I guess it depends on your definition of hyper inflation, but consider the following: The total number of dollars outstanding on 01 Jan 2000 was $5,751,743,092,605.50 As of 08 March 2007 the total is $8,833,183,947,747.23 The USD has therefore lost 53% of its value in just over 7 years; and because of the magic of reserve banking and compound interest the trend is parabolic. The only asset classes that have returned anything close are precious metals/commodities and real-estate. "Paper" assets like stocks have been huge losers -- while the DOW is testing all time highs, the purchasing power of the money has halved. Very difficult to invest for your retirement. Official US Treasury data available from http://www.treasurydirect.gov/NP/BPDLogin?application=np
"Recession is when the wealthy buy the riches of the working class -- at half price. Depression is when you have nothing left to sell."
There are some attempts, with all sorts of interesting geopolitical implications http://en.wikipedia.org/wiki/Islamic_gold_dinar
From 1941 to 1944; the US debt had grown almost double each every year; the war economy works with its magic way.
Why buy toilet paper when you need to hand over more pieces of green paper than are on the roll you are buying? You'd be better off going to the bank and changing all your $100 bills for 100 singles and using those instead. 100 singles will also burn longer than 1 x $100 bill.
The way I see it, given a somewhat responsible fed, stagflation can only be caused by a supply shock. Lack of energy, labor or capital. The baby boomers still have some years left to work and save, so I can only see deflation pressure the next years, but what happens after 2013? The fed can always stabilize inflation if it wants to. I vote for Inflation targeting.. Without inflation targeting gold is the only safe investment after 2013 I think because the fed might be tempted to print a lot of money to stabilize an economy that is doomed to grow a lot slower than it is currently doing.
Conducting monetary policy based on the measurement of inflation led to 1929... The only thing the Fed needs to do to stop stagflation is to stop printing money... problem is that monetarist theory tells them that the only way out of recession is to print massive amounts of money... so they have a dilema...
When nobody trusts your money, buying imports will be very painful. I believe Argentina had a similar end result, where foreign accounts were seized, things confiscated, and basically everyone made penniless in terms of real buying power. Keep in mind, we don't make much here anymore, and we no longer have any facilities too, either, and WE are the world's largest consumers. This is evidenced by the fact that 10 ships come from China loaded with "stuff" and 9 of the 10 go home empty. The trade deficit with them mirrors that, too. We'd need to increase exports by 100% just to keep the deficit from rising if imports increase 10% because its a 10 to 1 ratio. Guess what percentage imports from China are up year on year? How long can this silliness last? Maybe till 2010 when these other countries have alternatives in place, IMO. China now builds more cars everyday than we do. It won't be much longer before their fuel consumption will increase to where there isn't enough left for us. Remember that they have a trillion dollars and would like nothing better than to spend them just to keep the number from rising further. But wait! What will the OPEC folks do with all those dollars? Its going to be like a game of hot potato with everyone trying to discreetly avoid holding dollars while pretending everything is just fine, IMO. Sorry, I don't even care if its overpriced a bit currently. I add to my gold holdings daily, and in time it will be 30% of my portfolio. I'll use the willings after tax from the rest of the portfolio to buy it. At least that's the plan at the moment. I think by 2010 it will be proven a sound plan. During the depression, the ones that did well were the ones that had given forethought to the ramifications of the silliness. I don't think it even matters if its a deflation or inflation that goes wild. Gold will still be gold, and as easily judged against other spendable currencies as it is against dollars today.
Gold is a silly suckers game that ended in the 80"s..... You guys live in a pretend delusional world if you think EVERYONE doesn't take US Dollars...... Foreigners KNOW that if they buy 500 million worth of 90 day T bills......they will get 500 million back in 90 days, if they so desire Few, if any, other countries offer that safety...... What do you think would happen to the Middle East, if or when, oil goes back to $35/40 a bbl???? Basic math tells you their income is cut in half......big argument about exactly how much oil they have left in ground....Iran IMPORTS 40% of their gasoline!!! Take some third world South American dollars????....wake up Monday morning.....coup over weekend.....all banks closed till further notice.....reverse split......you get 50% of your funds back....thank you for your business, LOL Mr. Greenspan will be relieved that there is a poster on ET that understands monetary matters more than he does, LOL. Guys, most people simply do not understand how large our economy is.....it is huge beyond comprehension.....and very flexible and resilient..... The economy will ebb and flow......but it is not going into a 1929 depression, LOL..... SteveD
Iâm not a gold bugâ¦. Butâ¦.. How much money is invested in the gold market compared to the aggregate invested in the stock market, the bond market and in real estate? Try to imagine how much money that potentially could chase gold if bonds and stocks sell off as boomers retire and the fed starts to print money at a faster pace to support an economy that will struggle to grow when labor and capital becomes more expensive.