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>hyperinflation is driven by political or economic collapse rather than some vaguely defined irresponsibility. All hyperinflation in modern history has occurre

>hyperinflation is driven by political or economic collapse rather than some vaguely defined irresponsibility. All hyperinflation in modern history has occurred for one reason, and one reason only. That is loss of confidence in currency. Loss of confidence in a currency can be brought about by many reasons, but there is one constant factor. When hyperinflation has occurred in modern history every economy involved was decimated as and when it occurred. Examples: http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hyperinflation http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hype... Is it well-managed? Bernake himself said we're in uncharted terretory: http://www.businessinsider.com/bernankes-2010-qe-2012-8 http://www.businessinsider.com/bernankes-2010-qe-2012-8

chii 13y ago
Is it loss of confidence in the currency that causes hyper-inflation? or that (high) inflation causes the loss of confidence, leading to a downward spiral?
pjc50 13y ago
"Confidence" is not really an economic variable, nor does it magically evaporate. Go through that list of countries; filter out all those where: - it's a very poor third world country (Angola, Zaire, Zimbabwe etc) - countries coming out of Communism (all the 1992 events) or other revolution (revolutionary France) - hyperinflations triggered by war (Germany, Greece etc) - those predating a 20th century understanding of economics You're basically left with South America, which is somewhat exceptional and has a strong connection with the tendancy for revolutions, coups, US interference etc to trigger crises there. US inflation, meanwhile, ticks over at a few percent and is resolutely stable, despite the best efforts of the House to trigger a crisis.
- digitalengineer 13y ago
  Yeah, the US has the massive advantage of being the world's reserve currency (for now). As such they can EXPORT inflation. Se the Wall Street Journal: The Latest American Export: Inflation What do the years 1971, 2003 and 2010 have in common? In each year, low U.S. interest rates and the expectation of dollar depreciation led to massive "hot" money outflows from the U.S. and world-wide inflation. And in all three cases, foreign central banks intervened heavily to buy dollars to prevent their currencies from appreciating. When central banks issue base money to buy dollars, domestic interest rates are forced down and domestic inflationary pressure is generated. Primary commodity prices go up quickly because speculators can easily bid for long positions in organized commodity futures markets when interest rates are low. The world saw a surge in the dollar prices of primary commodity prices in 1971-73 following the Nixon shock of 1971 when the U.S. abandoned the gold standard. There was also a commodity price surge during the Greenspan-Bernanke shock of 2003-04, when the federal-funds rate was reduced to an unprecedented low of 1% followed by a falling dollar. http://online.wsj.com/article/SB10001424052748704405704576064252782421930.html http://online.wsj.com/article/SB1000142405274870440570457606...

chii 13y ago

Is it loss of confidence in the currency that causes hyper-inflation? or that (high) inflation causes the loss of confidence, leading to a downward spiral?

pjc50 13y ago

"Confidence" is not really an economic variable, nor does it magically evaporate. Go through that list of countries; filter out all those where: - it's a very poor third world country (Angola, Zaire, Zimbabwe etc) - countries coming out of Communism (all the 1992 events) or other revolution (revolutionary France) - hyperinflations triggered by war (Germany, Greece etc) - those predating a 20th century understanding of economics You're basically left with South America, which is somewhat exceptional and has a strong connection with the tendancy for revolutions, coups, US interference etc to trigger crises there. US inflation, meanwhile, ticks over at a few percent and is resolutely stable, despite the best efforts of the House to trigger a crisis.

digitalengineer 13y ago
Yeah, the US has the massive advantage of being the world's reserve currency (for now). As such they can EXPORT inflation. Se the Wall Street Journal: The Latest American Export: Inflation What do the years 1971, 2003 and 2010 have in common? In each year, low U.S. interest rates and the expectation of dollar depreciation led to massive "hot" money outflows from the U.S. and world-wide inflation. And in all three cases, foreign central banks intervened heavily to buy dollars to prevent their currencies from appreciating. When central banks issue base money to buy dollars, domestic interest rates are forced down and domestic inflationary pressure is generated. Primary commodity prices go up quickly because speculators can easily bid for long positions in organized commodity futures markets when interest rates are low. The world saw a surge in the dollar prices of primary commodity prices in 1971-73 following the Nixon shock of 1971 when the U.S. abandoned the gold standard. There was also a commodity price surge during the Greenspan-Bernanke shock of 2003-04, when the federal-funds rate was reduced to an unprecedented low of 1% followed by a falling dollar. http://online.wsj.com/article/SB10001424052748704405704576064252782421930.html http://online.wsj.com/article/SB1000142405274870440570457606...