FinancialGuy Writes!

Can You Say Hyperinflation?

Guess where I think the world financial system is heading? And if you want a good reason for my thoughts, take a look at this link: BBC NEWS | Business | US debt clock runs out of digits

How big a clock will the American system need?

And, if it happens to the US, how will the rest of us fare? Can we escape a similar fate? Will the US dollar soon become the American Peso?

Sure, any comparison with Zimbabwe seems a little far fetched. But once inflation gets hold of an economy it is very difficult to stop. Of course I may be totally wrong. After all, the US has volatile asset prices in markets and a plummeting real estate market. So really I should be using the dreaded ‘s’ word…

Stagflation.

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Comments

  1. Hyperinflation is generally caused by a massive monetary shock — a war, government printing a huge amount of money, investors dumping the currency causing it to lose value.
    Whatever problems the US has, we are a zillion miles away from hyper inflation’s.Current inflation in the US runs 3% per year — hyper inflation is 50% a month — so about 12,875% per year. That’s a whole lot higher than 3%.

  2. I think that you answered your own question there…

    To quote, “Hyperinflation is generally caused by a massive monetary shock — a war, government printing a huge amount of money, investors dumping the currency causing it to lose value.”

    A war = Iraq and Afghanistan

    Government printing huge amounts of money = need for expanded debt clock in story above / financial bail out / current account and trade deficits

    Investors dumping the currency = Long term, the dollar has been falling in value very steadily. Perhaps people have been selling! In the short term, it is strong against the euro, but will that last?

    A much more interesting question would be whether anyone (anywhere) really believes that the 3% +/- number for US inflation is real. I don’t believe it for a moment, but perhaps I am wrong.

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