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Sunday, August 29, 2010

How Hyperinflation Will Happen

(Illustration from this article at Cato)

From ZeroHedge (h/t to More's Lawyer), a clear explanation of potential Big Ugliness; sample:

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...But hyperinflation is not an extension or amplification of inflation. Inflation and hyperinflation are two very distinct animals. They look the same—because in both cases, the currency loses its purchasing power—but they are not the same.

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...
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Read it all.

Still socking it away for retirement?

Perhaps some more thinking is in order.

3 Comments:

Anonymous Abstemio said...

His description of "inflation" versus "hyperinflation" is not accurate. Inflation is the increase of the money supply leading to the devaluation of currency. Hyperinflation is merely a severe and rapid devaluation of the currency.

Inflation, contrary to what the U.S. Treasury, and perhaps this author, (though he is not deliberately deceiving anyone) would have you believe, is not some "general rise in prices" due to some mysterious unknown force, or of an economy in search of scarce commodities. A rise in the price of commodities which are in high demand is merely an example of the proper functioning of an economy, as the market allocates resources to the people who have the highest demand for them.

August 29, 2010 at 4:37 AM  
Anonymous GardenSERF said...

Hyperinflation in the "near" future would not benefit the transnationalist elite at this time. Also, Abstemio is right on his points; and Americans would confuse inflation vs hyperinflation. Example: If gasoline suddenly rose to $9/gal (due to a new oil shock or whatever) then leveled off, that is NOT hyperinflation. However, there would be the usual howls on the internet: "Omigosh, we're in a period of hyperinflation!" Nope. Not even close.

I'm still sticking with that we're at least 10 years off before hyperinflation is in the cards for Americans:

http://gardenserf.wordpress.com/2010/06/10/the-price-fake-pior-to-inflation-war/

You always have to ask yourself: WHO would benefit from hyperinflation and is the TIMING right for them?

August 29, 2010 at 1:26 PM  
Anonymous Defender said...

CNN reports that one in five Americans is on some form of government dole (their choice of words).
Big Media is at least beginning to foreshadow the coming Bad Things. For now, they seem to be calling us lazy takers sponging off the government from whom all blessing flow. I wonder whether they include people collecting a fraction of the Social Security they paid into for decades, people collecting unemployment insurance benefits they paid into for decades... Not a lot of information on how we got here. Global economy. Overregulation of small business, which is the source of most jobs. Big Business robber barons.

August 31, 2010 at 12:09 AM  

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