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Sun Apr 29, 2012, 03:44 PM

 

Does deficit spending entail a threat of hyperinflation? No.

In this paper I will argue why the common misconception that “inflation is always and everywhere a monetary phenomenon” cannot be used to explain most historical hyperinflations.

A Historical Review

A review of the modern economic cases of hyperinflation show striking similarities. Most notably, they involved war (the losing end of a war), regime change, rampant corruption or foreign denominated debt. All resulted in catastrophic hyperinflations.

It’s important to note the cause and effect here. These hyperinflations were not merely monetary events. It was not just “high inflation” or excessive government spending. It was a full blown rejection of the sovereign currency. This is a dramatically different set of circumstances than a gradual increase in inflation or a consistent inflation.

Hyperinflations have generally occurred in nations with rampant corruption,
war, regime change, a ceding of monetary sovereignty or other extreme exogenous factors. The “money printing” that generally results is not actually the cause of the hyperinflation. It is merely the result of this exogenous event.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102

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Reply Does deficit spending entail a threat of hyperinflation? No. (Original post)
HiPointDem Apr 2012 OP
Zalatix Apr 2012 #1

Response to HiPointDem (Original post)

Sun Apr 29, 2012, 03:47 PM

1. I believe it can also happen when food shortages or other resource shortages occur.

 

Hyperinflation would destroy the Plutocracy's wealth. They'd lose everything except the gold that they're physically sitting on and can protect.

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