantities of useful productive force sit idle, which is a direct impediment to the standard of living.

The Weimar Republic experienced hyperinflation because it attempted to pay off foreign currency denominated debts with its own currency. That is self defeating. Their experience and ours is entirely different.

If you look at things since 2008, hard money hawks have been consistently predicting large scale inflation. The monetary base has increased 300% at this point and yet inflation is very low. It has been half a decade now. At what point do you reconsider your ideas in the light if new evidence?

I know what the econ textbooks say, although I don't think it is necessarily correct from what I observe. Deflation means paying back loans in the future is more difficult because you are paying them back with dollars that are worth much more than what you borrowed. It means the rate of borrowing will plummet (as real interest rates skyrocket) and thus the rate of money creation within the banking system also plummets.

Once the rate of borrowing plummets people will default en masse because the money doesn't exist to pay back their loans, as loans temporarily create money until repaid. Hence we need to loan ever increasing amounts of money. It doesn't matter if its a bunch of small loans for college or house prices rise or whatever, the loans MUST get bigger or more frequent. Aggregate demand is a fluffy concept to me. Seems like it is just code for borrowing to the hilt.

The reason for no inflation is very simple. The banks are sitting on the excess reserves instead of loaning them out. Everything is actually very simple.