Home > Uncategorized > The Obsession with Hyperinflation

The Obsession with Hyperinflation

Look, this guy is saying the same thing I am!

What, however, if banks (or more precisely: their shareholders) are no longer willing or in a position (because of equity capital shortage) to lend and take additional credit risks?

Or even worse for the adherents of relentless monetary expansionists: What if commercial banks, despite high excess reserves, start calling in maturing loans and contract the credit supply? This would actually lead to a shrinking of the money stock — and cause deflation.

If the central bank purchases bonds, the original issuers of the bonds will have to keep paying interest and principal to the central bank. Such payments reduce the money supply in the form of M1 and M2 over time.

In other words, by purchasing bonds, the central bank just postpones the inevitable — namely, the shrinking of the fiat-money supply through contractual debt (re)payments on the part of borrowers (“deleveraging”).

But then somehow comes to the exact opposite conclusion!!!

The ongoing attempt to keep down the interest rate to prevent the fiat-money stock from declining could easily lead toward a policy of high inflation, even hyperinflation.



Categories: Uncategorized
  1. September 20, 2011 at 4:37 am

    Well, couldn’t we expect a short-term deflationary spiral followed by a period of high inflation or hyperinflation?

  2. Free Radical
    September 20, 2011 at 6:30 pm

    But how are they going to create that hyperinflation? Austrians just seem to end everything with “and then they print a bunch of money and cause hyperinflation.” It’s not that simple. Could they do it? Yes. But they would have to completely change the money creation mechanism or else continue to expand the public debt exponentially forever which there doesn’t seem to be the political will for at the moment.

  3. September 20, 2011 at 10:28 pm

    Well, couldn’t you use deficit spending and the printing press to get out of the deflationary sprial? Then you would have a period of high inflation right afterwards?

  4. Free Radical
    September 21, 2011 at 7:12 pm

    Yes, that’s what I mean by “expand the public debt exponentially forever.” But if you’re willing to do that there’s no reason it has to be “hyperinflation” in the sense that is usually meant by that (prices rising rapidly and uncontrollably) you could theoretically just inflate the money supply enough to get inflation in line with expectations and call it good. An Austrian might say “but the money supply expanding exponentially is really hyperinflation” but that’s basically just a semantic argument and is entirely beside the point as I see it.

  5. February 6, 2013 at 8:16 am

    Meiner Meinung nach ist die Elite voll und ganz aus Ihrem Zeitplan rausgekommen.Genau gomenmen mfcssten wir schon le4ngst beim Zeichen des Tieres aus der Johannes Offenbarung angelangt sein. Wenn man bedenkt das Bush Senior bereits 1991 f6ffentlich das in Kraft treten der NWO verkfcndete, merkt man das das ganze Prinzip dieses Polizeistaates auf Sand gebaut ist.Das einzige was ich beffcrchte, ist der zwar notwendige Wandel durchs Volk , aber die Gefahr der dadurch entstehenden Verfolgung der Christen.Doch auch das, muss eigentlich so geschehen, denn die Bibel lfcgt bekannlich nicht. Bis Himmel und Erde vergehen, wird nicht vergehen der kleinste Buchstabe noch ein Tfcpfelchen vom Gesetz, bis es alles geschieht.93 Matthe4us 5.17-18

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