share your best reasoning for why Hyperinflation won't happen in the U.S.
PreTurb
Posts: 1,193 ✭✭✭
Please share with everyone your best reasoning for why Hyperinflation won't happen in the U.S.
Mine is: The financial services & investment industry is HUGE. There are TONS of people reliant on the whole system "the way it is". Not to mention those in power politically. Tons of 401K money being constantly (mindlessly) pumped into the system buying stocks, etc. Most of the public (95% ?) is totally ignorant as to what may or may not be going on financially with Wall Street, currencies, or commodities, the rest of the world, ect. Busy watching TV. So the public is unlikely to cause a "run" on the dollar/banks. Yes, the US has huge debt. So does everyone else. The way I see it, we are in a global "the emperor has no clothes" situation - but no one - ever - is going to call the emperor on it.
Mine is: The financial services & investment industry is HUGE. There are TONS of people reliant on the whole system "the way it is". Not to mention those in power politically. Tons of 401K money being constantly (mindlessly) pumped into the system buying stocks, etc. Most of the public (95% ?) is totally ignorant as to what may or may not be going on financially with Wall Street, currencies, or commodities, the rest of the world, ect. Busy watching TV. So the public is unlikely to cause a "run" on the dollar/banks. Yes, the US has huge debt. So does everyone else. The way I see it, we are in a global "the emperor has no clothes" situation - but no one - ever - is going to call the emperor on it.
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That can change very fast. The American People are not as dumb as Wall Street thinks they are.
Box of 20
<< <i>So the public is unlikely to cause a "run" on the dollar/banks. Yes, the US has huge debt. So does everyone else. The way I see it, we are in a global "the emperor has no clothes" situation - but no one - ever - is going to call the emperor on it. >>
What happens when the following countries become wise to the fact they are never going to get paid back.
Something has got to give when the U.S. defaults on these monstrous obligations.
1. Hyperinflation will not happen as long as foreign countries/investors keep buying our debt.
2. Hyperinflation will happen as soon as foreign countries/investors stop buying our debt.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
when common folk do not want dollars, then it is time to worry
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
The only way it won't happen is if the currency is reanchored, altered, tossed in a new basket of currencies/commodities for an SDR, or devalued before it does happen.
roadrunner
In the near term, next five years, we will probably continue to bear the brunt of a collapse in property prices and a big debt overhang. That's not inflationary, though the government's response of printing money like crazy might cause it to be.
'Doctor Doom': US Treasuries now the 'mother of all bubbles'
US Treasuries Bubble
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
<< <i>Simple answer to this question....
1. Hyperinflation will not happen as long as foreign countries/investors keep buying our debt.
2. Hyperinflation will happen as soon as foreign countries/investors stop buying our debt. >>
I agree and I'll also say choice #2 will definitely happen.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Somebody answered the same question when I asked them with the answer above. Would be funny if it weren't so sad.
It's human nature to attempt to avoid the unpleasant. The politicians practice this craft to the furthest possible point.
Normal working people try to ignore the fact that the government is going to reneg on every promise that has ever been made to them. There will be a default on all government obligations, and whether that is an "official" default or a "silent" default via printing money - the effect is the same. Loss of purchasing power.
Our abundant resources and economy has cushioned us from the harsher aspects of a currency collapse, but we now have a system that is rife with vulnerabilities in the supply chain, the public health system, home security, national security, the means of production, and the social fabric.
Americans are resilient, but we are going to be tested.
I knew it would happen.
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Yeah, what MJ said.
roadrunner
<< <i>Hyperinflation would be the result of a currency event/collapse and perhaps nothing else. Draw your own conclusions about the dollar. MJ
Yeah, what MJ said.
Yeah, what RR said that MJ said.
Hyperinflation will be more the result of lack of demand for the dollar than it will be oversupply of the dollar (although it's really the same thing).
The article in this thread explains it really well.
People are not buying what this economy is able to produce...... Not even close......
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
<< <i>Because we love our country and have faith in it as the economic leader of the world. >>
Now say it like you mean it! Or is Larry Kudlow channeling you?
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>
<< <i>Because we love our country and have faith in it as the economic leader of the world. >>
Now say it like you mean it! Or is Larry Kudlow channeling you?
Sounds like wishful thinking to me.
P.S.---I also love my country but I'm also a realist.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
This thread caused me to learn something interesting today, as I recalled a comment made popular by Hillary Clinton a few years ago. There is actually a philosophical concept that relates to the OP. I contend that - if you can be convinced that mathematics can be managed to yield whatever answers you need, then you believe hyperinflation can be avoided, in spite of massive debt buildup. From Wikipedia:
Suspension of disbelief or "willing suspension of disbelief" is a formula named as such in English by the poet and aesthetic philosopher Samuel Taylor Coleridge to justify the use of fantastic or non-realistic elements in literature. Coleridge suggested that if a writer could infuse a "human interest and a semblance of truth" into a fantastic tale, the reader would suspend judgment concerning the implausibility of the narrative.
The phrase "suspension of disbelief" came to be used more loosely in the later 20th century, often used to imply that the onus was on the reader, rather than the writer, to achieve it. It might be used to refer to the willingness of the audience to overlook the limitations of a medium, so that these do not interfere with the acceptance of those premises. According to the theory, suspension of disbelief is a quid pro quo: the audience tacitly agrees to provisionally suspend their judgment in exchange for the promise of entertainment. These fictional premises may also lend to the engagement of the mind and perhaps proposition of thoughts, ideas, art and theories.
I knew it would happen.
Rising interest on the ever-increasing debt keeps eating up more and more of the productive output of the economy. It's a math problem and math is pretty much immutable.
I knew it would happen.
<< <i>As in the Weimar Hyperinflation, the citizens had no faith in their Government. It had sold them out to the Allies, and was look at as essentially a joke. For the USA to look that way we would have to be a basket case in our eyes as well as by the rest of the world. If you think that is the case then you have in fact "suspended all belief" in the economy of the world, not just the USA. If that is the case, you probably get your information from some non-reputable source. >>
You don't think that the US is a "basket case" right now? Things are bad, and getting worse, not better. To think that the rest of the world does not see this is only wishful thinking. I will give you that things here might look bad but things are worse elsewhere. Things are also better elsewhere, but it will always be the case that other places are better or worse than we are.
In 2008/09 the local mall was nearly empty! Only about 1/2 the stores were open for business and the rest were walled up. This last week, I went to the mall and every store was open, and there were many people in them. Sure it's hot in Tucson so the A/C in the mall is a draw, but you tell me with real honesty if things are worse than what they were in 2008/09.
Things are actually getting better. The recent jobless numbers only added about 35K to unemployment, which in the grand scheme is about flat-line. That's equivalent one major company laying off.
<< <i>We won't have hyperinflation in the near to medium term because the FED cannot print enough money to replace all the credit destruction. In fact, higher capital requirements for the banks ensures this. >>
What do you see in the long run?
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
I've defined inflation as the ratio of money available to the total amount of goods / services that an economy can produce. Essentially how much money supply do we have in our country vs what's available to purchase. Hyper inflation is the excessive monetary over supply.. (but wait.. didn't the fed.. hold on a sec, let's walk through this)
I realize people can disagree on that definition and it's important to define hyperinflation / inflation as part of this discourse. If you disagree on the definition, please advise.
What metrics / data do I use to determine the relative level of goods / services available?
1) Supply: Unemployment is an easy one to indicate supply. With 10% unemployment, there's obviously a lot of people "on the bench" that could produce more "stuff" for consumers / businesses to buy. That's the metric that indicates "over supply of supply" If there was demand, employers would hire them. The red herring about how business can't predict the regulatory environment and therefore are not hiring is nuts. Small business owners are smart, they will only turn down so many orders then they will hire or purchase equipment to meet the order.
2) Money: Here's the hard part. Big numbers are hard for people to fathom, plain and simple, it's part of being human. It happens to smart people / average / not so smart people. Abstract thinking is a relatively new feature of the brain. Take this for example: $$Historical Supply of $$$ in USA How can the average educated person make sense of that? Hard, but in the numbers there's a lot info, the average increase in money supply for saving accounts, stocks, bonds etc... another good one Banking Reserves
When you look at the above data, you see why I smile when I read that the stimulus was "large.". Compared to what? My paycheck Yes, My State's budget, Yes; The total economic out of the country (GDP) No, The total monetary supply, No, not at all. It was extremely small. That's the problem.. it used to be that a billion here and a billion there and we're talking real money.. now it's trillion here , trillion there.
Since people have trouble with large numbers, 800 B looks big b/c we are unfamiliar with it. 20 bucks was a HUGE birthday present. My son asks for a P3 game, 60 bucks, doesn't even occur to him that's 3x larger than the HUGE gifts I got....that's just in a short 25 years..
Bottom Line:
Not much change in the aggregate money supply that people use to buy stuff, but a huge change in the availability of goods and services (over supply) make stuff and invest in stuff. We are not heading for hyper inflation, plain and simple. Deflation is a much higher risk.
I realize if you're without a job the aggregate statistics don't matter....
when I owe the bank 200,000 on my mortgage, they own me... When I owe the bank 8 trillion dollars, I own them
a stable monetary system is in everyone's interest, no one wants to quickly move reserve currencies. If / or when it happens, it will happen slowly, predictably and with a "plan"
The EU has shown its really just the central bank of Germany, not the whole EU. That's significant from a reserve perspective, much less attractive after seeing what happened.
<< <i>Curious how we are going to see hyper inflation?
I've defined inflation as the ratio of money available to the total amount of goods / services that an economy can produce. Essentially how much money supply do we have in our country vs what's available to purchase. Hyper inflation is the excessive monetary over supply.. (but wait.. didn't the fed.. hold on a sec, let's walk through this)
I realize people can disagree on that definition and it's important to define hyperinflation / inflation as part of this discourse. If you disagree on the definition, please advise. >>
I disagree because you ignore that other side of the equation... demand.
Hyperinflation can exist because of lack of demand for dollars. Let's say something happens to the US to cripple it's economy suddenly overnight... a nuclear (or other type of) attack, a massive earthquake or tsunami hitting the entire west coast, massive civil unrest, etc, or perhaps just a string of moves by Washington that destroys or diminishes confidence in the future of the US. Then let's say I have commodities for sale. Do you think I want US dollars? Heck no! In order for me to take your USD, you're going to have to give me WAY more of them, because by the time I get around to spending them on something else, they will (or might be) worth less than when you gave them to me. Call it a risk premium. If you pay me in silver, I don't have to worry about what I can buy with it next month. You pay me in USD, and now I'm taking a chance, so I'm going to want more of them... and the cycle begins...
And where are these orders going to materialize from? It's not a red herring to avoid taking on debt and hiring more people when the government is promising to tax the crap out of all your efforts to the extent that you are simply working harder, for longer hours and less money.
I knew it would happen.
<< <i>The red herring about how business can't predict the regulatory environment and therefore are not hiring is nuts. Small business owners are smart, they will only turn down so many orders then they will hire or purchase equipment to meet the order.
And where are these orders going to materialize from? It's not a red herring to avoid taking on debt and hiring more people when the government is promising to tax the crap out of all your efforts to the extent that you are simply working harder, for longer hours and less money. >>
It's not a red herring. You're correct that at some point a business will go ahead and hire a person if they reallly need them, but they are going to wait longer and tax their existing employees longer - or delay expansion - longer than they would otherwise. Whereas a small business owner may estimate a $50k annual cost for hiring an employee, they will make sure they can recoup that cost and more with the additional productivity. But with uncertaintly about actual costs looming, they'll likely raise that estimate to $60k or $70k.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
this is a great answer. I'd add, "we won't have hyperinflation in the near to medium term because the economy is awash in excess goods and services, while the tendency of the people and corporations, in an uncertain tax and regulatory environment, is to save, not spend, and to reduce debt, not add to it"
Liberty: Parent of Science & Industry
<< <i>I'd add, "we won't have hyperinflation in the near to medium term because the economy is awash in excess goods and services, while the tendency of the people and corporations, in an uncertain tax and regulatory environment, is to save, not spend, and to reduce debt, not add to it" >>
And I'd suggest that we are not awash in excess goods (but maybe services and labor). Thie bad economy is now going on 2 years or so, and inventory levels for most goods are not high or excessive, although there are limited exceptions. No one is overproducing in this environment.
I will also suggest that we could have almost instant hyperinflation if the government willed it (how likely this is is a different discussion). Remember the $1000 checks Bush sent to everyone? As was stated in a recent thread, deflation would be a choice that the government would have to make, and I just don't think they'd choose deflation. To counter deflation, one solution is Washington could easily issue new and bigger checks to everyone and have them out within weeks.
The Treasury/FED/Big Banks definitely can't print enough money but they can keystroke ANY amount of money they want into existance in any time frame they desire. And by keystroking such liquidity and shuffling it around, it can be effectively hidden. One cannot use the standard Monetary Supply markers anymore as the only means to decipher liquidity injections. The banks got the money first via TARP and other FED programs. They have used that money to further push inflation in commodities, stocks, and bonds. They certainly didn't use that money to help bolster durable goods, home prices, or small business ventures.
While Joe Six Pack is watching M1 and M2 for signs of a impending "big inflation" over the past 2 yrs, the PTB have probably injected the equivalent of $10-$20 TRILL into slush money around the world. How come that doesn't show up in the monetary aggregates? Note that while M1 and M2 showed only moderate increases of 10-20% increases over the past 2 yrs., M0 went from $830 BILL to $2 TRILL....a nifty 140% jump. The banks got to use that money as balance sheet collateral while continuing to play their various markets unabated with TARP and other ransom money.
roadrunner
<< <i>
Our abundant resources and economy has cushioned us from the harsher aspects of a currency collapse, but we now have a system that is rife with vulnerabilities in the supply chain, the public health system, home security, national security, the means of production, and the social fabric.
>>
You sound much like the politicians you criticize.
Lots of scary words, no data or facts to back them up. Everyone's entitled to opinions, not facts
@ DoubleEagle59
<< <i>
Gold has worked down from Alexander's time ... When something holds good for two thousand years I do not believe it can be so because of prejudice or mistaken theory. (Bernard M. Baruch)
>>
I agree with your quote, it stores value, nothing more...you don't make anything off of it...
<< <i>
1. Hyperinflation will not happen as long as foreign countries/investors keep buying our debt.
2. Hyperinflation will happen as soon as foreign countries/investors stop buying our debt.
>>
@pmcollector
Again, evidence would be helpful. These bond vigilantes must be stupid, they keep buying treasuries at lower and lower rates.
We were told by no other than WSJ that interest rates on bonds would soar WSJ Debt Concerns Send Treasuries....
and finally a little bit of sense on the whole issue
Bond Vigilantes
HarleyWookie
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
From that Bond Vigilantes article:
But all of this also proves the point about the former vigilantes becoming deficit cheerleaders. Banks and investors would look for other places to park their cash if federal bonds were considered dangerous or likely to become illiquid because of borrowing concerns. That’s obviously not the case.
To which I ask, what is the alternative to the Treasury market for fund flows of size? There's the money markets (no yields!), there's real estate (which is illiquid as all heck *and* colossally overvalued, still), there's equities (what the vigilantes are allegedly running from in the first place), there's forex (the least ugly girl at the dance? no thanx), and then there's commodities....
The market for Treasurys is in the trillions, whereas commodities are what, tens to hundreds of billions? The ratio of markets has to be at least 10:1, if not 20:1 or more.
Another article linked here sometime back made the case that the physical coined bullion mkt simply did not have the spare capacity to settle bullion orders of even $5m (they weren't talking about COMEX trading though). I think one of the main reasons that "flight-to-safety" flows have gone to Treasurys is the fact that it can handle liquidity flows of this magnitude. There's simply not much of an alternative.
The only bond "vigilantes" are the FED, Brits, Channel Islands, and other friends of Ben. They don't care what the rates are, they just buy when they are told to do so.
roadrunner
<< <i>I agree with your quote, it stores value, nothing more...you don't make anything off of it... >>
To the true goldbug it's not about making money, it's all about preserving wealth.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
How much of GDP do you think we should eat up in interest payments on the debt? It's at record levels already and still going higher. And that doesn't even include the unfunded liabilities that will ultimately have to be monetized or defaulted on. You know, the little stuff like Medicaid and Social Security - those nagging little details?
Keep in mind that the huge debt is currently being carried at extremely low interest rates which are being held low by bogus purchases from phantom buyers. As rates rise, the interest obligations on that debt (which is still ballooning too) will double, triple and quadruple as the interest rates go from 1%, to 2%, to 3%, to 4% on longterm treasuries.
Harley, you can tell me that wasting $800 billion on bogus spending here and $800 billion on welfare for crooked bankers there - is extremely small, you can tell me that GM & Chrysler management, pensioners and union workers didn't milk the taxpayers dry and shouldn't have been jettisoned, you can tell me that AIG, Goldman Sachs, BoA, Countrywide, Citi and Wells Fargo (and the people who work for them) aren't parasites and should be given a free ticket to paradise, you can tell me that Barney Frank & Chris Dodd haven't been screwing every single taxpayer continually for years in the Fannie & Freddie Fiasco, but I sure as heck don't need a government chart to tell me whose digging us into the biggest hole we've ever been in because I've been paying for it, and it sure looks like that's not going to change. Don't give me your government excuses, it's a government-caused disaster, no way around it.
I knew it would happen.