muses of the moment

October 1, 2012

900 Days and Counting talks about the coming hyperinflation. Click here.

Good article and good links to more information.

A quote:

I would like to clear up probably the most common misconception about hyperinflation. What most people believe is that massive printing of base money leads to hyperinflation. No, it’s the other way around. Hyperinflation leads to the massive printing of base money.

Hyperinflation, in most people minds, conjures images of trillion dollar Zimbabwe notes. But this image is simply the government’s reflexive response to the onset of hyperinflation, which is actually the loss of confidence in the currency. First comes the loss of confidence (hyperinflation), then, and only then, comes the massive printing to keep the government and its obligations afloat.

You see, hyperinflation is exactly like deflation. The only thing hyperinflation has in common with inflation is part of its name. It looks just like a deflationary depression. In fact, it IS a deflationary depression, with a different numéraire, being GOLD.

There is still a debate in gg’s mind that hyperinflation in the dollar would have less of an effect on the core (US) vs. the rest of the world dealing in dollars. However, in this global economy, any effect outside, leads to an effect inside. In addition, trade wars, currency wars and, of course, the dreaded petro non-dollar will have a negative effect on the US economy, inflation in prices, and jobs. The question is how bad an effect? 100% increase on prices? 200? 500? In a jobless recovery, any increase is extreme pressure. gg thinks it is a question of will we meet the “official” percentage of hyperinflation or will it just feel like it? Does it really matter?


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