Sunday, August 29, 2010

Zero Hedge Explains How Hyperinflation Could Happen

Zero Hedge: How Hyperinflation Will Happen.

Notice my title says "could", the actual article says "will". They are smarter than I am, but I still hedge my predictions. The point of the article is pretty scary, because it draws a distinction between "inflation" and "hyperinflation". Hyperinflation is not simply inflation gone wild. Here are the key quotes:
Inflation is when the economy overheats: It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena.

Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money—they want less of the currency: So they will pay anything for a good which is not the currency.

(Author's italics emphasis. Bold is my emphasis.)

So, you know that nagging feeling you have that this is not going to end well? This is why.

No comments:

Post a Comment