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Hyperinflation Question

Mick01

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Many people believe we will see hyperinflation at some point due to all the printing Ben's doing, but I recently read an economist who stated it will take very long due to a few reasons.

1)The amount of cash printed represents only 2-3% of overall US dollars on the world market and therefore Ben could print like this for a decade before the US sees hyperinflation.


2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely.


Can anyone disprove these, or further prove them?
 

Joe Steel

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Many people believe we will see hyperinflation at some point due to all the printing Ben's doing, but I recently read an economist who stated it will take very long due to a few reasons.

1)The amount of cash printed represents only 2-3% of overall US dollars on the world market and therefore Ben could print like this for a decade before the US sees hyperinflation.


2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely.


Can anyone disprove these, or further prove them?

As the money supply increases and prices begin to rise, producers will enter the market to sell their goods and services. This will force down prices. Hyperinflation can occur only at or near the productive capacity of the economy when increases in the money supply can't attract more production.
 

Norman

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Many people believe we will see hyperinflation at some point due to all the printing Ben's doing, but I recently read an economist who stated it will take very long due to a few reasons.

1)The amount of cash printed represents only 2-3% of overall US dollars on the world market and therefore Ben could print like this for a decade before the US sees hyperinflation.


2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely.


Can anyone disprove these, or further prove them?

Well, the plan is to add 40 billion a month to the money supply. That's actually that's ONLY the mortgage program though. Keeping interest rates at 0% + operation twist etc. add to that.

Base money is currently around 3 Trillion.

40 billion x 12 = 520 billion a year.


That is way more than 2-3%. However I think they are comparing the base money supply to the overall money supply. The overall money supply is IIRC around 10 trillion. (depending how you count).

Ben has taken the money supply from 700 billion to around 3 Trillion already. But a lot of bank credit has busted. So that's why you haven't got hyperinflation even though he has already tripled the money supply.


The real threat exists however. Because ben's printing in part has aided the govt to take a lot of debt. The interest rates rates are going to raise and... Then what? That's more of a concern.

A other concern is the trade balance of US. If china for example thinks that US is inflating they may dump their dollars. Exchanging all those dollars for products means more demand, less supply = could be a disaster. I don't know what the exact balance of payments is but I am pretty sure that central bank of china has some dollars stock piled. If they sense danger they will start selling those, also dumping the bonds which could contribute to the interest rate problem.

Certainly, everything has been thrown at the problem. Hyper inflation is possible but I don't think it will happen. High inflation is more likely though.
 
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Mick01

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Many people believe we will see hyperinflation at some point due to all the printing Ben's doing, but I recently read an economist who stated it will take very long due to a few reasons.

1)The amount of cash printed represents only 2-3% of overall US dollars on the world market and therefore Ben could print like this for a decade before the US sees hyperinflation.


2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely.


Can anyone disprove these, or further prove them?

As the money supply increases and prices begin to rise, producers will enter the market to sell their goods and services. This will force down prices. Hyperinflation can occur only at or near the productive capacity of the economy when increases in the money supply can't attract more production.





This answer seems logical when dealing with a manufacturing driven economy, which the US no longer is. Would you then include the entire manufacturing of the world, which can easily ship into this economy to fill the need?

Seems to break down when we consider how easily other manufacturing countries could fill the need.
 

Joe Steel

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Many people believe we will see hyperinflation at some point due to all the printing Ben's doing, but I recently read an economist who stated it will take very long due to a few reasons.

1)The amount of cash printed represents only 2-3% of overall US dollars on the world market and therefore Ben could print like this for a decade before the US sees hyperinflation.

2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely.

Can anyone disprove these, or further prove them?

As the money supply increases and prices begin to rise, producers will enter the market to sell their goods and services. This will force down prices. Hyperinflation can occur only at or near the productive capacity of the economy when increases in the money supply can't attract more production.

This answer seems logical when dealing with a manufacturing driven economy, which the US no longer is. Would you then include the entire manufacturing of the world, which can easily ship into this economy to fill the need?

Seems to break down when we consider how easily other manufacturing countries could fill the need.

I think it would be applicable to services, too. We have 23 million unemployed and underemployed workers. Some could be enticed to change occupations (perhaps by retraining) to those attracting increased spending.

Imports would fill the demand. Of course, the relatively long trip from factory to consumer might make the effect less timely.

The analysis, however, also is complicated by the use of American dollars as the de facto world currency. As the supply of dollars increases, the dollars might find their way into foreign markets where they will increase production which never enters the US.
 

EdwardBaiamonte

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Many people believe we will see hyperinflation at some point due to all the printing Ben's doing, but I recently read an economist who stated it will take very long due to a few reasons.

1)The amount of cash printed represents only 2-3% of overall US dollars on the world market and therefore Ben could print like this for a decade before the US sees hyperinflation.


2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely.


Can anyone disprove these, or further prove them?

The Fed expanded its Balance sheet perhaps $2-3 trillion depending on how you count all the emergency measures they have taken. In a $14 trillion economy that might produce 5-10% inflation in the worse case.

The TIPS market which predicts inflation through the prices of treasury securities indicates very little inflation is anticipated. THey take Bernanke at his word, namely, inflation will be held to 2% or so.
 

Paulie

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Many people believe we will see hyperinflation at some point due to all the printing Ben's doing, but I recently read an economist who stated it will take very long due to a few reasons.

1)The amount of cash printed represents only 2-3% of overall US dollars on the world market and therefore Ben could print like this for a decade before the US sees hyperinflation.


2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely.


Can anyone disprove these, or further prove them?

The Fed expanded its Balance sheet perhaps $2-3 trillion depending on how you count all the emergency measures they have taken. In a $14 trillion economy that might produce 5-10% inflation in the worse case.

The TIPS market which predicts inflation through the prices of treasury securities indicates very little inflation is anticipated. THey take Bernanke at his word, namely, inflation will be held to 2% or so.
Yeah we should definitely be considering the so-called TIPS indicator over the gold and silver indicator :rolleyes:
 
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Mick01

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Many people believe we will see hyperinflation at some point due to all the printing Ben's doing, but I recently read an economist who stated it will take very long due to a few reasons.

1)The amount of cash printed represents only 2-3% of overall US dollars on the world market and therefore Ben could print like this for a decade before the US sees hyperinflation.


2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely.


Can anyone disprove these, or further prove them?

The Fed expanded its Balance sheet perhaps $2-3 trillion depending on how you count all the emergency measures they have taken. In a $14 trillion economy that might produce 5-10% inflation in the worse case.

The TIPS market which predicts inflation through the prices of treasury securities indicates very little inflation is anticipated. THey take Bernanke at his word, namely, inflation will be held to 2% or so.




You really think we should take the word of a guy who calls himself an expert economist but couldn't see the crash of 2008 coming?

Has Bernanke ever been right? Don't think so. His word isn't worth much IMO
 

oldfart

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Many people believe we will see hyperinflation at some point due to all the printing Ben's doing, but I recently read an economist who stated it will take very long due to a few reasons.

1)The amount of cash printed represents only 2-3% of overall US dollars on the world market and therefore Ben could print like this for a decade before the US sees hyperinflation.

2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely.

Can anyone disprove these, or further prove them?

First hyperinflation is an exceeding rare event, having occured three times in modern history. Only one of those episodes involved a major economy (Germany, 1923) with the other two being Hungary in 1945 and Zimbabwe currently. The first two resulted from economic dislocations following major wars and the last a nation that had experienced a prolonged internal struggle. I think this supports the second rationale you gave.

Monetarists believe that increases in the monetary base inevitably cause proportional changes in price levels. This was broadly true under the gold standard, but has not been true since about 1920. Keynes introduction of the liquidity trap theory directly contradicted the monetarist predictions. In the last five years we have conducted an economic experiment that quadrupled the monetary base. Following this action, for the next three years we had deflation rather than hyperinflation. Every economically advanced nation on earth had similar experience. The anti-Keynesians lost the debate; inflation remains low five years out and there is no hint of hyperinflation despite constant warnings that it is just around the corner. People in the investment sector who bet on hyperinflation have lost hundreds of billions of dollars.

One more note: the rise in gold prices does not validate the monetarist theory. Gold prices are very strongly inversely related to real (inflation-adjusted) interest rates. Gold prices rose consistently before and after the expansion of the monetary base in response to changes in the real rate of interest.
 

Kevin_Kennedy

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What major war was Zimbabwe engaged in before their hyperinflation hit?
 

oldfart

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What major war was Zimbabwe engaged in before their hyperinflation hit?

I was parsing words here about internal conflict. Zimbabwe was formerly known as Rhodesia and for about 20 years was a bastion of white rule in southern Africa. It was a violent period and when it ended there was a massive economic dislocation.
 

oldfart

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The Fed expanded its Balance sheet perhaps $2-3 trillion depending on how you count all the emergency measures they have taken. In a $14 trillion economy that might produce 5-10% inflation in the worse case.

The TIPS market which predicts inflation through the prices of treasury securities indicates very little inflation is anticipated. THey take Bernanke at his word, namely, inflation will be held to 2% or so.

I did a double take. Someone actually is aware that the TIPS--Treasury spread is a pretty good measure of inflation expectations. Throw in a yield curve and you could be a financial commentator!
 

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First hyperinflation is an exceeding rare event, having occured three times in modern history. Only one of those episodes involved a major economy (Germany, 1923) with the other two being Hungary in 1945 and Zimbabwe currently.

What definition are you using? Many former Soviet and Eastern bloc countries saw brief hyperinflation in the 1990's, mostly due to the supressed inflation from price controls. Bolivia and Peru saw hyperinflation in the 80's and Brazil and Chile to a lesser extent.
 

Kevin_Kennedy

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What major war was Zimbabwe engaged in before their hyperinflation hit?

I was parsing words here about internal conflict. Zimbabwe was formerly known as Rhodesia and for about 20 years was a bastion of white rule in southern Africa. It was a violent period and when it ended there was a massive economic dislocation.

The claim was:

"2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely."

You're telling me that violence in the former Rhodesia was "serious" enough to cause hyperinflation, but that the "War on Terror" isn't? Now I know you didn't make the claim, so I don't expect you to defend it.
 

EdwardBaiamonte

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What major war was Zimbabwe engaged in before their hyperinflation hit?

I was parsing words here about internal conflict. Zimbabwe was formerly known as Rhodesia and for about 20 years was a bastion of white rule in southern Africa. It was a violent period and when it ended there was a massive economic dislocation.

The claim was:

"2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely."

You're telling me that violence in the former Rhodesia was "serious" enough to cause hyperinflation, but that the "War on Terror" isn't? Now I know you didn't make the claim, so I don't expect you to defend it.

you seem to be lost!! Prices can only go up if liberals print money to pay the rising prices. Get it?? Without new liberal funny money prices must stay the same!!!!

Now you know what inflation is and hyper-inflation too.
 
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oldfart

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First hyperinflation is an exceeding rare event, having occured three times in modern history. Only one of those episodes involved a major economy (Germany, 1923) with the other two being Hungary in 1945 and Zimbabwe currently.

What definition are you using? Many former Soviet and Eastern bloc countries saw brief hyperinflation in the 1990's, mostly due to the supressed inflation from price controls. Bolivia and Peru saw hyperinflation in the 80's and Brazil and Chile to a lesser extent.

Well in 1923 Germany the inflation rate reached 60% PER DAY. I would define hyperinflation as a irreversible runaway increase in prices that makes currency worthless in a matter of days and ends only in a collapse of the curency as a medium of exchange and store of value. The examples you gave I would call severe inflation, but they were of limited duration or did not end in a currency collapse. I am not arguing that they were not enormously destructive, only that most economic historians reserve the term "hyperinflation" for the worst end of the spectrum. If you want to lump all these cases into one broader category, it's fine with me. Just be aware that historically the "reset" for hyperinflation in the narrower sense is different and less orderly than with the broader definition.
 

oldfart

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What major war was Zimbabwe engaged in before their hyperinflation hit?

I was parsing words here about internal conflict. Zimbabwe was formerly known as Rhodesia and for about 20 years was a bastion of white rule in southern Africa. It was a violent period and when it ended there was a massive economic dislocation.

The claim was:

"2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely."

You're telling me that violence in the former Rhodesia was "serious" enough to cause hyperinflation, but that the "War on Terror" isn't? Now I know you didn't make the claim, so I don't expect you to defend it.

Well the Rhodesia/Zimbabwe situation involved a medium intensity civil war, a redistribution of land that destroyed the export market and caused a former exporter of agricultural staples to experience food shortages. I think hyperinflation has to involve rapid price increases in basic commodities needed for everyday life. I image that natural disasters or endemic diseases could also bring about these conditions, so I don't think war is a requirement.
 

oldfart

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you seem to be lost!! Prices can only go up if liberals print money to pay the rising prices. Get it?? Without new liberal funny money prices must stay the same!!!!

Now you know what inflation is and hyper-inflation too.

I would argue on the basis of both monetary theory and the historical record that the monetary base is not the only determinant of price levels. Sometimes, like the present, there is no relationship between them at all.
 

Kevin_Kennedy

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I was parsing words here about internal conflict. Zimbabwe was formerly known as Rhodesia and for about 20 years was a bastion of white rule in southern Africa. It was a violent period and when it ended there was a massive economic dislocation.

The claim was:

"2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely."

You're telling me that violence in the former Rhodesia was "serious" enough to cause hyperinflation, but that the "War on Terror" isn't? Now I know you didn't make the claim, so I don't expect you to defend it.

you seem to be lost!! Prices can only go up if liberals print money to pay the rising prices. Get it?? Without new liberal funny money prices must stay the same!!!!

Now you know what inflation is and hyper-inflation too.

Only if liberals print it, huh? Not conservative appointed Federal Reserve chairmen like Ben Bernanke or Alan Greenspan?
 

Kevin_Kennedy

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I was parsing words here about internal conflict. Zimbabwe was formerly known as Rhodesia and for about 20 years was a bastion of white rule in southern Africa. It was a violent period and when it ended there was a massive economic dislocation.

The claim was:

"2)Hyperinflation requires a major trigger like a serious war, not the conflicts the US has been in for a decade. Without this, hyperinflation is very unlikely."

You're telling me that violence in the former Rhodesia was "serious" enough to cause hyperinflation, but that the "War on Terror" isn't? Now I know you didn't make the claim, so I don't expect you to defend it.

Well the Rhodesia/Zimbabwe situation involved a medium intensity civil war, a redistribution of land that destroyed the export market and caused a former exporter of agricultural staples to experience food shortages. I think hyperinflation has to involve rapid price increases in basic commodities needed for everyday life. I image that natural disasters or endemic diseases could also bring about these conditions, so I don't think war is a requirement.

Well my original comment was to the OP, I wasn't attributing it to you.
 

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