Comments on: Hyperinflation, national bankruptcy, dollar crash and other exaggerations

By: pjfny

pjfny — Thu, 15 Oct 2009 18:18:20 +0000

Of course there is an alternative to the Dlr…It is called a basket of everything non-dollar (including gold and natural resources).
The Nash equilibrium (it is in nobody's interest the dollar goes down, so we we wont sell the dlr, except for the us) has been destabilized with the slow decline of the dlr. If this continues, first out (small asian central banks?), before a dlr crisis, is best off. This trading thinking, not academic/economist thinking.

By: vasra

vasra — Thu, 15 Oct 2009 17:00:56 +0000

Edward,

Thank you for this balanced post. Many salient points.

As for the hyper-inflation argument, it is sad that Mar Faber, being as well read on economic and financial history, clearly hasn't read or understood Bernholz's book on hyper-inflation and the structural triggers the pre-date any such events ('Monetary Regimes and Inflation: History, Economic and Political Relationships').

I really recommend it as a reading. Eventually it's about credibility, but the steps required to be taken to the loss of credibility are what matter.

USA is not there yet objectively speaking, although it is taking some calculated steps towards that direction and the markets are keenly watching.

As for the money management firm newsletter that cherry-picked Bernholz's analysis recently, well they clearly have not read the whole book nor studied the fiscal history of several nations.

By: pjfny

pjfny — Thu, 15 Oct 2009 12:18:20 +0000

By: vasra

vasra — Thu, 15 Oct 2009 11:00:56 +0000

Edward,

Thank you for this balanced post. Many salient points.

As for the hyper-inflation argument, it is sad that Mar Facer, being as well read on economic and financial history, clearly hasn't read or understood Bernholz's book on hyper-inflation and the structural triggers the predate any such events ('Monetary Regimes and Inflation: History, Economic and Political Relationships').

I really recommend it as a reading. Eventually it's about credibility, but the steps required to be taken to the loss of credibility are what matter to me.

USA is not there yet objectively speaking, although it is taking some stumbling steps towards that direction and the markets are keenly watching.

As for the money management firm newsletter that featured Bernholz's analysis recently, well they clearly have not read the whole book nor studied the fiscal history of several nations.

By: pebird

pebird — Thu, 15 Oct 2009 02:07:30 +0000

Certainly more than 30 years ago, but the US had a deficit that was 68% of spending in 1864, 73% of spending in 1865, 40% in 1935, 43% in 1936 and 50% in 1945. Of course, mostly depression and war years – but we are in two wars now and probably a depression. I don't think there were hyperinflation periods in the US back then.

The countries we are talking about include Argentina, Brazil, Bolivia, Angola, Eastern European countries after communism fell. In 1983, inflation hit close to 200% in Israel (don't know if that fits the definition of hyperinflation).

There were a lot of reasons why those currencies inflated – I doubt it was due to budget deficits as a percentage of government spending, but it sounds good.

By: Edward Harrison

Edward Harrison — Wed, 14 Oct 2009 19:49:55 +0000

It sounds more like you agree because you admit “it may take a while.” That is exactly my point.

By: Adam Sharp

Adam Sharp — Wed, 14 Oct 2009 19:41:10 +0000

"Right now, there is no alternative to the dollar."

Hey Edward, gotta disagree with you here. It may take a while to complete, but the dollar appears to be on its way out as reserve currency.

A study of all hyperinflation incidents of the last 30 years shows that the tipping point occurs when a government's deficits reach 40% of its expenditures. That's the US's projected deficit in 2009. Writeup here:

http://www.bearishnews.com/post/2420