
The US is going into hyperinflation - gautamcgoel
https://seekingalpha.com/article/4371490-united-states-is-going-hyperinflation
======
jrg123
This guy does not seem like the greatest of prognosticators. He is extremely
(wrongly) bullish about metals.

Avino Silver & Gold Mines Providing Investors An Opportunity To Enter At A 50%
Discount ([https://seekingalpha.com/article/4207912-avino-silver-
gold-m...](https://seekingalpha.com/article/4207912-avino-silver-gold-mines-
providing-investors-opportunity-to-
enter-50-discount?source=all_articles_title)) -- ASM fell from 0.62 at the
time to a low of 0.30 just before the pandemic

[https://seekingalpha.com/article/4241519-stock-market-
recove...](https://seekingalpha.com/article/4241519-stock-market-recovery-is-
dead-cat-bounce?source=all_articles_title)
[https://seekingalpha.com/article/4215321-6-reasons-
why-2019-...](https://seekingalpha.com/article/4215321-6-reasons-
why-2019-will-be-nightmare-for-stock-investors?source=all_articles_title) \--
SPY +31% for 2019

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JavaBatman
Hyperinflation usually occurs for one of two reasons:

1\. Supply-side shocks such as disruptions in oil production, food production,
etc. that cause shortages, leading to massive spikes in price. This happened
in the 1970s during the oil crisis and led to stagflation. Zimbabwe had a
crisis in food production, leading to hyperinflation.

2\. Lots of foreign-denominated debt. Latin American countries experience
hyperinflation because their debt is usually in USD rather than their domestic
currency. Printing money to service foreign debt leads to hyperinflation.
Weimar Germany had this problem when attempting to pay back the foreign-
denominated debt reparations.

It's very rare to see demand-induced hyperinflation. That occurs when
countries print way beyond the capacity of their economy to handle. If the US
was at full capacity utilization and full employment, then an increase in the
money supply beyond that would lead to inflation. But currently, the US is
nowhere near full employment or full capacity utilization, so the threat of
high inflation/hyperinflation is - to put it bluntly - nonsense.

You could make the argument that the stock market is overvalued because of
current policy, but that is not hyperinflation.

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gmuslera
As long as it can print its own money without a serious devaluation (because
the dollar is the standard international currency) it shouldn't happen.

The money won't lose its value. International goods will keep their prices in
dollars, won't be an inflation on that side, so anything from outside won't
get more expensive.

Trillions has been suddenly printed, in 2008 and this year, without making a
big change in how expensive are things. If you try that, in those numbers, in
any other country, you may face a big surge in inflation.

~~~
jmnicolas
> without making a big change in how expensive are things

Stocks beg to differ.

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christophilus
This is debatable. The end of our monetary path is probably not great. But
with every major currency doing some form of QE, the ultimate outcome is
uncertain. The current velocity of money seems to point to deflation in the
near term. If inflation picks up, the Fed has a number of tools at their
disposal. I distrust anyone who speaks confidently of the future in this
arena.

~~~
panarky
Exactly right. Macro economics 101 provides the identity

    
    
      MV = PQ
    

where M is the money supply, V is the velocity of money, P is the price level,
and Q is national output.

So it's true that if you hold V and Q constant, then an increase in M will
lead directly to increasing prices.

But in the chart linked below, you can see that the V fell off a cliff at the
same time M increased.

[https://fred.stlouisfed.org/series/M2V](https://fred.stlouisfed.org/series/M2V)

Looks more deflationary than inflationary to me.

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nine_zeros
I'm not fully convinced about a hyper inflation along the lines of Weimar
Republic or Venezuela or even Argentina levels inflation for that matter.

However, I understand that this is only and only because of US dollar being
the global reserve. The real outcome of this is that all countries that
handled covid better and are back on track economically, now are richer,
because the US dollar is poorer. They can either choose to provide more
liquidity in their system, thus raising their GDP or just stay rich with
higher currency values.

Either way, Americans are poorer. And maybe deservedly so given the
mismanagers that have been running the country.

~~~
dragonwriter
> However, I understand that this is only and only because of US dollar being
> the global reserve.

No, historically it's because the US dollar supply is actively managed with
moderate inflation as a key goal. Now, the range of other policy options
enabled consistent with that, yes, has benefited from the US dollar being a
global reserve currency.

The Fed has recently made announcements that seem to indicate that it is
weakening focus on the price side of it's mandate to do more on the employment
side (to, in effect, compensate for Congress’ failure to marshal fiscal polict
to deal with that.) If there is unusual inflation, that active choice of
monetary policy priorities—not debt or deficits—will be the proximate cause.

But even in that scenario, hyperinflation is unlikely unless the Fed
completely abandons the price level side of it's mandate in setting monetary
policy.

~~~
nine_zeros
What makes you think other countries with rapid inflation don't manage
currency supply?

If the monetary base suddenly doubles, the money will trickle down soon
enough.

In US dollars case, it will trickle down to people and almost all other
countries. Those countries will have more dollars in reserve, thus raising
value of their currency or giving them low interest rates or ability to print
even more.

This is extremely evident in the case of emerging markets like China. They
will now get even more printed dollars in reserve and the only way to absorb
it all is to print more yuan and allow more money to flow through China's
economy, thus increasing wealth of the hundreds of millions still in poverty.

~~~
dragonwriter
> What makes you think other countries with rapid inflation don't manage
> currency supply?

They do. But on the (fairly rare) occasion of hyperinflation, they aren't
managing it focussing on price levels, but some other objective, usually one
or both of juicing short-term economic performance without regard to price
levels or monetizing debt.

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jklinger410
The US has been hiding it's inflation for a while now. If you compare the
quality of products vs the price of europe compared to the US, it's not even
close.

~~~
systemvoltage
I am not sure if I follow your logic about quality of products and what that
has to do with inflation.

~~~
voisin
Imagine if it costs $2.00 for a 200g Kit Kat bar and ten years later it still
costs $2.00 for a Kit Kat bar but they’ve shrunk the size to 160g. Size is an
attribute and companies are working feverishly to alter attributes while
staying as close to a price point as possible (consumers are much more focused
on objective price point than subjective attributes and largely ignore
objective measures like grams in a chocolate bar).

There is massive inflation, just not in first order pricing but rather in
second order pricing-to-[insert attribute] ratio.

I think even casually observing your purchases over time will yield a
conclusion that you are spending approximately the same for “less” in most
(but not all) areas of your life.

