It is tough to read about inflation worries without reading the more alarmist and extreme predictions of hyper-inflation. Like the article I posted on January 10th, this article is a very brief history lesson on four country’s hyper-inflation experiences. The authors then argue that the USA situation is different than was the case in these historical examples, and therefore hyper-inflation will not happen in the States. Interesting enough to make it worth the quick read.
I do believe that governments everywhere have promised far more than can ever be delivered under the status quo. Without the political will to reduce these over-promises or increase taxes to pay for them, inflation remains one of a few tools by which to “manage” this dilemma.
To be clear, I do NOT feel North America is headed for hyper-inflation. I do believe we will experience regular 70’s-style inflation with continued bail-outs, quantitative easing, money printing, etc…. and this will do plenty of damage. Only once the voting public experiences the effects of this higher inflation, will the political will for true change emerge.
Excerpt from the article:
There is a specter haunting our economic debate — the specter of hyperinflation. A depressing number of arguments the past few months (and years) can be reduced to the following exchange: “We need more stimulus!” “If we keep spending, we’ll just end up like Greece!” “Greece is mostly in trouble because they can’t print their own money.” “Great, you want us to print money and end up like the Weimar Republic!“