Thoughts on Hyperinflation

[Mega]

http://www.greenenergyinvestors.com/...howtopic=10873

Not sure i 100% agree, but its a good read.
Mike

[ThePythonicCow]

Re: Thoughts on Hyperinflation

http://www.greenenergyinvestors.com/...howtopic=10873

Not sure i 100% agree, but its a good read.
Mike

Yes, it is a good read.

We've also been discussing this article on the iTulip thread How Hyperinflation Will Happen, where raja posted a link to a zerohedge article discussing it, and I then posted a link to the original How Hyperinflation Will Happen article by Gonzalo Lira on his blog.

Yesterday Mr. Lira posted a follow-up post at Hyperinflation, Part II: What It Will Look Like which is also worth reading.

[Mega]

Re: Thoughts on Hyperinflation

Thanks PC i enjoyed reading that, i past it on.
Mike

[touchring]

Re: Thoughts on Hyperinflation

Actually, I am starting to doubt whether hyperinflation will happen in America that is part of a global economy.

How will inflation happen if jobs, work and money are exported to India, China and rest of Asia all the time?

[ThePythonicCow]

Re: Thoughts on Hyperinflation

Actually, I am starting to doubt whether hyperinflation will happen in America that is part of a global economy.

How will inflation happen if jobs, work and money are exported to India, China and rest of Asia all the time?

Hyperinflation doesn't depend much one way or the other on where the jobs are or are not.

Wage inflation is one (not the only one) of the mechanisms that can be involved in ordinary inflation.

But hyperinflation is the collapse of a currency. People no longer want it. They lose confidence in its value. Any of it they have, they spend quickly on whatever they can get that might be useful, for they are convinced that it will soon be worth much less, if nothing. The government usually responds to the economic turmoil and rising prices on essentials (food, gas, heating oil) with price controls and money printing. This spirals out of control and the currency joins the history books of failed currencies.

[touchring]

Re: Thoughts on Hyperinflation

Hyperinflation doesn't depend much one way or the other on where the jobs are or are not.

Wage inflation is one (not the only one) of the mechanisms that can be involved in ordinary inflation.

But hyperinflation is the collapse of a currency. People no longer want it. They lose confidence in its value. Any of it they have, they spend quickly on whatever they can get that might be useful, for they are convinced that it will soon be worth much less, if nothing. The government usually responds to the economic turmoil and rising prices on essentials (food, gas, heating oil) with price controls and money printing. This spirals out of control and the currency joins the history books of failed currencies.

The question is whether the dollar will collapse so easily.

[jtabeb]

Re: Thoughts on Hyperinflation

Depends on EJ's presumption on weather or not the US still has 8000 tons of Gold (unaudited) that it still claims to have.

[ThePythonicCow]

Re: Thoughts on Hyperinflation

The question is whether the dollar will collapse so easily.

Yes - that is the question.

My second best guess is that the dollar will collapse, but not so easily. First there will be a period of substantially increased economic pain for Americans.

My best guess is that I'm wrong <grin>.

[ThePythonicCow]

Re: Thoughts on Hyperinflation

Depends on EJ's presumption on weather or not the US still has 8000 tons of Gold (unaudited) that it still claims to have.

I shall tread on thin ice and venture to disagree with jtabeb on a matter involving gold.

There are two reasons that I don't think the question of whether the dollar self destructs through hyperinflation depends on whether the United States still possesses physically and legally that 8000 tons of gold in Fort Knox.

For one thing, 8000 tons is 192 million ounces (if my math is correct.) At $1200/ounce, that's worth $230 Billion. As you know better than I, that's no where close enough to back all the dollars we have afloat with gold. In other words, if we did have all that gold in Fort Knox and if the Dollar collapsed only enough to make it honestly backed by that gold, then that collapse would be the sort of 1000 to 1 collapse that for all practical purposes would be the same affect as hyperinflation. Granted, it would not be the hyperinflation as I defined earlier in this thread; the dollar would not necessarily be completely destroyed. But it would have about the same affect.

For another thing, so long as the elite evil b*st*rds currently running this show continue to have a dominant say in our affairs, it's all a giant con game. Us little folk may do well, or not, by arranging our personal affairs properly, but what happens in the big scene, where these 8000 tons of gold (if such there be) exist, is quite difficult to make sense of. "They" could have the gold and destroy the dollar through hyperinflation even so, or they could not have the gold and keep the dollar alive even so.

[grapejelly]

Re: Thoughts on Hyperinflation

Hyperinflation, inflation, deflation...will any of it happen in the world today?
I believe that the US dollar is heading towards zero in value. And that will result in a very rapid depreciation of the US dollar and ALL currencies against such stores of value as gold, silver and oil.
Let's see why that is.

The reason people want dollars is that they can make MORE dollars from them.

It's the financial economy that wants dollars.

When and if it becomes evident that the jig is up, that by using and holding dollars you will LOSE dollars, then we enter hyperinflation. The crack-up boom when people holding dollars buy ANYTHING they can to get rid of the dollars.

This is the time of hyperinflation because the dollar denominated price, the nominal price, of tangible stores of value SOARS.

The REAL price of other assets COLLAPSES, although the nominal price might skyrocket.

Real wages FALL.

Real values of shares in businesses FALLS.

Real values of real estate FALLS.

Are we at the point? Of course not.


But as Bernanke has made interest rates near zero, there is less and less of a return from US dollars. So banks would ordinarily use leverage -- borrow against US treasurys, use the money to buy more treasuries, and so forth.


I am sure the banks and hedge funds are doing that.


But at some point, bond prices will collapse. Interest rates will soar. Some event, some black swan, will cause it. And then there will be a rapid flight from the US dollar and all currencies, and a rapid flight into tangibles.


That's what we can expect, hyperinflation. It may be this year, next year or in five years, but it will happen.

[Fiat Currency]

Re: Thoughts on Hyperinflation

...For one thing, 8000 tons is 192 million ounces (if my math is correct.) At $1200/ounce, that's worth $230 Billion.

FWIW I think it is wrong. When talking gold - it's almost always metric tonnes and troy ounces.

1 metric tonne = 32,150.7466 troy ounces

8133.5 tonnes * 32,150.7466 * $1,200 = approximately $314 billion

... which doesn't really diminish your point about the coverage/backing.

I disagree with your point. Hyperinflation & currency destruction is all about confidence.

If the gold isn't there - I doubt the confidence in the $USD goes up

[ThePythonicCow]

Re: Thoughts on Hyperinflation

FWIW I think it is wrong. When talking gold - it's almost always metric tonnes and troy ounces.

1 metric tonne = 32,150.7466 troy ounces

8133.5 tonnes * 32,150.7466 * $1,200 = approximately $314 billion

Thank-you for the correction.

[ThePythonicCow]

Re: Thoughts on Hyperinflation

I disagree with your point. Hyperinflation & currency destruction is all about confidence.

If the gold isn't there - I doubt the confidence in the $USD goes up

The confidence of the average person using Dollars does not depend on the gold in Fort Knox. (corollary: jtabeb is not ordinary <grin>)

If prices for gas, food and heating oil rise, and if wages or easy lending or some other means of dispersing dollars to the general population provide more dollars, then those prices can spiral upward and the confidence in the dollar spiral downward. Then if that spiral persists and escalates, we can get locked into hyperinflation, loss of all remaining confidence in the dollar and currency destruction.

We (ordinary folks) are playing this game against the most pervasive, powerful and devious b*st*rds known. "They" too are but human, and limited by their very own fears, greed and dishonesty. However there are three big "if"'s in the previous paragraph. "They" may well not (I certainly hope not) be able to control all as they desire, but "they" certainly will continue to work hard to influence the result. If "they" don't want the dollar to die, it likely won't die, even if that means economic hell for us ordinary folks.

My worry is that "they" do want the dollar to die, in favor of some "new world order" and world monetary system, and that this means tyrannical hell for us ordinary folks.

My hope is that "they" fail, even though that likely means writing a couple of fairly tumultuous chapters in the history books of humanity.

[Starving Steve]

Re: Thoughts on Hyperinflation

Let me play devil's advocate: Who says bond prices will collapse at some point? So long a Bernanke keeps printing to buy and rig treasury bond auctions, everything looks just fine, forever. And not just Bernanke is doing this, but all of the central bankers are doing this. The entire world is awash in paper money and sovereign debt.

Yes, nuclear war or another 9/11 attack might trigger a run on bonds. But the bond bubble is secure so long as Bernanke and his clones at the other central banks keep buying bonds--- even their own bonds back.

Inflation (money-printing) is very forgiving. Let's not forget that point. Politicians love inflation and will never abandon inflation (kick-the-can) economics. This is a worldwide love-affair with inflation, and only a worldwide collapse with mass starvation due to hyper-inflation would end this love-affair.

[Fiat Currency]

Re: Thoughts on Hyperinflation

The confidence of the average person using Dollars does not depend on the gold in Fort Knox. (corollary: jtabeb is not ordinary <grin>)

Thank god we still have some unordinary minds in North America.

And you're right - the average person will have little to no influence in this. That's why it's called Fiat Currency. It will be countries who depend on International trade that will most likely be the tipping point.

If prices for gas, food and heating oil rise, and if wages or easy lending or some other means of dispersing dollars to the general population provide more dollars, then those prices can spiral upward and the confidence in the dollar spiral downward. Then if that spiral persists and escalates, we can get locked into hyperinflation, loss of all remaining confidence in the dollar and currency destruction.

We (ordinary folks) are playing this game against the most pervasive, powerful and devious b*st*rds known. "They" too are but human, and limited by their very own fears, greed and dishonesty. However there are three big "if"'s in the previous paragraph.

While those are true - they represent only one historical path to currency destruction. The logic tree of currency destruction has many branches.

"They" may well not (I certainly hope not) be able to control all as they desire, but "they" certainly will continue to work hard to influence the result. If "they" don't want the dollar to die, it likely won't die, even if that means economic hell for us ordinary folks.

My worry is that "they" do want the dollar to die, in favor of some "new world order" and world monetary system, and that this means tyrannical hell for us ordinary folks.

My hope is that "they" fail, even though that likely means writing a couple of fairly tumultuous chapters in the history books of humanity.

This is why I personally plan to be very active in whatever way I can help, when it's time to decide on what the "new" World Reserve Currency should look like.

However, this can may be kicked down the road for quite some time yet.