Hyperinflation is here to stay
I would be missing out on getting in line to opine since Jack Dorsey sent the twitter sphere and the web into a tail spin since last week and continuing into this week. Numerous public figures and economists and piled on him since his tweet declaring that there is hyperinflation.
Some ridiculing him to others agreeing with him but it all depends on how you look at it. Even Janet Yellen had to calm the waters by saying that the “US is keeping inflation under control.” I do not see the difference from this and Fed President, Jerome Powell spouting the “Inflation is Transitory” malarkey.
In the real world, most people would agree that the prices of everyday goods and services have risen exponentially. Of course, it all depends on what you buy and what you use to measure it with. As economists use their beloved CPI numbers which are backdated and not really accurate to measure a group of people.
According to Investopedia.com;
Hyperinflation refers to rapid and unrestrained price increases in an economy, typically at rates exceeding 50% each month over time.
Hyperinflation can occur in times of war and economic turmoil in the underlying production economy, in conjunction with a central bank printing an excessive amount of money.
Hyperinflation can cause a surge in prices for basic goods—such as food and fuel—as they become scarce.
While hyperinflations are typically rare, once they begin, they can spiral out of control.
The above definition explains that we are in a period of hyperinflation despite comments stating the contrary.
Even Prof. Steve Hanke of the John Hopkins University data and metrics suggests so despite him also piling on to shut Jack Dorsey down;
“Since Dec.2019, $5.5T of M2 has flowed into the monetary bathtub. By Dec.2024, M2 will grow another $5.1T. Of this $10.6T, real GDP growth will drain $1.4T. Money demand will drain $1T. So, the excess $8.2T in the tub will hit the inflation overflow drain.”
Since March 2020 and the beginning of the Covid era, we have seen massive government fiat printing in central banks all over the world, after governments collectively shut down production and businesses, crippled supply chains and ushered in a spiral of economic downturns.
According to Steve Hanke’s Inflation Dashboard, hyperinflation is already taking place in at least 6 countries as above 50% in the list below;
According to the Corporate Finance Institute, “Hyperinflation commonly occurs when there is a significant rise in money supply that is not supported by economic growth. The increase in money supply is often caused by a government printing and injecting more money into the domestic economy or to cover budget deficits. When more money is put into circulation, the real value of the currency decreases and prices rise.”
The United States has been injecting money into the economy as the country was shutdown with less and less economic activity. This has led to talk of Universal Basic Income (UBI) in some quarters, which some would say is socialism in another form. One relate this to why many are less willing to go back to work as there is free helicopter money from government.
We can see this displayed from different equity markets like US, EUR, JPY, IND, CHI. According to this chart by Preston Pysh, India looks like the first one in this basket to display hyperinflation in fiat terms.
A couple of headlines from mainly the US demonstrating prices of goods skyrocketing;
I focus on the US Dollar as a measure cos it is a reserve currency and international trade occurs in USD. Anything that happens there will reverberate downwards. According to Jack Dorsey, this will happening in the US soon and all over the world crippling lives and livelihoods. As the masses rush to get out of the system after realizing their governments are working against them, we are witnessing more government control and totalitarian policies put in place through CBDC’s which is still fiat backed.
For example, the capital controls put in place in Nigeria and China to keep money within their respective systems, as people are hedging their bets and protecting their purchasing power through alternate systems in the form of cryptocurrencies a la Bitcoin, which is not government backed.
I agree with Jack Dorsey here that we are in an hyperinflationary environment and it has come to stay.
I am reminded of George Carlin and something he said which I will paraphrase here, “the system is fixed and rigged. There is a club and you ain’t in it”.
Hyperinflation is eliminating the middle class into oblivion. These are trying times and we have to pay attention to what is being done and not what is being said.
I leave you with this;
“But then finally, the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack up boom appears” - Ludwig Von Mises
See you tomorrow!
- Ope