Hyperinflation - Never !

Discussion in 'Economics' started by Onlygold, Oct 13, 2009.

  1. Onlygold


    Hyperinflation won't happen - despite what have been mentioned happened in Weimar Germany, Zimbabwe and the Latin Americas.

    Inflation here is simple consumer price inflation. In some discussions, it is not necessary to talk about other forms of inflation/deflation like money supply, producer prices, wages or commodities. Consumer prices have components of input in material (iron, copper, oil, etc), wages and profits. Consumer price inflation, in general, has to be accompanied by matching inflation in wages, profits and commodity prices.

    A 20% inflation is a good enough a figure to consider as hyperinflation. Although the US national debt is 12 trillions or whatever and budget deficits may be a trillion this year and next, etc,... hyperinflation still won't happen. A 10% inflation for 5 to 10 years may be as close a call as workable.

    Whatever is said about the US having to pay for its past excesses, nothing will be paid for by the US alone. It will be borne by the global economy. Hyperinflation means hyperinflation globally and it cannot work out as there are too many prices to adjust by too much a margin. A 20% means all global wages had to be adjusted and it may mean adjusting hundreds of millions of paychecks to keep up with inflation otherwise these salaried workers die away or riot. Every commodities too have to adjust significantly, i.e find their "true" level, if ever it can work to clear away past excesses.

    Between inflation and deflation, the path of least resistance is deflation. Deflation here strictly means GDP reduction. Companies that have weightings that matter in inflation or deflation may have 50 workers or more. For inflation over deflation, the number of nodes (worker or company) to be adjusted has a factor of 50:1. Nature chooses the path of least resistance (in physics, called the optimal principle) and it is easier to close off one company than adjusting wages of 50 employees.

    So all these global bailouts and stimulus may cause negative growth for 5 to 10 years and this may mean Great Depression of 2010s'.

    Inflation and deflation above do not say anything definite about the stock markets. Deflation very likely means the end for stocks for some time. Inflation may be accompanied by sideway trading stock markets.
  2. Onlygold


    Misguided Monetary Mentalities
    Published: October 11, 2009

    Interesting argument that "We do seem to have avoided a second Great Depression".
  3. Onlygold


    My original post had the above inaccuracy. The seeds of the Second Great Depression, if it is to happen, had been planted long before the Lehman collapse. The global bailouts and stimulus to date will not work to stop a runaway deflation spiral.
  4. whether there is hyperinglation, deflation or any other price change one thing for sure is that things will get worse it will have a different name i am sure.

    either way i have often wondered whether price matters as long as people have what they need. there have always been people who do not have what they need but it will get worse so what ever you call it there will be more poverty and more absolute poverty.
  5. Onlygold


    Quarterly Review and Outlook - Third Quarter 2009
    Ponzi Finance
    By Van R. Hoisington and Lacy H. Hunt, Ph.D.

    The gist of the article seem to indicate a possible downward deflationary spiral to clear total indebtedness.
  6. Since when did your opinion(s) govern what will and will not happen in the world?