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I'm still waiting for the hyperinflation Ron Paul and his adherents have been promising for....decades now. If the best they can do is point to Zimbabwe or one

by Frondo 8y ago

I'm still waiting for the hyperinflation Ron Paul and his adherents have been promising for....decades now. If the best they can do is point to Zimbabwe or one or two other developing nations, then I think the concerns about governments printing money are either overblown or entirely off the mark.

supergilbert 8y ago
Look up Weimar Republic
- Jwarder 8y ago
  Someone totally needs to write some fan-fiction where bitcoin running on mechanical computers prevents the rise of fascism.
- _Tev 8y ago
  Nice example of the grasping at straws. Can you actually answer parent's question with an example that is not almost 100years old?
  - JetSpiegel 8y ago
    Germany only finished the Versailles Treaty reparations in 2010. http://www.spiegel.de/international/germany/legacy-of-versailles-germany-closes-book-on-world-war-i-with-final-reparations-payment-a-720156.html http://www.spiegel.de/international/germany/legacy-of-versai...
  - maxlybbert 8y ago
    Are you taking the position that hyperinflation hasn’t happened in the last century, or simply that it only happens in banana republics?
    - _Tev 8y ago
      In last half century, I would say yes. When you get close to 100y ago you get the always-mentioned Weimar, but I don't know about other cases. I would actually like to know more examples other than Weimar/Zimbabwe/Venezuela.
      - maxlybbert 8y ago
        It’s true that well-run countries generally don’t run into hyperinflation, but it’s also true that well-run countries turn into poorly-run countries very quickly (e.g., https://drive.google.com/file/d/0B9_mR_M2zOc4Y2VhNzZkMDQtMDdlNC00YWQ0LWJlYzQtMzAxZjAxMGYxNzM5/view https://drive.google.com/file/d/0B9_mR_M2zOc4Y2VhNzZkMDQtMDd... , feel free to ignore the first page; I’m only focusing on Gödel’s statements about countries turning into dictatorships). The first relatively recent, nonobvious, example of hyperinflation that comes to my mind is Brazil during military dictatorship (which, yes, qualifies as a banana republic). According to Greenspan’s “Age of Turbulence,” Brazil paid for 90% of its budget with taxes and bonds like a well-run country, and printed money to cover the gap. Middle class and upper class workers got contracts with automatic inflation pay raises, but lower class workers did not. Those automatic pay raises created a feedback loop and hyperinflation ( http://www.sjsu.edu/faculty/watkins/brazilinfl.htm http://www.sjsu.edu/faculty/watkins/brazilinfl.htm ). When prices got too crazy, they lopped off a few zeros and renamed the currency (e.g., cruzeiro, cruzado, novo cruzeiro). The solution to the problem was much more straightforward than I would have expected: (1) stop printing money to cover the deficit, (2) convince people that inflation would go away, and (3) get IMF loans to straighten out the government budget ( https://en.wikipedia.org/wiki/Plano_Real https://en.wikipedia.org/wiki/Plano_Real , the loans were quickly paid off). I was convinced we would have high inflation when the Fed increased the money supply during the financial crisis ( https://fred.stlouisfed.org/series/BASE https://fred.stlouisfed.org/series/BASE ). The fact that we haven’t shows that the Fed correctly predicted that people would want more currency on hand because of economic uncertainty, and in fact did a good job predicting the size of the change. I’m impressed that they did such a good job, but I’m not convinced they always will. I wouldn’t get rid of the Fed, and I don’t have any money in gold or any other inflation hedge. But I don’t expect our current low inflation to last forever (since the Fed has been targeting a higher inflation rate than we’ve seen, I don’t think the low inflation rate is proof that the Fed has complete control of things; it is arguably proof of the Fed’s limits to get what it wants).
mkirklions 8y ago
Decades are not very long for debt. People usually hold bonds for decades. The issue will come in when the cost to pay interest exceeds revenue. We would need debt to pay back debt, it will be THEN that we have hyper inflation. If you have historical examples where this was avoided without printing money or invading a country, I'm interested.
triviatise 8y ago
The current debt is 20T, the current money supply is about 6T. The inflation is guaranteed to happen. One reason why it has not is that we are the reserve currency so other countries have to have large US dollar reserves to buy oil. As the world is weaned off oil, demand for US dollars will drop. At the same time we will have to print money to pay off the debt.

by Frondo 8y ago

supergilbert 8y ago

Look up Weimar Republic

Jwarder 8y ago
Someone totally needs to write some fan-fiction where bitcoin running on mechanical computers prevents the rise of fascism.
_Tev 8y ago
Nice example of the grasping at straws. Can you actually answer parent's question with an example that is not almost 100years old?
- JetSpiegel 8y ago
  Germany only finished the Versailles Treaty reparations in 2010. http://www.spiegel.de/international/germany/legacy-of-versailles-germany-closes-book-on-world-war-i-with-final-reparations-payment-a-720156.html http://www.spiegel.de/international/germany/legacy-of-versai...
- maxlybbert 8y ago
  Are you taking the position that hyperinflation hasn’t happened in the last century, or simply that it only happens in banana republics?
  - _Tev 8y ago
    In last half century, I would say yes. When you get close to 100y ago you get the always-mentioned Weimar, but I don't know about other cases. I would actually like to know more examples other than Weimar/Zimbabwe/Venezuela.
    - maxlybbert 8y ago
      It’s true that well-run countries generally don’t run into hyperinflation, but it’s also true that well-run countries turn into poorly-run countries very quickly (e.g., https://drive.google.com/file/d/0B9_mR_M2zOc4Y2VhNzZkMDQtMDdlNC00YWQ0LWJlYzQtMzAxZjAxMGYxNzM5/view https://drive.google.com/file/d/0B9_mR_M2zOc4Y2VhNzZkMDQtMDd... , feel free to ignore the first page; I’m only focusing on Gödel’s statements about countries turning into dictatorships). The first relatively recent, nonobvious, example of hyperinflation that comes to my mind is Brazil during military dictatorship (which, yes, qualifies as a banana republic). According to Greenspan’s “Age of Turbulence,” Brazil paid for 90% of its budget with taxes and bonds like a well-run country, and printed money to cover the gap. Middle class and upper class workers got contracts with automatic inflation pay raises, but lower class workers did not. Those automatic pay raises created a feedback loop and hyperinflation ( http://www.sjsu.edu/faculty/watkins/brazilinfl.htm http://www.sjsu.edu/faculty/watkins/brazilinfl.htm ). When prices got too crazy, they lopped off a few zeros and renamed the currency (e.g., cruzeiro, cruzado, novo cruzeiro). The solution to the problem was much more straightforward than I would have expected: (1) stop printing money to cover the deficit, (2) convince people that inflation would go away, and (3) get IMF loans to straighten out the government budget ( https://en.wikipedia.org/wiki/Plano_Real https://en.wikipedia.org/wiki/Plano_Real , the loans were quickly paid off). I was convinced we would have high inflation when the Fed increased the money supply during the financial crisis ( https://fred.stlouisfed.org/series/BASE https://fred.stlouisfed.org/series/BASE ). The fact that we haven’t shows that the Fed correctly predicted that people would want more currency on hand because of economic uncertainty, and in fact did a good job predicting the size of the change. I’m impressed that they did such a good job, but I’m not convinced they always will. I wouldn’t get rid of the Fed, and I don’t have any money in gold or any other inflation hedge. But I don’t expect our current low inflation to last forever (since the Fed has been targeting a higher inflation rate than we’ve seen, I don’t think the low inflation rate is proof that the Fed has complete control of things; it is arguably proof of the Fed’s limits to get what it wants).

mkirklions 8y ago

Decades are not very long for debt. People usually hold bonds for decades. The issue will come in when the cost to pay interest exceeds revenue. We would need debt to pay back debt, it will be THEN that we have hyper inflation. If you have historical examples where this was avoided without printing money or invading a country, I'm interested.

triviatise 8y ago

The current debt is 20T, the current money supply is about 6T. The inflation is guaranteed to happen. One reason why it has not is that we are the reserve currency so other countries have to have large US dollar reserves to buy oil. As the world is weaned off oil, demand for US dollars will drop. At the same time we will have to print money to pay off the debt.