Saturday , 15 June 2024

High Inflation is Coming but Hyperinflation is Highly Unlikely – Why is That? (+3K Views)

People get confused about the nature of mass inflation, hyperinflation, and what causes both. [Let me clarify the nature and causes of each.] Words: 930

So says Shaun Connell ( in edited excerpts from his original article* which Lorimer Wilson, editor of (Your Key to Making Money!), has edited below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.

Connell goes on to say, in part:

What is Hyperinflation?

Historically speaking, hyperinflation is essentially always a political event. Someone loses a war, the government collapses, socialists take over — some huge dramatic political event happens that triggers the hyperinflation. After this huge event, the politicians in charge generally begin printing money and dishing it [out] many times more than existed the year before… as inflation begins to pick up, the leaders then also generally speed up the printing.

First, high inflation and hyperinflation are different. I think we’re going to see high inflation over the next five to ten years — unless something goes very, very wrong with the economy, that is, but that’s not hyperinflation.

Hyperinflation is when people spend money as fast as they can because it’s losing value on a daily or weekly basis. In other words, it’s when savings of any sort become ]the] stupid [thing to do]. That’s absolutely, absolutely not the case right now. People who understand the value of cash have made a killing, because we’re not yet in a hyperinflationary economy.

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Why Hasn’t Hyperinflation Hit Yet?

Hyperinflation isn’t going on right now. Some prices are going through the roof, but nothing close to what it would be like in hyperinflation, especially not since some other prices are staying steady or dropping. Sure, inflation is occurring– but not hyperinflation.

Hyperinflation hasn’t hit yet for several reasons:

  • Credit dried up: Credit [hasn’t been] what it used to be since 2008. We went from credit being something anyone could get to it being almost impossible for…[much] of society to get loans. That might be bad economics, but that’s deflationary and the Fed and even Congress’ printing hasn’t put enough money into the economy at a rate fast enough to counteract much of the loss in the supply.[…]

In our economic system, debt is currency…[and while] it’s a horrible system that creates huge bubbles that have to burst…[causing] recessions/depressions and, during recessions/depressions, credit dries up. Banks are afraid to lend money. That means deflation kicks in. So if $500b in loans are not lent out, then we’re going to have deflation — even if the Fed lowers interest rates. That’s just the world we live in, for better or worse.

  • Printing is “too” slow: For hyperinflation to hit, [the Fed and other central banks] will need to issue much, much more currency…[than what is being loaned out] — and that is just not going to happen anytime soon. If hyperinflation happens, it won’t be because of anything currently in the news. If anything, we’re about to [encounter] more deflation — especially because of what’s going on in Europe.

…During QE2, when the Fed essentially bought government debt with newly “printed” currency, the impact was minimal because the purchased debt was just put on the Fed’s books… it’s essentially the government paying the government money. In other words, that money isn’t in circulation yet, and probably won’t be in circulation to the extent [necessary] to trigger anything like hyperinflation…

In a world where debt is money, a drop in the availability of new credit is essentially a drop in the money supply and that’s why hyperinflation hasn’t hit, and won’t hit, unless something drastic happens.

Can the Fed Cause Hyperinflation?

The Fed doesn’t print money and most likely can’t “create” inflation. They can only allow inflation to be created — but that requires the banks to do a bunch of lending. That’s not going on and during a recession, it won’t happen…

[With] Quantitative Easing…the Fed [has been] trying to play duct-tape with the economy, and that’s not working. Basically, the Fed is running out of bullets.

Why didn’t this QE create massive velocity and explode consumer prices more than the jump that it did cause? The reason is pretty simple… the Fed just bought US debt, but it’s still on the balance sheets. When they did that, the reserve requirements suddenly changed. That’s why even Ben admitted that the QE really didn’t achieve anything except a psychological impact.

Just because there’s more money on the Fed’s balance sheets doesn’t mean that that same money will hit the market. Here’s a simple explanation:

If the government printed $1 Trillion dollars and sent that cash to the moon, would that create massive inflation? Of course not. That money is on the moon [and] that’s one of the reasons QE2 hasn’t had the huge impact many thought it would… the overall amount of money in circulation barely changed.


The most important thing you can learn from this article is this:

The Fed can’t print money at will. It can only lend money out when there’s a demand for credit [to] buy certain assets already in existence – and during a recession, it’s very, very hard to lend that money out.

The above being the sase, hyperinflation is very unlikely to happen in the United States [or elsewhere in the developed world, for that matter,] in the very near future. We’re absolutely going to suffer from inflation, and we have plenty of malinvestment bubbles created by the Fed [and other central banks], but the end result is going to be stagflation rather than hyperinflation.

* (To access the article please copy the URL and paste it into your browser.)

Editor’s Note: The above article has been has edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.

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