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0 pointsvkou5y ago0 comments

1. We would need to print quadrillions of dollars to get hyperinflation. Hyperinflation is a boogieman, unless this administration completely loses its mind.

2. Recessions cause the destruction of money (Due to defaults, and lack of new loans). This causes deflation. If the new money created by the printing press does not exceed these deflationary pressures, you won't even get inflation, let alone hyperinflation.

3. Deflation is horrible, and is much more dangerous than mild inflation.

4. The printed money is currently chasing investment assets (Mostly stocks), not flour and ground beef. Our previous experience with QE did not result in the prices of commodities inflating - only the prices of investments.

Inflation is not the problem.

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missedthecue5y ago

>1. We would need to print quadrillions of dollars to get hyperinflation.

Is there actually a mathematical equation that proves this or is that your conjecture?

vkouOP5y ago

Look at the MZM, which is a good proxy for 'all the money in the economy'. [1]

There's ~20 Trillion of it.

Hyperinflation is, by definition, 50% monthly, ~600% annual inflation.

The Fed has, so far in this crisis, printed ~2 Trillion that is staying in the economy (The rest goes into very short term liquidity). It's not a hyperinflationary scenario, even if they print another 2, or 4, or 6 trillion.

If they printed 20 trillion, that would be another story.

[1] https://fred.stlouisfed.org/series/MZM

wmeredith5y ago

I’d love to find out otherwise, but I don’t think so. Macro economics is social science, not mathematics.

simonh5y ago

All good points, deflation is a serious risk in a situation like this. But also a dose of moderate inflation for a few years or even a decade could help. One of the effects of inflation is to erode the value of loans, deficits and liabilities. In a way it spreads out their costs across the economy and over time.

mlyle5y ago

Some stimulus measures are creating money to chase flour and ground beef-- the paycheck protection program, etc, are borrowing (and re-lending) in order to preserve pay to consumers. But I agree it's not most of it.

0x8BADF00D5y ago

You won't see it until it's too late. Inflation is a backward looking measure. Expected inflation can be inferred by nominal interest rates. If you look at the corporate debt market those rates are already quite high.

What happened in the oil market could easily happen in the gold market, but in reverse. Nobody wanted to take delivery on oil, but a lot of people are going to want to take delivery on gold, because there's a shortage of it. At what point does COMEX go bankrupt when nobody is honoring their word to deliver gold upon expiry?

A high gold price would be very bad for dollars, because gold is an alternative reserve currency to dollars. Instead of buying a tbill, someone can just buy gold, hold it, and sell a small portion when they need to buy dollar denominated assets, mainly crude. And crude prices are at historic lows, so you don't need to buy as many dollars as you did before.

nradov5y ago

What exactly is the mechanism by which Comex would go bankrupt? Commodity delivery contracts are still legally enforceable through the court system, although some civil cases may be delayed several months.

Gold is a commodity, not a currency. I can't pay my tax bill in gold.

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empath755y ago

If there isn’t ground beef and flour being made, the price will go up.

tastygreenapple5y ago

Deflation isn't horrible unless you have a lot of debt, it rewards savers. It's probably less efficient for central banks to try to 'hack' inflation than just deploy fiscal policy.

And we're almost definitely seeing inflation in the finanical markets. It's not great that valuations are so divorced from fundamentals.

mlyle5y ago

Deflation punishes investing in anything. Deflation rewards hoarding cash.

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0 pointsvkou5y ago0 comments

1. We would need to print quadrillions of dollars to get hyperinflation. Hyperinflation is a boogieman, unless this administration completely loses its mind.

3. Deflation is horrible, and is much more dangerous than mild inflation.

Inflation is not the problem.

0 comments

missedthecue5y ago

>1. We would need to print quadrillions of dollars to get hyperinflation.

Is there actually a mathematical equation that proves this or is that your conjecture?

vkouOP5y ago

Look at the MZM, which is a good proxy for 'all the money in the economy'. [1]

There's ~20 Trillion of it.

Hyperinflation is, by definition, 50% monthly, ~600% annual inflation.

If they printed 20 trillion, that would be another story.

[1] https://fred.stlouisfed.org/series/MZM

wmeredith5y ago

I’d love to find out otherwise, but I don’t think so. Macro economics is social science, not mathematics.

simonh5y ago

mlyle5y ago

0x8BADF00D5y ago

nradov5y ago

Gold is a commodity, not a currency. I can't pay my tax bill in gold.

1 more reply

empath755y ago

If there isn’t ground beef and flour being made, the price will go up.

tastygreenapple5y ago

Deflation isn't horrible unless you have a lot of debt, it rewards savers. It's probably less efficient for central banks to try to 'hack' inflation than just deploy fiscal policy.

And we're almost definitely seeing inflation in the finanical markets. It's not great that valuations are so divorced from fundamentals.

mlyle5y ago

Deflation punishes investing in anything. Deflation rewards hoarding cash.

j / k navigate · click thread line to collapse