Mish thinks you need some major trouble like losing a war and paying reparations to get hyperinflation. The US won the Revolutionary War, did not pay any reparations, and still had hyperinflation. Remember, "not worth a Continental"? There was hyperinflation in the South during the Civil War. So I think it is fair to say that America has had hyperinflation twice already. As someone pointed out in the comments, there were more cases of hyperinflation in America's colonial period. I also think that if the US had not made it illegal to own gold in 1933 that the Fed would have gone bankrupt
, because they did not really have enough gold to back all of the notes they had issued, and that paper money would have become worthless then too. The US was not in a war in the 30s. Hyperinflation is more common than most people realize. The time periods from the Revolutionary War hyperinflation, to the Civil War hyperinflation, to the 1930s currency crisis, to now, are all similar. To me this looks like some major currency crisis cycle is about due.
Mish will say that the Fed cannot give money away or spend it and that banks only want to lend to credit-worthy businesses but those and consumers are still deleveraging. So Mish can not see how the Fed can put money into the economy. He is not seeing that the government has no real limit on the amount they can borrow and spend. They have a debt limit but they increase it anytime they get close, so it is not a real limit. This government deficit spending, financed by the central bank making new money, is the real source of inflation but Mish never talks about it.
Mish does not think the US central bank would willingly destroy their currency. He thinks this alone debunks hyperinflation. Why did that same logic not protect all the other central banks from making hyperinflation? The government writes the laws, appoints the people to the central bank, and controls the guns. When the government is desperate for money from the central bank they get it. But also remember that the central bank is created by the government. If the government collapses because it does not have enough money to pay for things, the central bank will probably go down as well. The survival of the central bank does depend on the survival of the government. I think this is the core of why central bankers risk their currency to support their governments.
Mish thinks it is silly to compare the US to Weimar Germany or Zimbabwe hyperinflations because the situations are so different. Hyperinflation happens because debt gets over 80% of GNP and deficit gets over 40% of spending. It does not matter how you get into that situation. Hyperinflation works the same if you lose a foreign war, a civil war, a dictator goes crazy, a government with excessive foreign debt, nationalizing too many businesses, rampant corruption, productive collapse, excessive regulation, a regime change, too many taxpayers fleeing high taxes, a massive depression, or whatever. It just matters that the government is spending nearly twice what they get in taxes and has already borrowed more than is reasonable. When they are in this situation they can not borrow more, except from the central bank under their control. So they get the central bank to make money and give it to them.
Mish thinks that the US having around $400 billion in gold would prevent a complete loss of faith in the currency. It does not matter how much gold the US is holding if they are spending 50% more than they get in taxes. They will have to keep printing money, so there is not a finite amount of paper money. With a constantly increasing quantity of paper money it is not possible to hold any fixed exchange rate of dollars to gold. It is the debt and deficit and the fact that when the government will always get the central bank to print money and buy government bonds when things get desperate that causes hyperinflation.
Mish thinks people would not decide to have hyperinflation. I don't believe there has ever been a "decision to have hyperinflation". Hyperinflation is when things get out of control. It is not something central banks or government voted on. No group in government or a central bank has had a show of hands like "all in favor of hyperinflation raise your hands". Not the way hyperinflation happens. Hyperinflation is a market response to government debt over 80% of GNP and deficit over 40% of spending when the central bank starts printing money and buying up government debt. Everyone thinks they just need to print a bit more money to make it through the next week or month and there is nothing else they can do since the government needs money to keep in operation. Nobody votes for hyperinflation. Nobody wants it. It just happens.