Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: NOW who wrote (72673)	12/22/2007 8:41:46 PM
From: Mike Johnston	Read Replies (1) \| Respond to of 116555

The primary reason of high inflations/hyperinflations is an increase in money supply and/or increase in money velocity ( loss of confidence and drop in demand for money - when the demand for money drops, while supply stays the same, the value of money is dropping ) Increase in credit alone cannot cause hyperinflation. Massive increase in credit is a credit bubble, but it is not hyperinflation. What would cause hyperinflation would be for example monetization: elimination of credit with freshly printed money. However, when real interest rates are negative, as they have been for some time, demand for credit increases dramatically at the artificially low rates. This would be the case in early stages of hyperinflation and could provide initial stimulus of developing hyperinflation. Later on, the demand for credit would increase, but the supply of credit collapses as nobody is willing to lend any money. At that point government printing presses take over or hyperinflation is driven entirely by rapid increase in velocity as the demand for money drops to 0.