Every time the US dollar ticks lower, commodity prices tick higher, or the CPI rises two tenths of a percent, hyperinflationists come out of the woodwork with nonsensical predictions and silly comparisons to Zimbabwe or Weimar Germany.



Given that the US dollar recently fell to the lower end of its trading range, hyperinflationists once again came forth with their message of impending doom.



Silly Comparisons to Weimar Germany



Please consider The Time to Prepare for Hyper-Inflation is BEFORE It EXPLODES

by Graham Summers.

The similarities between the US today and Weimar pre-hyperinflation are striking. As in Weimar, US fiscal authorities are not taking any steps to rein in their loose money policies. Similarly, the US Fed, like Germany’s financial elites believes that currency depreciation is a good thing.



Thus we have a rather frightening set-up for hyperinflation in the US: the largest emerging market players are moving away from using the US Dollar at the same time that US monetary authorities are engaging in disastrous policies similar to those employed by the men who brought hyperinflation to Weimar Germany.



I firmly believe the US will see serious (‘70s style inflation) if not hyperinflation within the next 2-3 years. It could come sooner depending on how the Fed’s policies play out.

Similarities? What Similarities

Germany lost World War I

The Treaty of Versailles imposed repayment conditions on Germany that could not be met

To enforce the treaty, France occupied parts of Germany

Germany printed money so fast people burnt stacks of money for heat

Reserve Currency and Trade Nonsense





Indeed, it was just revealed that ASEAN+3 countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, China, Japan, and South Korea) are researching the prospect of a “common currency” similar to the Euro.



The significance of this development cannot be overstated.

Significance of Asean Currency Proposal Wildly Overstated

Real but Meaningless

Confident Predictions

By March of 2011, once higher commodity prices reach the marketplace, monthly CPI will be at an annualized rate of not less than 5%.

By July of 2011, annualized CPI will be no less than 8% annualized.

By October of 2011, annualized CPI will have crossed 10%.

By March of 2012, annualized CPI will cross the hyperinflationary tipping point of 15%.

CPI Check

A Good Laugh Now

2012 will be the bad year: I predict that hyperinflation’s tipping point will be no later than the first quarter of 2012. From there, it will accelerate. By the end of 2012, I would not be surprised if the CPI for the year averaged 30%.



By that point, the rest of the economy—unemployment, GDP, all the rest of it—will be in the toilet. By that point, the rest of the economy will no longer matter: The collapsing dollar will make 2012 the really really bad year of our Global Depression—which is actually kind of funny.



It’s funny because, as you know, I am a conservative Catholic: I of course put absolutely no stock in the ridiculous notion that “The Mayans predicted our civilization’s collapse in 2012!”—that’s all rubbish, as far as I’m concerned.



It’s just one of those cosmic jokes that 2012 will turn out to be the year the dollar collapses, and the larger world economies go down the tubes.



As cosmic jokes go, all I’ve got to say is this:



Good one, God.

John Williams on the Weak Dollar

The Energy Report

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JW:





Mish Response:



JW:

Mish Response:

JW:

Mish Response:

TER:

JW:

Mish Response:

Predictions

Lira sees hyperinflation starting now, and it will be in full swing in 2012 with the CPI up at least 15% and as much as 30% or more. Williams says "hyperinflation will happen as soon as 2014" Summers sees "serious (‘70s style inflation) if not hyperinflation within the next 2-3 years."

Myopia

Massive Inflation in China

US Total Credit Market Debt Owed

US M1

Money Supply



Total Consumer Credit

Total Loans and Leases of Commercial Banks

Hyperinflation is a Political Event

Daily Capitalist

In every modern case of hyperinflation the decision to inflate was a political one, not an economic one. In almost every case hyperinflation followed a war or a coup or some massive political change such as the end of the Soviet empire or the rise of a dictator or a populist-socialist takeover, and other political unrest.



In the 20th Century there were quite a number of hyperinflationary events. I used the Wikipedia list of modern hyperinflations (Since WWI) and researched the political circumstances of each country. The circumstances can be put into three rough categories: post-war disruption, post-Soviet collapse, and socialist-populist regimes.







For example we all know what happened in Germany during after WWI when politicians, mostly socialists, blamed all their problems on reparations and continued to print so much money that it resulted in the famous cash-in-a-wheelbarrow photos. They literally had no clue what they were doing.



The post-Soviet empire collapse is easier to understand as former communist/socialist regimes fought for power and struggled with economic policy. Many of these countries have reformed or were forced to reform their monetary and fiscal policies.



Many of the socialist-Marxist regimes were Latin American populist governments who employed “revolutionary” anti-capitalist nostrums for economic policy. Chile (Allende) and Argentina are good examples. Argentina has had years of high inflation to hyperinflation since 1980. In Africa most countries were a mixture of strongmen with socialist-Marxist policies. I am not suggesting that these were pure socialist governments, but rather the typical situation where the government seizes or controls large parts of industry and issues regulations controlling much economic activity.



These hyperinflations all had one common denominator: during a period of instability, spending was used as a political tool and it got out of hand. I understand that the circumstances of each country were different and that it is perhaps unfair to say, lump Israel in with Argentina. But each country faced political factors that created instability or a national crisis; the government spent heavily to gain popular support, and resorted to the printing presses to pay for their spending.



Zimbabwe vs. Weimar

Can The Fed Cause Hyperinflation?

Hyperinflation Would End The Game

Hyperinflation by definition would destroy the currency and thus the banks

Hyperinflation would destroy the wealthy and all their corporate bond holding

Hyperinflation would destroy the Fed

Hyperinflation would destroy the wealthy political class

could

Hyperinflation? No Way

The Federal Reserve is not going to push the economy into Zimbabwean hyperinflation. That's pure bunkum. The Fed's plan is to weaken the dollar to boost exports and to force China to let its currency appreciate to its fair-market value. By purchasing $600 billion in US Treasuries (QE2), the Fed effectively reduces the supply of risk-free assets, which sends investors into riskier assets like stocks and commodities. Is there an element of class warfare in the policy?



You bet there is. It's a direct subsidy to the investment class while workers are left to face higher prices on everything from gasoline to corn flakes. It's a royal screw job. But while Ben Bernanke may be a prevaricating class warrior and a charlatan, he's not insane. He's not going to shower the nation with increasingly-worthless greenbacks like they were confetti.



It's ridiculous to wail about "money supply" when velocity is zilch. It's pointless to crybaby over "bank reserves" when people are broke. It's crazy to yelp about "printing presses" when lending is down, credit is contracting and the economy is mired in the most vicious slump in 80 years.



The hullabaloo about inflation is vastly overdone. China's not going to dump its $3 trillion stockpile of mainly USD and US Treasuries. Who started that cockamamie story? China's doing everything it can just to keep its currency cheap just so to keep its people working. Are they suddenly going to do an about-face and commit economic harikari just to strike a blow against Uncle Sam? No way.

Gold

Charles Hugh Smith vs. FOFOA

If we take it as axiomatic that hyper-inflation is a political process, then we have to conclude that hyper-inflation serves some powerful interests who would support the policies that would bring it to fruition.



My problem with the "hyper-inflation is inevitable" school of thought is that I cannot identify what powerful interests would gain from the destruction of the currency and all financial wealth. A hyper-inflationary wipeout certainly wouldn't benefit the Financial Power Elites who hold the vast majority of the financial wealth. Yet it is this very Elite which wields the preponderance of political power.



Thus you end up with this untenable conclusion: the politically powerful Financial Elite will consciously choose to self-destruct. I don't buy that as a likely scenario. If inflation started destroying their wealth, then they would instantly influence political policy to reverse course to preserve their wealth.

How will "the Elite" profit from hyperinflation? By being the first to spend the bills with new zeros added and thereby outrunning the rest of us in the race to spend and winning the competition to retain standard of living. Hyperinflation is the end result of the dollar-debt timeline, there is no other way it can end. Only the severity is a variable to be considered.

Ackerman Convinced by Nonsense

Incredible! Three decades of bad assumptions, yet all that it took to persuade his self-defining outlook him was an article on anonymous blog. All of a sudden, hyperinflation is "entirely consistent with human nature."



Out of the deep freeze and into the fire.



But what of non-hyperinflationary Charles Hugh Smith, who three weeks earlier had been a model for him? Gone!

Stack of Things Missed by Hyperinflationists

Trade math Reserve currency math Credit dwarfs currency and changes in credit and the value of credit are far more important than the changes we have seen in money supply.

Failure to understand pricing currency of oil is meaningless Misconceptions about excess reserves (Please see Fictional Reserve Lending for a discussion).

Not understanding limits and restrictions on the Fed Not understanding limits and restrictions on Congress Failure to understand peak oil will not cause hyperinflation. Heck, peak oil will not even cause inflation. Inflation in China, does not constitute inflation in the US. Unfunded liabilities do not constitute debt Myopia - The US is not the only country with massive structural problems. Let's stop pretending otherwise Failure to understand the Fed will not destroy itself and the banks by allowing hyperinflation

Theory vs. Practice

theoretically

In theory there is no difference between theory and practice. In practice, there is.

Deflationists Won the Bet

again

Inflation vs. Deflation