Saturday, November 8, 2014
First Exchange Rate Drops Then Hyperinflation
In Weimar Germany the exchange rate adjusted well before inflation started.
In Zimbabwe the exchange rate collapsed 72% on November 14 1997. After that inflation really started picking up.
I believe the normal case for hyperinflation is that the exchange rate drops first and then the inflation picks up after. The exchange rate reacts quickly while the huge number of prices that make up inflation indexes take longer to adjust.
I expect that Japan will see the Yen exchange rate drop much more before they start getting high inflation.