Coming Hyperinflation?

Even though we've been experiencing deflation of consumer prices lately, many economists and your truly are concerned that this won't last.  As the Federal government has increased the money supply, it's started a chain of events with a very real possibility of a hyperinflationary result.

Those who refuse to learn from history are doomed to repeat it, said George Santayana, the philosopher. But this familiar maxim is being ignored this week by President Barack Obama and his fellow Democrats on Capitol Hill this week as they complete action on the chief executive’s proposed 2010 federal budget. With its unprecedented deficit approaching $2 trillion, this budget proposal is a certain prescription for hyper-inflation. So every senator and representative who votes for this monster $3.6 trillion budget will be endorsing actions that will turn America into the next Weimar Republic. For those too young to remember, that was the period in Germany in the years between the two world wars when people needed wheelbarrows full of money to buy a loaf of bread.

Note this this trend started under the Bush administration, but has greatly accelerated under Obama, Pelosi, and Reid.

I recommend taking some time to read through FerFAL's Surviving in Argentina blog, to see what it's like when a modern, developed country experiences an economic collapse, including hyperinflation.

Inflation Nation

This is something I've been increasingly worried about, with the trillions of dollars the Feds are pumping into the economy.

First, take a look at this graph from the St. Louis Fed of the US monetary supply over time, with indications of when we were in a recession.

Then-candidate Barack Obama bemoaned those simple-minded rural folk in Pennsylvania who "cling to guns and religion" in response to economic despair. Since Obama's election, however, Americans have clung to guns like never before. With hyper-inflation looming, a catastrophe initiated by Bush and continued by Obama, guns are thriving and religion may follow suit.

...

This may be an economic tsunami rolling toward us with little warning. The new money has no nexus whatsoever with the country's economy, which is comprised of the goods and services produced, bought and sold by humans. As this money supply has grown, the economy has contracted. This means the value of cash can only plummet. George Mason University law professor Todd Zywicki, who specializes in economics, explained on his blog that consumers haven't felt the inflationary effects of the inflated money supply only because of hoarding, brought about by economic fear.

...

"Presumably because the ‘velocity' of money has remained low - people and banks are hording money, rather than spending, borrowing, and lending it. Assuming velocity rises again, however, we may be looking at an inflationary spiral like we've never seen before in this country."

Now, go read the whole piece.