I wonder what this means

From here:

I still haven’t done all the economics reseach I keep meaning to do so I’ll just dump a few quotes from the source and let someone else interpret the data:

To say this situation is unprecedented does not do justice to the word.

Hyperinflation, or even strong inflation predictions in the near term look rather silly in the face of this data unless one is only looking at the printing and not the destruction in credit.

Think consumers are about to go on a spending spree after a massive $13.87 trillion collapse in net worth? Think banks are going to start lending with this employment picture and household debt? I don’t and boomer demographics makes the situation even worse. Don’t forget the bleak employment picture. There is no source of jobs.

Those who get hyperinflation out of this picture must be reading the playbook in Bizarro World because it sure is not the playbook here.

Sleep well.

4 thoughts on “I wonder what this means

  1. I guess I’m just not smart enough for all this.

    My understanding of inflation is that it is a decrease in the value of currency. In hyperinflation, this occurs to the point that everything gets so ridiculously expensive that it takes wheelbarrows full of cash to buy a loaf of bread. I read somewhere that Zimbabwe recently started printing million dollar bills because the value of their currency had decreased so much.

    The value of anything is based on supply and demand. If the supply goes up but the demand remains constant, the value goes down. Likewise, if the demand goes down with the supply remaining constant the value goes down.

    Right now, from what I understand, the supply is going up but at a fairly modest rate (so far…as China and the rest of the world slows down on funding our deficit, the only way the .gov will have to pay the bills is print more money, so expect that to change in the near future). But according to the linked article, the demand for money in the form of credit is decreasing rapidly.

    It’s not that the banks won’t lend, it’s that people who could afford to borrow, aren’t. The economic scares, the threats of layoffs, and the dcrease in overall net worth caused by the collapse in the housing market and in stocks, are all convincing people that this is not the time for new debt, it is the time to tighten the belt and get that debt paid off.

    So…the demand for money (credit) has SHARPLY decreased, but they are saying that this indicates DEFLATION?

    This flies in the face of my understanding of how it works. Decrease in demand with no decrease in supply leads to decrease in value…not increase.

    I’m no economist, perhaps there’s just some aspect of this that I’m not getting.

    Perhaps the author’s contention is that the banks WON’T loan money, which leads him to believe that there is a restriction in supply…which would lead to increased value and deflation. If that’s his contention, I’d say, based on the number of credit card applications I get every day and the loan rates still being offered to entice people to borrow money…he’s full of crap.

    The money is there to loan, The banks want to loan it. The demand simply isn’t there right now. That spells inflation, not deflation as far as I’m concerned.

    If an economist would care to enlighten me as to the flaw in my logic, I’m all ears.

  2. That’s why I keep telling people, we’re not going to see hyperinflation. We ARE going to see strong inflation because the relative cost of imports, and especially commodities. I expect something like 6%. We’re also going to see rapidly rising interest rates, and a general malaise in credit markets.

    That’s all bad, but it’s not hyperinflation bad.

  3. Oh, and regarding Zimbabwe’s hyperinflation:

    On January 16, 2009, Zimbabwe announced plans for imminent issue of banknotes of $10 trillion, $20 trillion, $50 trillion, and $100 trillion. At the time of the announcement, the latter was valued at ca. 30 US dollars, but that value is expected to evaporate swiftly.

    Hyperinflation in Zimbabwe

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