Thursday, November 5, 2009

Four Reasons Hyperinflation Hasn’t Hit the US... Yet

Everything we know about classic economic theory suggests the US economy should be experiencing Zimbabwe-like hyperinflation right now, thanks to the nearly $2.2 trillion the US Federal Reserve has pumped into the system.

But we’re not... yet.

Classic economic theory says that money supply can be used to stimulate the economy and our central bankers seem to agree. That’s why they’ve pumped more than $1 trillion dollars into the economy, engineered countless bailout bonanzas for zombie institutions, put Detroit on life support, and delivered a bunch of financial Band-Aids to the trauma ward -- all in a desperate bid to make Americans feel better about the global financial crisis.:

To their way of thinking, the trillions of dollars have been a success. That’s why any meeting of the Group of Eight nations looks more like a mutual affection society with central bankers eager to claim credit and backslap each other in congratulations for having avoided the “Great Depression II.”

But by taking the Federal balance sheet to more than $2 trillion from $928 billion 2008, they’ve created a situation that should have resulted in an epic inflationary spike to accompany the 137% increase in liabilities.

Yet that hasn’t quite happened.

Core inflation -- which denotes consumer prices without food and energy costs -- has actually decreased from 2.5% in 2008 to 1.5% presently. And that has many investors who have heard the siren call of the doom, gloom, and boom crowd wondering if they’re worried about nothing.

So what gives?

Well, there are four reasons we haven’t yet seen hyperinflation:


  1. DavosSherman@gmail.comNovember 5, 2009 at 8:06 AM

    I wouldn't read that article, I found it a waste of time written by someone who doesn't know what inflation is.

  2. A strong case for DE-flation:

  3. A waste of time? Well I'm sure we would all love your analysis and rebuttal of the points raised, if you are willing and able.

  4. The answer is more complicated. I wouldn't be surprised if we entered into another deflationary period in the short term. I could easily see another market collapse and a subsequent collapses in prices next year once the abysmal Christmas sales happen and the commercial real estate collapses.

    However, inflation WILL rear its head with all this monetization. Once we have another global market collapse Stimulus 2.0 will be bigger, meaner, and badder then the first one. So hyper-inflation is coming soon within the next few years. However, another short term deflationary period is in the works.

    Why is this a good thing? Well, it will give you one last chance to buy Gold and Silver at a lower price. However, when I say lower do NOT expect Silver to test its lows of the $8 - $9/ oz range. That is too low and because the cat is out of the bag regarding the U.S. dollar it will NEVER be that cheap. That being said I can see one last buying opportunity at $12 - $13/oz after this next collapse.

    Once it happens GET IN!

    So the question is not "will" inflation occur but rather "when" will it occur?

  5. We are in deflation not inflation. There will be no hyperinflation. EVER! The central bank controls interest rates to ensure that does not happen. Oh wait, I remember Zimbabwe's central bank does the same thing....wait...Now I remember, they don't have a central bank!

    People that talk about hyperinflation are stupid.

  6. People who call other people stupid because they talk about hyperinflation are BIG POOH POOH HEADS!

  7. All fiat currencies die. There are no exceptions throughout history.

    How do they die? Two ways.

    The country or entity doing the printing dies.

    Or the currency becomes worthless because of inflation.

    People that say the dollar will never be printed to death are, well, misinformed.

  8. People who think they are smart because they have latched on to the latest theory they have come across and denouce all others who disagree as stupid are, in fact, rather stupid.

    Hyperinflation has happened so many countless times in history it is not even funny. If I were you I would bite my lip and wait and see what happens. Nothing is written in stone. But history shows us that inflation is more common than any kind of long term deflation.

  9. Of course core inflation went down--nobody is buying anything so they are lowing all the prices. On the other hand, utiities are going up. Food is iffy; you really have to search for good sales. My state of Pennsylvania is short of money, so they are about to double the school tax to pay for gov't pensions. I will have no choice but to eat less in order to save my house, so I'm stocking up now.

  10. Let's share facts happening right now in California, the food basket of the world. Well, the EPA has ordered water be directed from farming to save fish. It means less food. Then let's go South. LA is buying water rights from farmers near the Colorado river flowing through the cannels. So? Fourty percent of the farmers in Riverside County accept. Why? No gas to buy, no workers to hire, less sueing and demands by the government. All you hear about is food shortages. Now you know partly why.
    Another fact: the Surpreme Court has mandated that the prison population be reduced. Reduced in a market where there is high unemployment. Look at the evidence and you can see more chances for inflation that deflation continuing. These are facts not posting to any news because it is not news worthy? Not suppose to alarm the populance?


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