Could the Weimar Hyperinflation Happen Again in America?

This is a discussion on Could the Weimar Hyperinflation Happen Again in America? within the Economic & Fundamental Analysis forums, part of the Methods category; Originally Posted by virtuos0 The whole premise of the thread makes no sense, monetary and fiscal policy allows the choice ...

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Old Feb 15, 2010, 11:17pm   #372
 
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Re: Could the Weimar Hyperinflation Happen Again in America?

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Originally Posted by virtuos0 View Post
The whole premise of the thread makes no sense, monetary and fiscal policy allows the choice between the two paths of inflation and deflation. So COULD it happen? Yes of course.

The real question is, which of the two paths of inflation and deflation allow for the government to maintain power and avoid blame..
The government (actually governments in the plural) are helpless.
That was the point of what I posted from Steve Keen. What's going to happen is going to happen, regardless of what the governments of the world do. All they can do is keep the pain from destroying civil society.
That was a challenge in the Thirties, and it will again be a challenge over the course of the next ten to twenty years.
If they listen to the folks who focus solely on government fiscal deficits or central banks "printing money", as if that matters in times like this, civil society will be destroyed. If not, not. That was what Keynes figured out in the Depression, and it's still true.
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Old Feb 16, 2010, 6:12am   #373
 
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Re: Could the Weimar Hyperinflation Happen Again in America?

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Originally Posted by Benton D Struckcheon View Post
The government (actually governments in the plural) are helpless.
That was the point of what I posted from Steve Keen. What's going to happen is going to happen, regardless of what the governments of the world do. All they can do is keep the pain from destroying civil society.
That was a challenge in the Thirties, and it will again be a challenge over the course of the next ten to twenty years.
If they listen to the folks who focus solely on government fiscal deficits or central banks "printing money", as if that matters in times like this, civil society will be destroyed. If not, not. That was what Keynes figured out in the Depression, and it's still true.
Governments are not helpless when it comes to the choice between deflation and inflation. Post Lehman the UK and US have chosen to avoid deflation via fiscal policy (reducing the rate of VAT in the UK, cash for clunkers) and via monetary policy (QE and lower interest rates), what they have tried to achieve is to cancel out the private sector deleveraging, to arrive back at 0-2% inflation as we had pre-crisis. This was the middle way.

The other two choices were either to let things run their course and allow deflation, or to keep monetising debt and using loose fiscal policy to creat high or even hyper inflation.

Of course as the debt to GDP increases fiscal and monetary policy becomes more and more difficult to wield for various reasons (zero real bound on interest rates, difficulty in selling debt) but if the government really wants to it can ALWAYS inflate out of a looming deflation as debt monetisation has no upper bound.
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Old Feb 16, 2010, 2:49pm   #374
 
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Re: Could the Weimar Hyperinflation Happen Again in America?

Interesting comments from Blanchflower and pretty much similar to what a number of bloggers on this site have been saying.


Inflation accelerates to 3.5% in the UK


I would repeat the main solution out of this mess is

1. low interest rates - monetary side
2. higher taxation - fiscal side

policies to stimulate investment and curtail inflationary pressures...

In the process modest inflation in our scenario is likely to be beneficial.

Without higher taxes, with continued growth impact of low interest rates and higher fuel prices will mean inflation kisses 2% goodbye...

As for credit - we now have negative interest rates - which means bring your purchase decision forward.

GBP is likely to fall with respect to other currencies.


imo - In the absence of tax rises - I would raise interest rates in April for sure...


As for the contras out there - it is unfathomable how anyone can state (and gloat ) we are in deflation at +3.5% inflation with falling money supply...
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Old Feb 16, 2010, 3:26pm   #375
 
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Re: Could the Weimar Hyperinflation Happen Again in America?

once again attilla your lack of observation has failed you. this thread is about america not the uk....
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Old Feb 16, 2010, 3:36pm   #376
 
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Re: Could the Weimar Hyperinflation Happen Again in America?

Quote:
Originally Posted by virtuos0 View Post
Governments are not helpless when it comes to the choice between deflation and inflation. Post Lehman the UK and US have chosen to avoid deflation via fiscal policy (reducing the rate of VAT in the UK, cash for clunkers) and via monetary policy (QE and lower interest rates), what they have tried to achieve is to cancel out the private sector deleveraging, to arrive back at 0-2% inflation as we had pre-crisis. This was the middle way.

The other two choices were either to let things run their course and allow deflation, or to keep monetising debt and using loose fiscal policy to creat high or even hyper inflation.

Of course as the debt to GDP increases fiscal and monetary policy becomes more and more difficult to wield for various reasons (zero real bound on interest rates, difficulty in selling debt) but if the government really wants to it can ALWAYS inflate out of a looming deflation as debt monetisation has no upper bound.
That last is what you might call Bernanke's Helicopter Hypothesis, which is being tested in real time by all of this. My bet is he's wrong, for the reasons Steve Keen lays out, and which conform to my experience of how banking actually works.
Keen flays Bernanke pretty severely for his alleged expertise on the Great Depression, btw. You should go over there and have a look.
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Old Feb 16, 2010, 4:05pm   #377
 
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Re: Could the Weimar Hyperinflation Happen Again in America?

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once again attilla your lack of observation has failed you. this thread is about america not the uk....
Thank you for pointing that out I am aware. May I counter by stating that if you look carefully on your keyboard you will find a CAPS LOCKS key or if your are reasonably coordinated a shift key that will allow you to use capital letters for names of countries like America and the UK.

Lack of observation and effort leaves a lot to be desired from the the same old Genics with chip on his shoulder - who lacks typing skills and comprehension...

However, I'm sure that is the last of your problems considering your grammer with one sentence attention defecit disorder...


Read the thread from the beginning and see how many references there are to the UK. Then tell me when you woke up to the fact this thread is only about the US???


As for that matter - US and UK economies facing same old issues; budget & BoP defecits, massive government debt - two countries at war with aging popullation and impending health crises.


How is your homework come along?
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Old Feb 16, 2010, 5:07pm   #378
 
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Re: Could the Weimar Hyperinflation Happen Again in America?

Of course ultimately a true HYPERinflation can only really be caused by a complete loss of confidence in the currency causing a popualtion to attempt to shift entirely into 'real' assets. Or in other words a drop in the demand for money (hoarding) to zero or almost zero, causing the price of money (purchasing power) to fall to zero.
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