Hyperinflation does not require money in the system, either by "quantity" or "velocity". If I go to Wal-Mart with a bunch of currency that I created and try to buy something, the clerk won't take my money. I have created relatively little, and none of it is in circulation. And yet, my money that I created is in a state of hyperinflation.
LOSS OF FAITH IN THE FIAT CURRENCY IS ALL THAT IS REQUIRED. And it won't take months or weeks. We're talking days or even hours.
Very good point. The "Loss of Faith" concept is a valid and very plausible scenario. I'm intending to do a "Part 3" soon and will include your observations in it. Thanks for the response!
Ben may be able to create inflation by dropping money out of a helicopter. But so far he hasn't done that. He is only giving it to super rich bankers. They already have a lot of stuff and can only consume so much, so deflation is coming until Ben gets out the helicopter.
craterman: You're right. And if Ben starts dropping money out of his copter, he will be diluting the value of the money he passed-out to his banker buddies (making them less rich). The Fed could start dropping money (mailing-out checks to everyone in the form of a "rebate") in an effort to "prime the pump" more, but I think Ben now realizes that there is a high probability he will destroy the current system by doing so. We'll just have to wait and see how desperate Ben and company really are.
My hyperinflation thesis is based on monetization of the debt, while the deflation thesis relies on worsening economic conditions (depression, default, mortgage crisis, etc.).
Hi Kyle: I'm thinking like you on China. Their economic model is based on making stuff cheap (labor arbitrage) and selling it to other countries. I've read that they have built vast amounts of manufacturing capacity that is now sitting idle. Also, they are still a "command and control" economy, run by a communist political system. Does anyone really believe that "central planners" can get it right?? I'm not sure I believe the numbers published by their government!!
Hyperinflation does not require money in the system, either by "quantity" or "velocity". If I go to Wal-Mart with a bunch of currency that I created and try to buy something, the clerk won't take my money. I have created relatively little, and none of it is in circulation. And yet, my money that I created is in a state of hyperinflation.
LOSS OF FAITH IN THE FIAT CURRENCY IS ALL THAT IS REQUIRED. And it won't take months or weeks. We're talking days or even hours.
surferaw949 1 year ago
Very good point. The "Loss of Faith" concept is a valid and very plausible scenario. I'm intending to do a "Part 3" soon and will include your observations in it. Thanks for the response!
watcherjohnny 1 year ago
Ben may be able to create inflation by dropping money out of a helicopter. But so far he hasn't done that. He is only giving it to super rich bankers. They already have a lot of stuff and can only consume so much, so deflation is coming until Ben gets out the helicopter.
craterman01999 2 years ago
craterman: You're right. And if Ben starts dropping money out of his copter, he will be diluting the value of the money he passed-out to his banker buddies (making them less rich). The Fed could start dropping money (mailing-out checks to everyone in the form of a "rebate") in an effort to "prime the pump" more, but I think Ben now realizes that there is a high probability he will destroy the current system by doing so. We'll just have to wait and see how desperate Ben and company really are.
watcherjohnny 2 years ago
My hyperinflation thesis is based on monetization of the debt, while the deflation thesis relies on worsening economic conditions (depression, default, mortgage crisis, etc.).
curtatlanta 2 years ago
Hi Kyle: I'm thinking like you on China. Their economic model is based on making stuff cheap (labor arbitrage) and selling it to other countries. I've read that they have built vast amounts of manufacturing capacity that is now sitting idle. Also, they are still a "command and control" economy, run by a communist political system. Does anyone really believe that "central planners" can get it right?? I'm not sure I believe the numbers published by their government!!
watcherjohnny 2 years ago