tag:blogger.com,1999:blog-1892824566694270102.post7719549892302807536..comments2024-01-27T00:46:34.345-08:00Comments on How Fiat Dies: Hyperinflation FAQVincent Catehttp://www.blogger.com/profile/06502618776820144289noreply@blogger.comBlogger192125tag:blogger.com,1999:blog-1892824566694270102.post-52144795092492852612014-05-29T18:13:25.334-07:002014-05-29T18:13:25.334-07:00I'm not Armstrong and the comments you refer t...I'm not Armstrong and the comments you refer to are from me, not him. I do not agree with many things Armstrong writes, but his views are far closer to reality then what has been posted here. BTW I did write my own explanation many times, which you responded by deleting and calling "personal attacks". The PM's have been going down just, as I predicted. Deflation is the future regardless of your explainations of what hyperinflation is. Sorry but reserve currencies DO NOT HYPERINFLATE. Reserve currencies only loose their status AFTER debt liquidation, history has shown this time and time again!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-78829406778388016782013-12-25T07:16:04.716-08:002013-12-25T07:16:04.716-08:00Armstrong, I removed your comment because it was m...Armstrong, I removed your comment because it was mostly a personal attack on me and did not have any meat. If you think you can refute my blog posts, then why not make a post on your blog, linking to mine, and refute it? This how the econoblogs usually work.Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-65606646756078458482013-11-16T17:35:31.951-08:002013-11-16T17:35:31.951-08:00Another alternative is for you to explain the mech...Another alternative is for you to explain the mechanism of hyperinflation. If you do not like any of the many different ones I have in the following post, please write your own explanation.<br />http://howfiatdies.blogspot.com/2013/09/hyperinflation-explained-in-many.htmlVincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-79735559537057576902013-11-16T17:23:17.551-08:002013-11-16T17:23:17.551-08:00Zimbabwe, Argentina, Venezuala, Germany, etc all h...Zimbabwe, Argentina, Venezuala, Germany, etc all had the same setup with a central bank and the same kind of money and government bonds. If it was "negative money" then none of them would have had hyperinflation.<br /><br />I am making an honest attempt but if you think you know were I am wrong, more than "negative money" which does not fit history, then please do explain it instead of trying to say what is in my head lets stick to what is written in the blog. Ok?Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-10880336312148105242013-11-16T12:34:27.626-08:002013-11-16T12:34:27.626-08:00You're trying to understand how you're rig...You're trying to understand how you're right, not how things work. If you made an honest attempt and the latter you've figured out you're wrong. <br /><br />To address what you're calling "meat", I rebut that what you're claiming is money isn't money. It's actually debt or negative money. The consequences of printing too much negative money are the opposite of printing too much money. People aren't "getting" out of bonds by choice, they're running out of money to purchase said bonds.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-30804167394041623662013-11-11T01:38:15.439-08:002013-11-11T01:38:15.439-08:00If you define hyperinflation as the death of a cur...If you define hyperinflation as the death of a currency, or even 50% per month inflation, then of course the bond market will die long before. Saying "we can't get hyperinflation because we have a bond market" is not good logic. What you can really say is "we don't yet have hyperinflation of 50% per month since our bond market is not dead yet". <br /><br />If you define hyperinflation to mean the death of a currency then you can never tell while you are in it if you have "true hyperinflation". You have to wait till it is all over and then the history books can say if the currency died or not. This is just not a reasonable definition for those currently living through the high inflation. <br /><br />I sent Armstrong an email and then he posted that. But he never addressed the meat of my arguments, like the positive feedback loop of printing more money and people getting out of bonds. It is very bogus for him to try to say I want hyperinflation. I am the one who is trying to understand history and how things work for hyperinflation. He won't see it coming till is is already there.Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-13837656046681538362013-11-10T16:39:41.364-08:002013-11-10T16:39:41.364-08:00Part IV
The end-game is clear. There will be a in...Part IV<br /><br />The end-game is clear. There will be a international monetary reform because the postwar Marxist-Keynesian system is crumbing to dust. Hyperinflation unfolds in a country with no debt markets for they are typically revolutionary that disavow the former debts of the government they have overthrown wiping out capital formation. We have debt markets and the bankers will be advising and screaming: “Are you crazy! Raise taxes and hunt everyone down for if you do not pay us, you collapse!” We are in the midst of a sovereign debt crisis. This is serious stuff. Go too far and we end up in a Mad Max event.<br /><br />BrettonWoods-8<br /><br />The current monetary system was NEVER designed. There was no Bretton Woods. This entire monetary system is a ad hoc patch-work that is far beyond anything normal. Everything will have to be restructured from the ground up. Money is electronic. They are now lobbying to Switzerland demanding they end the 1000sf notes and to stop the big notes in the Euro. They are trying to cut off all cash forcing money into the electronic world. Forget gold standards and tangible money. That is an ancient relic of the past that we will never see again. But cheer up. If money is electronic, we can also get our rights back and end taxation as well since that was needed only because money was tangible that government could not create out of thin air.<br /><br />The dollar will lose its reserve status because of (1) political reasons, and (2) this results in the exportation of domestic policy objectives to the rest of the world. Russia and China will exert pressure when the time is right to kill the dollar as the reserve currency. But we have to get there first and that is not by simply printing money mindlessly. There are major political restraints both from countries like China holding US debt and bankers. What we are seeing with the Fed informing the banks they will NOT be covered for losses in proprietary trading is a MAJOR step in severing the umbilical-cord between government and its primary dealers. In Europe, proprietary trading will be outlawed.<br /><br />The NEW CURRENCY will most like be an electronic reserve currency whereby each nation will still retain its own currency, but to conduct international transactions you will then convert to the reserve currency. This will be similar to a two-tier system that still isolates the domestic economy from infections internationally as the Swiss encountered with the flight from the euro. This will eliminate the dollar as the reserve currency and the new world currencies will be purely electronic.<br /><br />Nixon-5<br /><br />Why people insist hyperinflation MUST take place because that is what they want to see happen is beyond me. I am only interested in how history demonstrates these trends resolve themselves for the one thing that is certain, human reaction is always the same. Hammurabi in the 18th century BC imposed wage and price controls. Athens attempted that as well. Diocletian (284-305AD) tried wage and price controls with his edict in Rome. So did Richard Nixon in 1971. Present the same situation and you will illicit the same human response no matter who is in office or what century it takes place in. Obama criticized Bush for the NSA. Now he justifies the NSA 10 fold. The king is dead. Long live the new king. It is always the same thing.TheRealWorldhttps://www.blogger.com/profile/18204987031010794945noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-69459297186781399362013-11-10T16:38:47.356-08:002013-11-10T16:38:47.356-08:00Part III
This type of violent price action is wha...Part III<br /><br />This type of violent price action is what is necessary to see major political-economic reform. Will inflation in the USA then reach the 20% level? Perhaps not officially. But the chaos of shifting capital from debt to equity (Public to Private) should begin to force interest rates higher and that will then fuel the debt. As confidence declines in government debt, then and only then do we get the political-economic reform.<br /><br />The hyperinflation scenario is government merely goes willy-nilly into the light printing money. We have a debt market. Government is restrained by that and cannot simply print into oblivion and yet still sell the debt. This is why government is hunting every dime they can find, raising taxes, and causing the economy to implode internationally.<br /><br />Part of hyperinflation is the increase in the velocity of money because people do not hold it spending it as fast as they can get it. Right now, our problem is the opposite. The velocity has declined as has liquidity is still down by 50% and people have not been investing as they were prior to 2007. The flood of laws hunting money globally has reduced investment dramatically and this has been highly deflationary shrinking the velocity of money as well as liquidity of markets.<br /><br />The only alternative for smart money is now to buy equities to get the cash out of the banks. It no longer pays to keep cash in a bank and the bank in Europe are in major trouble because their reserves are spread throughout the sovereign member bond issues. Cyprus lost because the banks held Greek sovereign debt. The EU is adopting Bail-In strategies because they do not want to PRINT money to cover losses – i.e. avoiding hyperinflation driving straight into the dark abyss of deflation and depression.<br /><br />The pension funds are moving toward insolvency because the Fed has kept rates artificially low. The banks have been making a fortune paying nothing for your money but have not been lending without 100% collateral and the spread is huge paying 0.5% for 3 year CDs while asking 4% for a secured 3 year car loan. NORMALLY, the low rates should have helped the economy. But they have helped only the bankers accounting for the slow recovery.<br /><br />If you cannot see why governments are turning in the opposite direction from hyperinflation and are actually destroying civilization by tearing apart the global economy reducing job growth, then I do not see what else I can say. Just sit and wait for what you prefer to think is happening rather than observe what is happening.TheRealWorldhttps://www.blogger.com/profile/18204987031010794945noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-16272746814189734042013-11-10T16:36:02.278-08:002013-11-10T16:36:02.278-08:00Here is Armstrong's definition of Hyperinflati...Here is Armstrong's definition of Hyperinflation <br /><br />Some define hyperinflation as merely the cumulative inflation rate over three years approaching or exceeding 100% with an annual rate above 25%. The reason I do not agree with that definition is because many countries have had brief periods of inflation at that level, survived, and even the currency lives for another day. The USA experienced about 20%+ going into 1980.<br /><br />2012-USNatlDebt<br /><br />Measuring debt to GDP does not really work. The US national debt stood at $1 trillion in 1980 and it exploded during the economic collapse following 2007. You cannot truly test that before 1900 authoritatively. The hyperinflation v inflation to me is distinguished such as Germany or Zimbabwe as the end game where the currency does not survive.<br /><br />If you are going to claim that 20-25% annual inflation is hyperinflation, sorry. That does NOT guarantee the collapse of a country or a currency. New Zealand saw that in the 1980s and the USA reached at least 20% in 1980.<br /><br />Napoleon Consul 1803 1fr<br /><br />To me, hyperinflation is the point of no return. Those countries that have entered that phase have no bond markets, have been typically revolutionary, and emerge with a new currency. Between 1360 and 1641, the currency of France was the basic unit of 1 livre tournois. The French Revolution led to a hyperinflation that forced monetary reform re-introducing (in decimal form) the French franc in 1795 with the portrait of Napoleon. The French franc remained the national currency until the introduction of the euro in 1999.<br /><br />1900$X-M 1931 Sovereign Debt<br /><br />My definition of hyperinflation is one where the currency does NOT survive regardless of the rate of inflation be it 100% annually or 10,000%. The capital flows must take us to extremes on both sides in order to create the economic damage to cause change. This pendulum movement wipes out generally everyone on both sides. We can see as Europe moved into its crisis for 1931, the capital poured into the USA forcing the dollar higher. The rally in the Euro right now has been the typical false move before the storm that should not really unfold until after September. The capital inflows will send the dollar up wiping out the dollar loans exporting deflation to third world nations rolling in dollar debt, then the pendulum should swing in the opposite direction against the dollar.TheRealWorldhttps://www.blogger.com/profile/18204987031010794945noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-38527479187019241952013-11-10T16:33:25.842-08:002013-11-10T16:33:25.842-08:00Vincent
Martin Armstrong writes there is no risk...Vincent <br /><br />Martin Armstrong writes there is no risk of Hyperinflation in countries with developed Bond markets. See his comments <br /><br />The hyperinflation takes place only in countries without bond markets and have been typically the interim revolutionary government as was the case in Germany. The reason why hyperinflation takes place is because there is a new government that typically repudiates all debts of the previous. Even the USA when through such a period with the transition from the Continental Currency to the US dollar that was swapable into bank shares at 100:1.<br />When there is a government in place, what you end up with the Draconian attack against all resources of the people. This results in the collapse of the rule of law, rising taxes, and asset confiscation. This is how great empires collapse. This is what we are going through currently.<br />The government is sucking up a larger and larger share of national wealth. November 1st, you will see the first cut in food stamps. Entitlements are curtailed. The government will not simply print money to meet promises. They default on those promises just as we see plans for BAIL-INS taking depositor’s money rather than BAIL-OUTS as was the case following 2007.<br />This period is extremely hard to predict because the rule of law is collapsing. Privacy is under threat and they are hunting down every penny. When Hitler outlawed Germans having accounts outside of his reach, the Swiss passed their secrecy laws in 1934. Today, the Swiss government has given up everyone and has lost its real sovereignty in that regard where not even Hitler acted so recklessly as has the USA, Germany, and Britain not to forget France. They are all attacking the Swiss and demand their pound of flesh.<br />3FACESn of Inflation<br />The system will flip to asset inflation as capital begins to leave the public sector. But this is not DEMAND led inflation inspired by consumers, but Asset Inflation caused by a shift in strategy. There is also Currency Inflation where by assets rise because they are undervalued in the eyes of foreign capital. Both of these are distinctly different from the classic DEMAND led inflation because the economy is doing well and that manifests in an increase in buying power.<br />3FACESn of Deflation<br />The deflationary aspect is also three-dimensional. Classic Deflation by definition is declining prices concurrent with Monetary Restraint Deflation in a Keynesian system whereby government deliberately attempts to prevent a boom in some sector. When a currency rises too high, a nation is unable to sell its goods overseas and thus prices are too high relative to the international value causing discounts and price declines creating Currency Deflation. Then there is the normal Demand Deflation that unfolds because of an economic decline resulting in a collapse in demand and uncertainty emerges.<br />We are really trying hard to address the confiscation of pension funds. This is a serious risk and part of this deflationary atmosphere where government is sucking up everything it can. I would not retire. Withdrawing funds from a 401K may be an option. But that is premature just yet. This monumental question will be address. What will be the best solution is not yet identifiable.<br /><br />Armstrong goes on with ... see next post <br /><br />TheRealWorldhttps://www.blogger.com/profile/18204987031010794945noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-24307586234437466502013-09-14T17:56:14.799-07:002013-09-14T17:56:14.799-07:00I think the key factor is when debt service costs/...I think the key factor is when debt service costs/tax revenue ratios get very high while government debt/income ratios are high and all the debt has been refinanced at flat yield curves across the ZLB. Debt service costs move exponentially to shifts in interest rates while tax revenues move linearly to NGDP. When you hit that situation, inflation starts to push up rates so the central bank has to come in and peg the yield curve. When that happens, the floodgates open in the FX market.Suvynoreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-66302078419647151782013-08-28T18:09:59.472-07:002013-08-28T18:09:59.472-07:00When a central bank is buying bonds and the govern...When a central bank is buying bonds and the government is deficit spending how do you decide if this is "issuing currency to fund ongoing budget deficits" or not?<br /><br />The US has guys like Goldman Sachs between the central bank and the Treasury but what difference does that really make?<br /><br />In the following URL India's debt is 67% of GNP and Japan is 211%. From this it seems like Japan should fall first but there are other factors that really skew the starting point, so I don't know who goes first. I am near certain that Japan will go eventually but I am not sure how to predict the timing.<br /><br />http://www.tradingeconomics.com/country-list/government-debt-to-gdpVincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-4648619573651568682013-08-28T13:54:25.546-07:002013-08-28T13:54:25.546-07:00Hi Vincent,
The ECB has bent the rule about monet...Hi Vincent,<br /><br />The ECB has bent the rule about monetizing government debt but they haven't tossed it. There is an underlying assumption in Bernholz analysis about monetizing government debt i.e. it is issuing currency to fund ongoing budget deficits. As long as the ECB refuses to fund ongoing deficit spending with currency emissions they haven't crossed the Rubicon. The budgets of the Club Med countries are moving toward, or already in, primary balance net of interest payments.<br /><br />To date the ECB has acted to stabilize interest rates that were factoring in a potential break up of the EMU. Draghi's "whatever it takes" commitment has only been a verbal assurance thus far. Most of the ECB's book has a bank counterparty standing between them and the sovereign bond issuer.<br /><br />FWIW I agree 100% about Japan but I think that India and SE Asia are ground zero at present. Interesting times we live in.<br /><br />Cheers <br /> costatahttps://www.blogger.com/profile/17932860172715556937noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-61009784800518472612013-08-24T05:45:55.011-07:002013-08-24T05:45:55.011-07:00Here is my post on research ideas for predicting t...Here is my post on research ideas for predicting the start of hyperinflation:<br /><br />http://howfiatdies.blogspot.com/2012/05/predicting-timing-of-hyperinflation.htmlVincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-4101352721856850062013-08-24T05:44:53.016-07:002013-08-24T05:44:53.016-07:00I have tried to contact him and not gotten any rep...I have tried to contact him and not gotten any reply.<br /><br />I look at it as he has covered the history and the raw data. I am trying to provide a theory that can explain how hyperinflation works. The process, the feedback loops, the mechanics of hyperinflation.<br /><br />I hope I am working towards something that will be able to provide better predictive ability than the simple numbers he has found from history but can't really claim that yet. I have a post on predicting hyperinflation but it is mostly just a bunch of ideas. Predicting when hyperinflation starts is still a hard problem even after a good understanding of the mechanics of how hyperinflation works.<br /><br />Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-65668356193779378792013-08-22T16:23:30.450-07:002013-08-22T16:23:30.450-07:00Thanks Vincent,
It is such a moving target, with ...Thanks Vincent,<br /><br />It is such a moving target, with so many variables. I am late to your party, I apologise if the following has already been referenced.<br /><br />In October 2010 Prof Bernholz said of the US "There is no danger of hyper inflation, but this depends on the reaction of the Feds. The situation is dangerous no doubt." I note there is no danger, but it is dangerous.<br /><br />http://www.fbe.hku.hk/News/FBELectureInsight/File/Egon_Sohmen_Memorial_Lecture.pdf<br /><br />I have only found one more recent (quoted) comment from him, March 2011:<br /><br />“But does this mean that inflation may evolve into a hyperinflation in the United States? I believe not. Though it is true that budget deficits with government expenditures covered by 40 percent or more through credits have historically led to hyperinflation, it has been stressed in Monetary Regimes and Inflation that it is not only the size of these credits but also their composition that is important."<br /><br />http://www.financialsense.com/contributors/john-mauldin/inflation-and-hyperinflation<br /><br />In answer to your question: Why not ask Prof Bernholz his views as they have evolved over the last two years, particularly with regard to the extent of the Fed purchases at the long end, the reduced rate of growth of the deficit and then of the recent net sales of UST by foreigners? He might also more fully address the issue of excess reserves, whether it is Bernanke's brilliance or just a lack of demand for new loans that is keeping inflation at bay. <br /><br />All the best,S Rochehttps://www.blogger.com/profile/18070519576321568415noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-44463026444088099362013-08-22T12:57:56.535-07:002013-08-22T12:57:56.535-07:00When Spain was able to take gold from thew New Wor...When Spain was able to take gold from thew New World it was as if they were just making money. It did destroy their production capacity. But notice that the same has really happened to the US. Production jobs have been vanishing for a long time.<br /><br />The US imports more than it exports but does not have to work to acquire money to pay for these because the world accepts US dollars so far. But if that ends, then the US is in the same situation. If the US had to export goods to be able to import oil or goods from China the US would be suddenly in big trouble. Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-82561615816880926192013-08-22T12:47:12.288-07:002013-08-22T12:47:12.288-07:00Thanks!
If the Euro follows the rules they would ...Thanks!<br /><br />If the Euro follows the rules they would have no risk of hyperinflation. But a key rule is that the central bank can not monetize government debt and they have already tossed that rule. <br /><br />The Euro could also get a non-standard hyperinflation from the EU falling apart in some way. <br /><br />So while I would say Japan fits my model and scores a high chance of hyperinflation, I would say the Euro is too different from the normal hyperinflation case for my theory to make a prediction.<br /><br />Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-86471882003774209212013-08-22T12:35:28.933-07:002013-08-22T12:35:28.933-07:00This is in the second question in the FAQ. These ...This is in the second question in the FAQ. These numbers come from Bernholz. Yes, different cases are different but these are the best predictors I have seen. What other quantifiable variables do you think would help in predicting hyperinflation?Vincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-75982240024867610562013-08-21T23:43:58.145-07:002013-08-21T23:43:58.145-07:00Hi Vincent,
Likewise from Screwtape comments...yo...Hi Vincent,<br /><br />Likewise from Screwtape comments...your figure of debt at 80% of GDP combined with deficits of 40% of spending as being a trigger for, or precursor to, HI seems very similar to Reinhart & Rogoff's numbers which in fact vary wildly from case to case.<br /><br />You acknowledge this at one point but then keep referring to it as if it is a meaningful measure. Surely there are so many other variables as to render it almost meaningless in the case of the United States...no doubt you have addressed this, can you point me to a link?<br /><br />Thank you.S Rochehttps://www.blogger.com/profile/18070519576321568415noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-26249550064795330472013-08-20T02:28:25.273-07:002013-08-20T02:28:25.273-07:00Hi Vincent,
I picked up the link to your FAQ from...Hi Vincent,<br /><br />I picked up the link to your FAQ from your recent exchange of comments with Warren James over at Screwtape Files. Some very good work here sir. My compliments to you.<br /><br />FWIW I outlined an argument on why I think that the Euro cannot hyperinflate over at victorthecleaners blog in the comments on this post:<br />http://victorthecleaner.wordpress.com/2013/04/07/snippets/<br /><br />It is near the end of the comments - 17 August 2013 at 02:51. It might offer you a counter-argument for the Euro but otherwise it doesn't contradict your HI research and analysis.<br /><br />There are a couple of points that may hellp to bolster your case. Firstly deflation was the mechanism which automatically corrected imbalances under a gold standard. It's called the "price-specie-flow" mechanism (described by David Hume 1752). Correcting imbalances by either deflation or inflation IS a choice but take a look at the political hurdles for a deflationary solution today as described in this paper "What Role For Currency Boards?" here: http://bookstore.piie.com/book-store/20.html <br /><br />The description starts on Page 17 of "2. A Consideration Of The Pros And Cons".<br /><br />Secondly it is worth noting how little gold was actually in circulation in the USA by the time FDR called in the balance held in the banking system. This paper that FOFOA linked in a recent post asserts:<br /><br /><i>"... in the United States where the amount of gold coin in circulation halved between 1917 and 1930, while gold stocks held by domestic banks (as opposed to the Treasury or Federal Reserve) fell from over 350 m.t. in 1913 to 21 m.t. by 1930.."</i><br /><br />Most of the world's gold bullion was already in the major nations Treasuries. FDR seized the opportunity to take the general public off the gold standard while keeping international trade on a quasi-gold standard and securing a competitive devaluation of the US dollar against other currencies.<br /><br />You can find the paper here: http://www.gold.org/download/pub_archive/pdf/Rs23.pdf<br /><br />That paper also discusses the changing attitudes of governments toward gold in the aftermath of WW1. The situation today is very different. Gold confiscation today wouldn't help the USA avoid HI or solve any of its other problems either.<br /><br />Cheers<br /><br />costatahttps://www.blogger.com/profile/17932860172715556937noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-44976969023987165332013-08-19T06:16:34.039-07:002013-08-19T06:16:34.039-07:00Hey Vincent, just cross posting this from my blog ...Hey Vincent, just cross posting this from my blog http://dismalecon.blogspot.ca where you linked to my post where I was skeptical of the value of monetary policy. See below why I think your FAQ doesn't answer the questions that matter to me in terms of explaining why hyperinflations start.<br /><br />Hi Vincent,<br /><br />I read the faq early last week actually. I'm still a hyperinflation skeptic however, mainly because I don't think the quantity theory of money does a good enough job of explaining the major hyperinflation scenarios we've seen in the past. James Montier sums up my position on the topic nicely in this paper: <br /><br />http://www.scribd.com/doc/125658383/GMO-White-Paper-James-Montier-Hyperinflations-Hysteria-And-False-Memories<br /><br />Basically hyperinflations are caused by a collapse in the production base of an economy, increasing imports while shrinking exports. If that economy has foreign denominated debts (which the US doesn't but Weimar did) then it has to acquire foreign currency to pay those debts but because it has no production it can't sell anything to acquire them. In Weimar, after WWI the Germans were forced by the allied forces to make enormous war reparation payments that had to be paid in gold. With a manufacturing base devastated by the Allies occupation of Ruhr Valley, and France demanding a pound of flesh, Germany was forced to sell its coal mines and export all of its energy to France and Britain. They no longer had anything to export to acquire gold to pay off the war debts. So ultimately money printing hyperinflation is the last shoe to drop, but the depreciation of the mark was caused by the destruction of production and foreign denominated debts, not money printing. It's a very important part of the puzzle that you never address in the FAQ. You could in theory have a huge increase in the quantity of money but have that money spent on increased productive capacity (oil platforms, natural gas fracking, solar panel fields, bridges, road, railways etc.) Also, where are the wage pressures in the states with such a marginalized union portion of the labor force and so much unemployed surplus labor. If workers don't have the negotiating power to increase wages then it's one less thing that could push up producer prices. So even a high inflation scenario like the 1970s is unlikely.<br /><br />As such, hyperinflation in the US isn't on my radar. Financial instability and fragility certainly are, but not a collapse in the dollar. <br /><br />David Wisharthttps://www.blogger.com/profile/03753151612158167240noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-46318545812909346952013-08-16T10:05:45.143-07:002013-08-16T10:05:45.143-07:00when will the fed grow a pair and tell the spender...when will the fed grow a pair and tell the spenders to stop,Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-66834901421897001222013-08-13T20:32:34.071-07:002013-08-13T20:32:34.071-07:00Done!Done!Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-1892824566694270102.post-74684166402218476672013-08-13T20:31:57.587-07:002013-08-13T20:31:57.587-07:00OK, sure thing.OK, sure thing.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.com