6 ms·

You make some really interesting points. Allow me to reply with a bit of speculation: 1) Peruvian, Bolivian, Argentinan hyperinflation were purely printing-pre

You make some really interesting points. Allow me to reply with a bit of speculation: 1) Peruvian, Bolivian, Argentinan hyperinflation were purely printing-press inflations, without forex being the culprit. 2) Inflation is strongly affected by expectations. If everyone think prices will go up 5%, then we all increase salaries/prices by that and we self fulfill the prophecy. 3) 5-10% inflation is actually quite high for modern standards. We are not in the 70s anymore. 4) Lastly, the main point: onxe you get there, there is a high chance that the dollar will lose its place as the world's currency. Then, inflation accelerates and you enter a spiral.

jcranmer 6y ago
The good counterpoint here is Japan, which has insanely high public debt (about 200% of GDP), invented quantitative easing, and has struggled to hit 2% inflation for several decades now. If Japan hasn't been able to hit a hyperinflationary spiral based on its debt-fueled trajectory, then the US (which is far less along that path) isn't going to be hitting it anytime soon.
- Nasrudith 6y ago
  As nuts as it sounds I suspect high levels of debt may be a hint that there isn't enough money printed into the economy and the debt is a symptom. That more supply doesn't drop the demand significantly seems like a hint. I would love to hear counterarguments because this seems odd even to me.
  - bobthepanda 6y ago
    Japan is aging and also had a strong saving culture to begin with. For money to inflate consumer prices, consumers have to be circulating the money around. QE tends to inflate stock prices and real estate, things that institutional investors like sitting on. These however are not necessarily reflected in some measures of inflation; US CPI doesn't include stocks, and it involves what can best be described as a guesstimate for rents. So this may be Goodhart's law in action: "When a measure becomes a target, it ceases to be a good measure."
  - SubiculumCode 6y ago
    I suspect it is quite possible that we can vastly increase the money supply in circulation without vastly effecting inflation. There have been a number of injections of money into the economy over the last decade or so, and inflation has been incredibly stable. Perhaps the world's ability today to rapidly ramp up production to meet increased demand helps keep prices relatively stable. It could be that the complexity in today's economy acts like what is seen in complex ecosystems, where relative stability of the overall ecosystem is maintained by all the built up ecological relations among species.
    - brohee 6y ago
      Inflation is only stable because financial assets and real estate are not accounted for properly IMHO.
pjc50 6y ago
2) is definitely true, and was how Brazil was able to "reset" expectations with the Real. But at the moment, expectations are low? 3) I'm not sure I understand this, other than a question of mapping quantities to sentiment - I don't think it makes sense to say that 10% would be "hyperinflation"? 4) Like the old joke about not having to outrun the bear, who's going to overtake you? Is the Euro sufficiently uncoupled? 2008 financial crisis suggests not. (Possibly the most plausible dystopia is "US becomes a Latin American country", complete with US-backed coup)
- joycian 6y ago
  3) I think their point is that when you are at 10%, it's not probable that it will reverse at that point.
  - pjc50 6y ago
    A bit like the coronavirus, that depends whether the government takes appropriate action and what they've raised rates to by that point. If the government of the US has become too dysfunctional by then, sure; but I continue to not understand why Americans seem to embrace the dysfunctionality and political helplessness. America could choose to fly itself into the twin towers, but it could also .. choose not to?
  - Klinky 6y ago
    I think 3 is flawed in general, since 5% price increase often does not result in 5% salary increase. Wages have not kept up with inflation/CoL especially at the bottom, for decades. Instead, consumption would probably drop, especially for non-essentials. If consumption is low, prices would also probably remain low, or possibly lower, especially for non-essentials. For high-demand essentials, probably supply/demand is more likely to create higher costs, than inflationary sources. Right now I think a lot of people are in hunker-down mode. Without outrageous consumption to increase demand, reduce supply, raising prices and CoL to force increased salary demands, I don't think this self-fulfilling inflation will happen. Maybe the danger is people being overly-flush with cash after COVID-19 passes, but that looks like it'll be pretty far down the road, and I think we're also due for a bubble to pop on Wall Street, which will probably also hamper inflation.

jcranmer 6y ago

The good counterpoint here is Japan, which has insanely high public debt (about 200% of GDP), invented quantitative easing, and has struggled to hit 2% inflation for several decades now. If Japan hasn't been able to hit a hyperinflationary spiral based on its debt-fueled trajectory, then the US (which is far less along that path) isn't going to be hitting it anytime soon.

Nasrudith 6y ago
As nuts as it sounds I suspect high levels of debt may be a hint that there isn't enough money printed into the economy and the debt is a symptom. That more supply doesn't drop the demand significantly seems like a hint. I would love to hear counterarguments because this seems odd even to me.
- bobthepanda 6y ago
  Japan is aging and also had a strong saving culture to begin with. For money to inflate consumer prices, consumers have to be circulating the money around. QE tends to inflate stock prices and real estate, things that institutional investors like sitting on. These however are not necessarily reflected in some measures of inflation; US CPI doesn't include stocks, and it involves what can best be described as a guesstimate for rents. So this may be Goodhart's law in action: "When a measure becomes a target, it ceases to be a good measure."
- SubiculumCode 6y ago
  I suspect it is quite possible that we can vastly increase the money supply in circulation without vastly effecting inflation. There have been a number of injections of money into the economy over the last decade or so, and inflation has been incredibly stable. Perhaps the world's ability today to rapidly ramp up production to meet increased demand helps keep prices relatively stable. It could be that the complexity in today's economy acts like what is seen in complex ecosystems, where relative stability of the overall ecosystem is maintained by all the built up ecological relations among species.
  - brohee 6y ago
    Inflation is only stable because financial assets and real estate are not accounted for properly IMHO.

pjc50 6y ago

2) is definitely true, and was how Brazil was able to "reset" expectations with the Real. But at the moment, expectations are low? 3) I'm not sure I understand this, other than a question of mapping quantities to sentiment - I don't think it makes sense to say that 10% would be "hyperinflation"? 4) Like the old joke about not having to outrun the bear, who's going to overtake you? Is the Euro sufficiently uncoupled? 2008 financial crisis suggests not. (Possibly the most plausible dystopia is "US becomes a Latin American country", complete with US-backed coup)

joycian 6y ago
3) I think their point is that when you are at 10%, it's not probable that it will reverse at that point.
- pjc50 6y ago
  A bit like the coronavirus, that depends whether the government takes appropriate action and what they've raised rates to by that point. If the government of the US has become too dysfunctional by then, sure; but I continue to not understand why Americans seem to embrace the dysfunctionality and political helplessness. America could choose to fly itself into the twin towers, but it could also .. choose not to?
- Klinky 6y ago
  I think 3 is flawed in general, since 5% price increase often does not result in 5% salary increase. Wages have not kept up with inflation/CoL especially at the bottom, for decades. Instead, consumption would probably drop, especially for non-essentials. If consumption is low, prices would also probably remain low, or possibly lower, especially for non-essentials. For high-demand essentials, probably supply/demand is more likely to create higher costs, than inflationary sources. Right now I think a lot of people are in hunker-down mode. Without outrageous consumption to increase demand, reduce supply, raising prices and CoL to force increased salary demands, I don't think this self-fulfilling inflation will happen. Maybe the danger is people being overly-flush with cash after COVID-19 passes, but that looks like it'll be pretty far down the road, and I think we're also due for a bubble to pop on Wall Street, which will probably also hamper inflation.