Hyper Inflation May Be Avoided

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This contrarian sees a strong consensus around the notion that hyper-inflation is the inevitable end-game of nation-states / central banks issuing fiat currencies, i.e. currencies that are not restrained by being pegged to tangible assets such as gold reserves. The temptation to issue (via “printing” or borrowing new currency into existence by selling sovereign bonds) more currency becomes irresistible to politicians and central bankers alike. as the means to mollify every constituency, from elites to the military to commoners dependent on state-funded bread and circuses.

This unrestrained creation of new money far in excess of the expansion of goods and services (i.e. the real economy) devalues the currency, as “all the new money chases too few goods and services.” Gresham’s law kicks in–bad money drives good money out of circulation–as precious metals, fine art, gemstones, etc. are hoarded and the depreciating currency is spent as fast as possible before its purchasing power declines even further.

The Cantillon Effect also kicks in: those closest to the spigot of new money get first dibs on converting the depreciating currency into tangible goods, leaving the non-elites to sweep up the “trickle-down” shreds left as the currency loses purchasing power daily.

The consensus holds that there is no way to stop this decay of purchasing power to near-zero, i.e. hyper-inflation, once it starts. As in a Greek tragedy, the fatal flaw of the protagonist–in this case, fiat currency–leads inevitably to its destruction.

In the real world, things having to do with money tend to occur because they benefit powerful interests. This leads us to ask of hyper-inflation: cui bono, to whose benefit? Exactly which powerful interests benefit when a currency’s purchasing power plummets to near-zero?

Charlies Hugh Smith
May 27, 2024
Of Two Minds – Is Hyper-Inflation that Destroys a Currency a “Solution”?

Emphasis in the original.

I found his alternate version of things may turn out intriguing. But as I read his post I became more and more concerned with the question, if things will go a different way because of the “powerful interests” will steer it to something to their advantage, then why has their ever been hyperinflation? Wouldn’t those “powerful interests” have taken those previous (except perhaps the first example of hyper inflation) instances down a different path?

Still something other than hyper inflation as the reset button is something to consider and prepare for.


7 thoughts on “Hyper Inflation May Be Avoided

  1. Powerful interest have their wealth held in things other than the currency being devalued by hyperinflation. The truly wealthy didn’t sweat the great depression, the ones who leveraged their assets to try to become wealthy were the losers and the victims were people with no interest in the market at all.

  2. To me the problem is the dog chasing his own tail. Inflation isn’t a problem when wages keep up. But they never do.
    That and money is the projection of power. Based on pure perception.
    And the laws of the country one finds oneself.
    No one perceives Rupees to be worth much in America. So there not.
    Powerful interests always want more. So they take more, spend more. Always chiseling, making a nickel scream. And in doing so hold back from everyone else.
    America has a different problem as the world’s unofficial reserve currency. We sent dollars all over the world. Far above what we ourselves were using to produce goods and services sold around that same world. Now the only thing we have left to offer some other country is more money. Debt.
    If China is producing everything my country needs to import, why not use Chinese Yuan? Here America, take your debt back. We don’t need it.
    And that excess money gets pushed into an ever-smaller pool of wage earners, goods and services. One we can’t grow out of it because we don’t have the consumer pool to keep up with the return flood. (Part of the reason for bringing in all the criminal aliens? No one in big business seems to be complaining.)
    All that and the second/biggest reason for inflation is that government and a lot of non-essentials make up too large a portion of your economy.
    It’s/they’re a parasite that poisons the system as it grows.
    And hyper-inflation is just the desperation of a dying beast trying to stay alive.
    We may never see hyper-inflation like Weimar Germany. Because American’s no longer have the temperament to politely suffer like we did the last couple times this can got kicked down the road.
    Trying 1930’s style “conspicuous consumption” will get you gunned down in the streets with this crowd.
    For America, the money flooding back in with millions of criminal alien’s spells only one end. And it’s bad. Blood bad.
    Everything else is Kabuki cover-up. Trump, elections, trans-whatever. Biden hypocrisy, nightly news. Even the threat of hyper-inflation.
    Today the currency is in dollars. Soon it could be in bullets. With the threat being hyper-velocity instead of hyper-inflation.

  3. The powerful “elites” will always try to steer things in a direction favorable to themselves. They are not always successful, however, because there are many different factions among the elites spread around the world in different countries, with different and competing family interests, and different assets at their disposal. “They” are not a monolithic block, and all are simultaneously trying to game the system and set up a patsy so when the collapse happens they are not the ones getting hung from lamp-posts as the obvious culprits.

    The top bankers do not care if you string up the local bank-branch exec or teller. They. Do. Not. Care. About. Anyone. Else. But Themselves. They’d be totally OK with thousands of those little people dying to satiate the blood-lust of those who lost everything. What they don’t want is root causes and primary decision-makers being identified and rooted out.

    Certainly hyper-inflation can be avoided. Why do you think the NeoCons are pushing to hard to start a hot war with Russia, preferably going nuclear? Because in that case, all debts, along with a lot of people, get wiped clean. They are confident THEY will survive (debatable if that’s rational or not, many of them do), and they’d rather rule a smoldering ash-heap with a vastly reduced world population as the sole remaining power than share power or not be the biggest fish in the pond.

    • Oh, forgot the example I meant to include: Sometimes hyper-inflation was deliberate, weaponized banking. WWI happened in part because the banking and trade empire of Britain was threatened by German economic power. They conspired with other European nations to take them down. When Germany finally lost the war, the “Allies” imposed draconian economic penalties to further crush and humiliate the German state and people. They rubbed it in their face while the rest of Europe and the US went through the “Roaring 20s”. They engineered the hyper-inflation with the Weimar government, a foreign-controlled non-German lead government, specifically to destroy German industry and morale and cohesiveness. (guess was ethnicity was heavily involved in German banking and leadership?). That was what Nazism rose against.

      The US monetary / banking / industrial system isn’t run for the benefit of the American people, that should be bloody obvious to everyone by now.

  4. I won’t say that power corrupts but it’s undeniable that power attracts those easily corrupted. This includes the positions that control economics and currency. Fiat currency makes it child’s play for those in power to get wealthier quicker. That’s why it always happens. And the inevitable result is economic turmoil and collapse.
    This happens over and over throughout history because we are not an intelligent species. Merely a clever one.

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