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How Hyperinflation Will Happen

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  • #31
    Re: How Hyperinflation Will Happen

    Originally posted by Sharky View Post
    The author at ZH also posted a follow-up article:

    It seems to me, though, that a sudden increase in commodity prices isn't enough to trigger true hyperinflation -- we already went through that in 2008. Even losing confidence in Treasuries isn't enough by itself. No, there also has to be a loss in confidence in the currency.
    Yes, exactly. Excellent point about 2008; Hank Paulson demonstrated how well the system is controlled.

    You put your finger on the crux of the issue-- hyperinflation is a loss of faith in the legal tender. I rather like FOFOA's take:

    "Most simply stated, credibility inflation is the expanding confidence in the fiat financial system to always deliver a higher payoff tomorrow than today. And through credibility inflation we ultimately destroy the currency structure by believing it can somehow deliver more than reality will allow.

    Credibility inflation is the exact antithesis of price inflations like the 1970's. It is why we saw low consumer price inflation for the last 30 years relative to the massive monetary and financial product inflation. It is partly why we saw gold stagnant or falling for 20 years. Yet it is just as much a product of monetary inflation as regular price inflation is (more on this in a moment). And it is much more catastrophic in the end.

    Periods of high credibility inflation are generally not followed by smooth cycles of credibility DEflation. Instead, they tend to SNAP BACK into sudden real price inflation when confidence abates. What happens in the most extreme cases is real price HYPERinflation."