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Preparing Americans for Hyperinflation
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| habsfan |
http://www.youtube.com/watch?v=xbUIlH0stSc
Just wondering if Americans feel hyperinflation is a real possibility or not? The MSM sure doesn't talk about it but there are plenty of online sources that say it's inevitable.
Thoughts? |
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| Shakka |
Near-term, no. Long-term, unknown. Given high unemployment that is likely to continue for a while, combined with extremely low capacity utilization, inflation is likely to remain contained near-term (with deflation the near-term concern). Given the already tenuous state of the American consumer, any spurts in inflation levels are likely to be self-correcting.
Longer-term, inflation concerns remain, but it is unclear whether hypefinflation is a realistic possibility, in spite of massive money printing and debt issuance by the government. Inflation is a natural phenomena well documented by Friedman to be "always and everywhere a monetary phenomenon." However, hyperinflation is actually a (piss poor) policy decision (i.e. Post WWI Germany and current Zimbabwe). |
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| Krypton |
| Anyone saying America is going to experience hyper-inflation because of the current policies are practicing nothing more than sensationalism. Any study of history would demonstrate that hyper-inflation has occurred only in very special situations. For example, Wiemar Germany's huge war reparations. Argentina's and Zimbabwe's dictatorships and political instability. Etc. For hyper-inflation to occur in my view, there must be political instability and a politicized monetary system. America is politically stable with an independent central bank controlling the money supply. But of course, Ron Paul and his allies are doing everything they can to destroy the Federal Reserve's independence. |
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| Capitalizt |
Hyperinflation aint gonna happen..but neither is "regular" inflation.
I don't think we can discount a middle ground "uber inflation" of 10-20% for a decade or so. In ten years the debt will be at $22 trillion according to the CBO. The interest alone on this will be a huge burden, and it will come just as the vast majority of baby boomers retire permanently and start sucking down their entitlements, which will only exacerbate the crisis. Tax hikes can't come close to making up for the shortfall and there is simply no other way to sustain our current system without a major devaluation (paying the bills with cheaper dollars). |
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| jerZ07002 |
| quote: | Originally posted by Capitalizt
Hyperinflation aint gonna happen..but neither is "regular" inflation.
I don't think we can discount a middle ground "uber inflation" of 10-20% for a decade or so. In ten years the debt will be at $22 trillion according to the CBO. The interest alone on this will be a huge burden, and it will come just as the vast majority of baby boomers retire permanently and start sucking down their entitlements, which will only exacerbate the crisis. Tax hikes can't come close to making up for the shortfall and there is simply no other way to sustain our current system without a major devaluation (paying the bills with cheaper dollars). |
ten years of 'uber inflation' at 10% would turn my 200K of student debt into 77K. i'm all for it. ;) |
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| Shakka |
| quote: | Originally posted by jerZ07002
ten years of 'uber inflation' at 10% would turn my 200K of student debt into 77K. i'm all for it. ;) |
I think that's what the Federal government is thinking. Quantitative easing is soooooo tempting... |
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| Comrade Stalin |
| There are plenty of ways to protect your assets in a high inflation environment. I think Obama has some good people for counsel. Paul Volker and Ben Bernanke are quite possibly, the best men you could ask to advise the President. |
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| Shakka |
| quote: | Originally posted by Comrade Stalin
There are plenty of ways to protect your assets in a high inflation environment. |
Yeah. Whatever you do, don't hold cash or fixed income securities.
| quote: | | I think Obama has some good people for counsel. Paul Volker and Ben Bernanke are quite possibly, the best men you could ask to advise the President. |
It blows my mind that he basically brushed Volcker's advice off his shoulder until a week ago. Moreso, it blows my mind (though it shouldn't) that our wonderful elected leaders in Congress on both sides of the aisle can't see 2 inches in front of their faces to know the value that Bernanke brings as they are near hell-bent on destroying him and the independence of the Fed for taking heroic actions that they do not understand. |
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| jerZ07002 |
| quote: | Originally posted by Shakka
Yeah. Whatever you do, don't hold cash or fixed income securities.
It blows my mind that he basically brushed Volcker's advice off his shoulder until a week ago. Moreso, it blows my mind (though it shouldn't) that our wonderful elected leaders in Congress on both sides of the aisle can't see 2 inches in front of their faces to know the value that Bernanke brings as they are near hell-bent on destroying him and the independence of the Fed for taking heroic actions that they do not understand. |
word - fed actions (and certainly its independence from congressional approval) saved the financial sector and possibly the world economy. |
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| Comrade Stalin |
| quote: | Originally posted by Shakka
It blows my mind that he basically brushed Volcker's advice off his shoulder until a week ago. Moreso, it blows my mind (though it shouldn't) that our wonderful elected leaders in Congress on both sides of the aisle can't see 2 inches in front of their faces to know the value that Bernanke brings as they are near hell-bent on destroying him and the independence of the Fed for taking heroic actions that they do not understand. |
Anything to take the focus off them. I don't really think Ron Paul knows wtf are the unintended consequences of his anti-Fed crusade. |
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| atbell |
| quote: | Originally posted by Krypton
Anyone saying America is going to experience hyper-inflation because of the current policies are practicing nothing more than sensationalism. Any study of history would demonstrate that hyper-inflation has occurred only in very special situations. For example, Wiemar Germany's huge war reparations. Argentina's and Zimbabwe's dictatorships and political instability. Etc. For hyper-inflation to occur in my view, there must be political instability and a politicized monetary system. America is politically stable with an independent central bank controlling the money supply. But of course, Ron Paul and his allies are doing everything they can to destroy the Federal Reserve's independence. |
You mean like a country being in such trouble that they can't keep prisoners locked up, have to sell state buildings only to rent them back, and pay civil servants in IOUs? Man I'd hate to live there!
:P
I don't see hyper inflation, yet. Inflation yes, serrious inflation, yes, hyerper inflation no.
I expect the inflation to be subtle. Inflation can take the form of getting a smaller hamberger instead of paying more for the same old burger.
It will also be hard to determine because the prices of some things could drop to nothing. Sure the price of sustinance has trippled but you can get great deals on cat rain coats so it all balances out!
The decline of the value of the dollar is more of a concern than inflation proper, or could be seen to be the cause of inflation.
In broad terms what a lot of this is saying is that the labour that people in the US were providing and thought was oh so valuble is actually worth squat, shame.
Getting back to Krypton, there is a chance that the Fed becomes politicized if the Republicans block the re-election of Bernanke as I think I read they were trying to do. (I'd check that before putting money on it, the Dems might be the ones looking to change). I don't think there is any good that can come of politicizing the Fed, the workers there need to be chosen based on more on merit than on popularity. A part of thier job is to make decisions that are not popular now so that the future is brighter.
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Hyper inflation or not, even inflation can be harsh. Imagine everything except your wage doubled. What happens then?
More realistically inflation will occur in tradeable comodities first (food, oil, cars, baseball bats) and will hold off for service related things (going to the movies, hair cuts). Unfortunately for the service people they will have to live with the same low wage.
Another important note that is frequently missed by even the most celebrated academics is that inflation is not a single unit. Inflation is a measure of price change over time. The standard unit of measure is the year but there could easily be massive inflationary spikes which, if they were maintained, would be in the order of millions of percentage points per year. I have a feeling this is why the inflation numbers of both Zimbabwe and pre-wwII germany look so high, because inflation peaked high (~3000%/yr in Zim, in the order of millions in Germany).
As much as that might sound like a good thing, that yearly inflation is unlikely to be maintained at a hyper inflationary level, it isn't without risk. Two weeks of hyper inflated oil could crush millions in North America, people would have to liquidate thier savings just to go to work each day. Likewise a three month spike in food prices or electricity prices could suck out any discretionary income from consumers. |
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| atbell |
| quote: | Originally posted by Comrade Stalin
I am still be 50-50 stock bond though at this point to protect myself from what I see is risky environment price-wise.
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Stocks, meh. If they are in US$ you still get hit by currency devaluation.
Bonds seem dangerously close to trouble. The Financial Times opened the year with a weeks worth of pesimistic type articles, many of which included talk of seeking information about political risk and the search for protection against soverign bond default. Like I've argued with so many here and elsewhere, bonds do default, even big bonds, even big bonds of countries who can print money. This is not saying that it is going to happen, is likely to happen, or anything of the sort. The main thing is that it CAN happen and HAS happend in the past. Without including some consideration for the worst possible outcome risk becomes vastly undervalued: see 2008 financial crisis, 2007 credit crunch, 2010 ... ?
I'm bringing up cash again because 'cash' doesn't just mean US$. There is no reason not to pick up 1000 Euros from the bank, stick it in a shoe box and wait. If you have the money, why not? Other currencies are just as easily available from banks: Canadian, Australian, or Hong Kong dollars, the Yen, Swiss Franks, or any of the four R's (Real, Rmb, Ruppie, Ruple).
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Anything to take the focus off them. I don't really think Ron Paul knows wtf are the unintended consequences of his anti-Fed crusade. |
+1
Ron Paul - you don't get surprised by an avalanch you start on purpose but it could still kill you. |
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