Mish, hyperinflation has nothing to do with credit.
Hyperinflation has to do with growing supply of money and/or increasing velocity of money due to loss of confidence.
In theory, even if Central Banks stopped increasing money supply as of now, if the velocity of money already in existence would increase rapidly, very high inflation or hyperinflation would follow.
But in fact, there is no willingness to stop increasing money supply at high rates, on the contrary, interest rates are going further and further down into negative territory.
The credit bubble has burst, but M3 and MZM are still growing at highly inflationary rates. If no new credit is being created, because of the credit crisis and loss of confidence by banks, where is the money coming from ?
Why is the Fed accepting dubious collateral at inflated prices and what happens if the money is not paid back ?
A few points that i think are critical:
- Transparency has totally disappeared whether on a corporate level, government or activities of the Fed.
- Any government can create inflation/hyperinflation at a push of a button in a fiat currency system
- Central Banks have already printed too much money relative to the available goods and services ( causing their prices to rise )
- the Fed can increase money supply without increasing credit/debt, in fact the Fed can increase money supply while eliminating debt/credit in a process called monetization
- the Fed has been reckless and irresponsible at best, at worst they have been committing massive fraud ( again lack of transparency ) and nothing indicates that this will change in the future
- It is clear that the authorities have chosen inflationary path, it was done in the wake of the stock market crash in 2000-2002, once inflationary path is chosen it always leads to a collapse of currency
- The Fed has threatened use of unconventional methods and monetization, use of unconventional methods and monetization will result in massive inflation and quite possibly hyperinflation
- Extraordinary measures were taken in the wake of the Nasdaq collapse, namely housing bubble was inflated to unimaginable proportions. At this time, the magnitude of the potential economic crash and the huge number of people it would involve make it very likely that the authorities will use even more extraordinary and unimaginable measures. |
