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> If we get hyperinflation This isn’t hyperinflation, nor is it on the precipice. It’s not in the same ballpark, it’s not in the same league. The only way the

> If we get hyperinflation This isn’t hyperinflation, nor is it on the precipice. It’s not in the same ballpark, it’s not in the same league. The only way the US experiences hyperinflation is if the petrodollar system completely collapses along with several other shocks to the system at the same time. Not impossible, but completely separate and distinct from current fed policy.

lazide 5y ago
It currently isn’t, hence the ‘if’.
- wbsss4412 5y ago
  There are a lot of ‘if’s’ in the world. In the context of this conversation it was pretty clear that this if was indicating some level of real likelihood. My point was that it just isn’t likely at all. No more than it was before this year anyway.
  - lazide 5y ago
    We’ve got one large ‘once in a century’ shock going on now. Bretton woods was less than a century ago. I don’t know how we would even quantify in any real what odds on any of these events practically speaking. Do you?
    - wbsss4412 5y ago
      This isn’t even the biggest inflation shock in the last 50 years. A lot of the inflation we are seeing is due to base effects from last year. Oil prices literally went negative at one point and are only back to pre fracking boom levels.
      - lazide 5y ago
        The last shock in the 70’s caused large scale socio economic changes and power shifts, and the ‘currency’ was brand ‘new’ at the time (less than 20 years since Bretton Woods, still riding high on post WW2 prosperity, etc) The demand collapse and now demand spike we’re seeing only started occurring very recently (less than 6 months ago for the spike), and we don’t know what will happen. We’ve never had anything like it occur in a modern economy at this scale. So probably not going to end the world or anything, but we really don’t have any precedent for this situation.
        wbsss4412 5y ago
        The situation is absolutely unprecedented and it’s going to be a real challenge for policymakers to get the balance right. In retrospect, some level of inflation was going to be inevitable. The question is how to balance it with employment and growth going forward.
        lazide 5y ago
        Agreed. A big question in everyone’s mind i think is if this is ‘permanent’ inflation ‘catching up’ from all the QE and money printing/stimulus, or a temporary spike as pent up demand from the drop last year unblocks and rushes for the door, and will subside afterwards as the larger deflationary (consumer price wise) trend continues afterwards. I personally suspect it will be a 70’s style ‘step’ (down related to buying power of a given dollar, probably not visible in relation to other currencies though, and up in prices), albeit without a strong hike in interest rates that happened under Carter and caused really weird other effects. They didn’t have the overall consumer price deflation due to tech and global trade like we’ve had for awhile now. It would be nice to have a crystal ball, but alas.
wayoutthere 5y ago
COVID, climate change, and near-term high inflation in the dollar are all system shocks that will unravel the petrodollar in pretty short order. We’re following the Argentina school of monetary policy, so it shouldn’t surprise us if we get the same hyperinflation here.
- wbsss4412 5y ago
  Yes, but those are generally long term structural factors, where near term fed policy isn’t the primary driver. The petrodollar system was always going to come to an end at some point, the problem has been that we’ve governed over the last 40 years as though it was a fact of nature.
- boc 5y ago
  Unravel the petrodollar and replace it with what? There are no better alternatives.
  - wbsss4412 5y ago
    At the end of the day, the petrodollar is a geopolitical arrangement, it’s end and subsequent replacement will be drafted to reflect whatever the new geopolitical order comes to be.
    - boc 5y ago
      Which will remain the United States as the sole superpower. China does not have a blue-water navy and won't for another decade+, which means they cannot regulate oil shipping routes worldwide like the USN. Russia can't project naval power outside their region. The entire EU collectively doesn't have close to the naval power that the US does, and does not have the resources to keep routes open. The petrodollar is The Prize the US receives for being willing to enforce global shipping lanes across the world's oceans. Without that overwhelming force, things rapidly collapse as Iran shuts the Strait of Hormuz.
      - wbsss4412 5y ago

lazide 5y ago

It currently isn’t, hence the ‘if’.

wbsss4412 5y ago
There are a lot of ‘if’s’ in the world. In the context of this conversation it was pretty clear that this if was indicating some level of real likelihood. My point was that it just isn’t likely at all. No more than it was before this year anyway.
- lazide 5y ago
  We’ve got one large ‘once in a century’ shock going on now. Bretton woods was less than a century ago. I don’t know how we would even quantify in any real what odds on any of these events practically speaking. Do you?
  - wbsss4412 5y ago
    This isn’t even the biggest inflation shock in the last 50 years. A lot of the inflation we are seeing is due to base effects from last year. Oil prices literally went negative at one point and are only back to pre fracking boom levels.
    - lazide 5y ago
      The last shock in the 70’s caused large scale socio economic changes and power shifts, and the ‘currency’ was brand ‘new’ at the time (less than 20 years since Bretton Woods, still riding high on post WW2 prosperity, etc) The demand collapse and now demand spike we’re seeing only started occurring very recently (less than 6 months ago for the spike), and we don’t know what will happen. We’ve never had anything like it occur in a modern economy at this scale. So probably not going to end the world or anything, but we really don’t have any precedent for this situation.
      - wbsss4412 5y ago
        The situation is absolutely unprecedented and it’s going to be a real challenge for policymakers to get the balance right. In retrospect, some level of inflation was going to be inevitable. The question is how to balance it with employment and growth going forward.
        lazide 5y ago
        Agreed. A big question in everyone’s mind i think is if this is ‘permanent’ inflation ‘catching up’ from all the QE and money printing/stimulus, or a temporary spike as pent up demand from the drop last year unblocks and rushes for the door, and will subside afterwards as the larger deflationary (consumer price wise) trend continues afterwards. I personally suspect it will be a 70’s style ‘step’ (down related to buying power of a given dollar, probably not visible in relation to other currencies though, and up in prices), albeit without a strong hike in interest rates that happened under Carter and caused really weird other effects. They didn’t have the overall consumer price deflation due to tech and global trade like we’ve had for awhile now. It would be nice to have a crystal ball, but alas.

wayoutthere 5y ago

COVID, climate change, and near-term high inflation in the dollar are all system shocks that will unravel the petrodollar in pretty short order. We’re following the Argentina school of monetary policy, so it shouldn’t surprise us if we get the same hyperinflation here.

wbsss4412 5y ago
Yes, but those are generally long term structural factors, where near term fed policy isn’t the primary driver. The petrodollar system was always going to come to an end at some point, the problem has been that we’ve governed over the last 40 years as though it was a fact of nature.
boc 5y ago
Unravel the petrodollar and replace it with what? There are no better alternatives.
- wbsss4412 5y ago
  At the end of the day, the petrodollar is a geopolitical arrangement, it’s end and subsequent replacement will be drafted to reflect whatever the new geopolitical order comes to be.
  - boc 5y ago
    Which will remain the United States as the sole superpower. China does not have a blue-water navy and won't for another decade+, which means they cannot regulate oil shipping routes worldwide like the USN. Russia can't project naval power outside their region. The entire EU collectively doesn't have close to the naval power that the US does, and does not have the resources to keep routes open. The petrodollar is The Prize the US receives for being willing to enforce global shipping lanes across the world's oceans. Without that overwhelming force, things rapidly collapse as Iran shuts the Strait of Hormuz.
    - wbsss4412 5y ago