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What Causes Hyper Inflation

Usually, countries with hyper inflation have the following features

Large government debt, usually over 100% of GDPPrinting Money. To cope with meeting the debt, the government starts printing money. This decreases the value of existing money creating a multiplier effect where people lose confidence in money and keep demanding wage increases.Reluctance / inability to deal with it. When Germany experienced hyperinflation in the 1920s it was not a phenomena they fully appreciated or understood. Their primary fear at the time was unemployment. They feared that unemployment could precipitate a Communist Revolution so they didn't want to do anything to reduce demand and possibly cause a recession.

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kb2001 said:

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The OP is all pretty much non-sensical gibberish with no basis in reality, but one line in particular is the cornerstone of Keynesian thought, and is one of the dumbest things I've read. I can't fathom how people can believe this. His username seems to mean he's class of 2020, so I can only assume he learned this at TAMU.

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Another reason we should not be concerned by the massive spending is that $1 in government spending = greater than $1 in gdp growth.

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This is one of those almighty benevolent government tropes, where somehow when government spends the $1 it's magical and different. Nevermind the roughly 40% waste in government funded anything, where $1 of spending buys you roughly $.60 of output.

ETA- the post is written like a grade school paper as well, so this points even more to a prof at TAMU being responsible for poisoning this mind

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BuddysBud said:

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Oldag2020 said:

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BuddysBud said:

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Oldag2020 said:

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BuddysBud said:

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Oldag2020 said:

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Demand is temporarily outpacing our production(supply). Due to covid shut downs and supply chain disruptions. Ex. Lumber prices were inflated, now they are correcting themselves.

Once our supply chains are back up to full capacity, the added demand created by the stimulus will not cause long lasting inflation.

Our productive capacity is so high, in fact, I believe our biggest fear should be deflation, not inflation. Our productivity growth is not disappearing any time soon. The inputs to production are 1. Technological advancements and 2. Increase in labor force. Our computing power doubles every 18 months. Clearly this growth will not disappear.

It's no accident that we have continued to spend more and more throughout the last several decades with little to zero long term negative consequences.

In fact, the fed has struggled the last decade to maintain their inflation level goal of 2%. This even Despite massive spending in 2008 and artificially low interest rates.


Another reason we should not be concerned by the massive spending is that $1 in government spending = greater than $1 in gdp growth.
Gdp growth = 1/ the propensity to save
The propensity to save is currently ~ 20%
Therefore every dollar spent today grows our gdp tomorrow by $5

This $5 of gdp growth then increases tax revenue by $5.
This increase in tax revenue is used to service the debt.

Basically, we can spend as much as we want with little to zero negative consequences. Long term inflation is not on the way.

Be sure to allocate portfolios accordingly.

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This reads like a perpetual motion machine.
Put a big fan in front of a windmill to blow on the blades to generate electricity that powers the fan. The fan blowing the windmill will never stop because the windmill keeps turning by the fan blowing on it. Easy.

Look, and endless supply of energy.

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That is precisely where we are. I don't believe I could have said it any better!

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Since perpetual motion machines are impossible, your post was sarcasm.

You fooled many of us. Good job.

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They are in fact, not impossible.

Imagine if you drilled to the earths core, shot water into that hole, and used the steam generated by the earth as a source of power. That is limitless power that theoretically can never run out. The power created by the steam could be used to perpetually power itself, making a perpetual power machine.

This in fact is currently being developed by a team of billionaire investors through one of their family offices.

I am not sarcastic. I fully believe my OP

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Perpetual motion machines are in fact impossible. It is Newton's Second Law. Drilling into the center of the earth is taking energy from internal heat generation within the earth, primarily nuclear decay. In your example, external energy would be used to heat the water. It would also take a lot of energy to drill that deep and to produce materials that could withstand such extreme pressure and heat. Removing the internal heat for our energy use could eventually cool the earth's interior, thereby ending plate tectonics, which would have real consequences regarding ocean currents, the atmosphere, weather, and climate. Nuclear fusion would also produce what we might consider and endless supply of energy, but it takes energy to start the reaction and energy for containment. Basically it is conversion of potential energy to mechanical energy, as is nuclear fission, and burning wood, coal, oil, and gas. The conversion of potential energy to mechanical produces the excess energy that powers our civilization.

In physics it is impossible to get something from nothing. Economics is the same. Everything has consequences, and it is impossible to just create endless money for unrestrained endless spending by the government without affecting the value of the money.

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Ribeye-Rare said:

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Oldag2020 said:

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Basically, we can spend as much as we want with little to zero negative consequences.

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Absurd. Government spending is, almost without exception, much more wasteful and much more prone to inefficient allocation of economic resources than is spending by the private sector. While economic resources are certainly not completely finite, they definitely are subject to restraints that prevent them being supplied in unlimited quantities.

A government owned or favored 'enterprise', lacking the 'stick' of a profit motive to keep it efficient and honest, can virtually never provide the same standard of quality or price that a private sector business can. Moreover, those in government who are granted the authority to choose winners and losers rarely, if ever, have their own skin in the game. Subsidies, grants and all other manner of BS seldom work out for the benefit of the taxpayer, and take resources away from allocations that make economic 'sense'.

Politicians make very poor businessmen. Saying we should give them carte blanche to spend unlimited sums of 'other people's money' is just not sustainable. The examples of history are before your very eyes:

West Germany vs. East Germany
South Korea vs. North Korea
Taiwan vs. China (pre 'opening')

If unlimited government spending is without consequence, why were those economies so damn pitiful? Throw in Venezuela to boot, if you like.

As to the points about technological advances and increased labor supply, it would seem considering that much of the current (and planned) increase in labor supply will be in those who are definitely unskilled and uneducated, they will be the most likely to be replaced by that technology, rather than use that technology to enable the making of a zillion widgets more than we make now.

I will admit that I've been baffled by the relative lack of inflation over last the 15 years. Like the man in the nursing home awaiting his ultimate fate, I've been waiting for it, have yet to see it, but I damn sure know it's coming and it bothers me.

OTOH, part of me thinks we are being 'punked' by OP, and he is really a Chicago-school monetarist like Milton Friedman who is playing the devil's advocate just to screw with us.

If he really is serious, I don't know how 'old' an Ag he could be. Thinking like this would have earned you an F- in the economics department I attended at A&M in the '70s, where the Monetarists were king and we thumbed our noses at the Keynesians down the road on the Berkeley East 40 acres.

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TheMasterplan said:

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The transitory explanation makes some sense.I'm not convinced it's true.

As far as the fed goes, take a look at historical interest rates.

They peaked sometime in the 70s or 80s I believe and dropped to create growth after a crash and every time the fed tried to raise rates to get back to normal there was another crash. Then they dropped rates again. It's been a downward trend line since.

The fed has never even got close to that peak again and now we're at zero to near zero since 2008. The fed is what is causing these economic crashes in the first place.

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Oldag2020 said:

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BuddysBud said:

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Oldag2020 said:

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Demand is temporarily outpacing our production(supply). Due to covid shut downs and supply chain disruptions. Ex. Lumber prices were inflated, now they are correcting themselves.

Once our supply chains are back up to full capacity, the added demand created by the stimulus will not cause long lasting inflation.

Our productive capacity is so high, in fact, I believe our biggest fear should be deflation, not inflation. Our productivity growth is not disappearing any time soon. The inputs to production are 1. Technological advancements and 2. Increase in labor force. Our computing power doubles every 18 months. Clearly this growth will not disappear.

It's no accident that we have continued to spend more and more throughout the last several decades with little to zero long term negative consequences.

In fact, the fed has struggled the last decade to maintain their inflation level goal of 2%. This even Despite massive spending in 2008 and artificially low interest rates.


Another reason we should not be concerned by the massive spending is that $1 in government spending = greater than $1 in gdp growth.
Gdp growth = 1/ the propensity to save
The propensity to save is currently ~ 20%
Therefore every dollar spent today grows our gdp tomorrow by $5

This $5 of gdp growth then increases tax revenue by $5.
This increase in tax revenue is used to service the debt.

Basically, we can spend as much as we want with little to zero negative consequences. Long term inflation is not on the way.

Be sure to allocate portfolios accordingly.

---

This reads like a perpetual motion machine.
Put a big fan in front of a windmill to blow on the blades to generate electricity that powers the fan. The fan blowing the windmill will never stop because the windmill keeps turning by the fan blowing on it. Easy.

Look, and endless supply of energy.

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That is precisely where we are. I don't believe I could have said it any better!

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Win Smith said:

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My understanding is that too much inflation happens when the money supply increases by a lot more than production. I don't know much about all that fancy economics you're talking about (and I sure don't know anything about the closed/open system drilling to earth's core stuff) but it sure seems like production in the US didn't increase in the past year and a half but the money supply sure as hell increased a lot.

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Oak Tree said:

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https://econ.economicshelp.org/2008/04/hyperinflation-causes-costs-and.html?m=1

Quote:

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What Causes Hyper Inflation

Usually, countries with hyper inflation have the following features

Large government debt, usually over 100% of GDPPrinting Money. To cope with meeting the debt, the government starts printing money. This decreases the value of existing money creating a multiplier effect where people lose confidence in money and keep demanding wage increases.Reluctance / inability to deal with it. When Germany experienced hyperinflation in the 1920s it was not a phenomena they fully appreciated or understood. Their primary fear at the time was unemployment. They feared that unemployment could precipitate a Communist Revolution so they didn't want to do anything to reduce demand and possibly cause a recession.

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Grapes said:

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Greece was not the worlds reserve currency.

What does it matter if China convinces its sphere of influence to do business in the yuan. The entire world is not going to abandon the US.

Absolute worst case conservative Americans get what they want. An isolated America.

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Oldag2020 said:

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Imagine if you drilled to the earths core, shot water into that hole, and used the steam generated by the earth as a source of power. That is limitless power that theoretically can never run out. The power created by the steam could be used to perpetually power itself, making a perpetual power machine.

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Oldag2020 said:

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BuddysBud said:

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Oldag2020 said:

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BuddysBud said:

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Oldag2020 said:

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BuddysBud said:

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Oldag2020 said:

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Demand is temporarily outpacing our production(supply). Due to covid shut downs and supply chain disruptions. Ex. Lumber prices were inflated, now they are correcting themselves.

Once our supply chains are back up to full capacity, the added demand created by the stimulus will not cause long lasting inflation.

Our productive capacity is so high, in fact, I believe our biggest fear should be deflation, not inflation. Our productivity growth is not disappearing any time soon. The inputs to production are 1. Technological advancements and 2. Increase in labor force. Our computing power doubles every 18 months. Clearly this growth will not disappear.

It's no accident that we have continued to spend more and more throughout the last several decades with little to zero long term negative consequences.

In fact, the fed has struggled the last decade to maintain their inflation level goal of 2%. This even Despite massive spending in 2008 and artificially low interest rates.


Another reason we should not be concerned by the massive spending is that $1 in government spending = greater than $1 in gdp growth.
Gdp growth = 1/ the propensity to save
The propensity to save is currently ~ 20%
Therefore every dollar spent today grows our gdp tomorrow by $5

This $5 of gdp growth then increases tax revenue by $5.
This increase in tax revenue is used to service the debt.

Basically, we can spend as much as we want with little to zero negative consequences. Long term inflation is not on the way.

Be sure to allocate portfolios accordingly.

---

This reads like a perpetual motion machine.
Put a big fan in front of a windmill to blow on the blades to generate electricity that powers the fan. The fan blowing the windmill will never stop because the windmill keeps turning by the fan blowing on it. Easy.

Look, and endless supply of energy.

---

That is precisely where we are. I don't believe I could have said it any better!

---

Since perpetual motion machines are impossible, your post was sarcasm.

You fooled many of us. Good job.

---

They are in fact, not impossible.

Imagine if you drilled to the earths core, shot water into that hole, and used the steam generated by the earth as a source of power. That is limitless power that theoretically can never run out. The power created by the steam could be used to perpetually power itself, making a perpetual power machine.

This in fact is currently being developed by a team of billionaire investors through one of their family offices.

I am not sarcastic. I fully believe my OP

---

Perpetual motion machines are in fact impossible. It is Newton's Second Law. Drilling into the center of the earth is taking energy from internal heat generation within the earth, primarily nuclear decay. In your example, external energy would be used to heat the water. It would also take a lot of energy to drill that deep and to produce materials that could withstand such extreme pressure and heat. Removing the internal heat for our energy use could eventually cool the earth's interior, thereby ending plate tectonics, which would have real consequences regarding ocean currents, the atmosphere, weather, and climate. Nuclear fusion would also produce what we might consider and endless supply of energy, but it takes energy to start the reaction and energy for containment. Basically it is conversion of potential energy to mechanical energy, as is nuclear fission, and burning wood, coal, oil, and gas. The conversion of potential energy to mechanical produces the excess energy that powers our civilization.

In physics it is impossible to get something from nothing. Economics is the same. Everything has consequences, and it is impossible to just create endless money for unrestrained endless spending by the government without affecting the value of the money.

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I'll leave it to the billionaires to decide what investments they should pursue.

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Helicopter Ben said:

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kb2001 said:

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ETA- the post is written like a grade school paper as well, so this points even more to a prof at TAMU being responsible for poisoning this mind

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Unfortunately, I think you're right. And I don't think this is a troll. My MIL is an economics professor and this is almost exactly what she believesand teaches.

While it's kind of funny to observe such insanity, these beliefs are currently manifesting themselves into real-world policies. It's like we've let a blind, insane person take the driver's seat and we're plummeting down a huge hill straight for a cliff. And nobody is stopping them.

The one thing I'm not sure of is if the people in power truly believe this. It defies all logic yet they persist no matter how much evidence, history, or reason you present them with. I think the truly powerful people behind the scenes know it's all bull****, but it's just a good way to harvest the wealth of an entire population.

When you point out that history is littered with examples of governments who have done the exact same thing only to end in ruin, they respond with something along the lines of "the world will never abandon the dollar." In other words nuh uh!

Every single fiat currency in history has gone to zero and ultimately been discarded. This destroys the value of savings and transfers wealth from the productive to the non productive. How they can argue against it is pure insanity. They are flat out wrong and I'm tired of arguing.

The OP even said he's more worried about deflation. As if falling prices and a lower cost of living are somehow a bad thing. Again, pure insanity! Orwellian back-asswards nonsense. The natural order is for most things to get less expensive. Yet somehow the government has convinced people that it's good for them to lose purchasing power over time.

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