Our Perspective Hyperinflation is a Fiscal, Not Monetary Phenomenon
| Hyperinflation is a Fiscal, Not Monetary Phenomenon |
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| Written by Steve Meyers |
| Wednesday, 25 August 2010 13:33 |
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Months ago we wrote about the true causes of hyperinflation. We proceed to expand upon our views as we disagree with the views put forth by John Mauldin, Mike Shedlock and now Jim Rickards who all focus on velocity and/or bank lending as important causes of hyperinflation. The reality is that hyperinflation is first and foremost set in motion and driven by a deteriorating fiscal situation. In fact, significant economic weakness and deflation is a precursor to hyperinflation. Too many analysts believe that there has to be some economic demand or some consumption to stimulate inflation or hyperinflation. Printing money to try and stimulate your economy or excessive credit growth is what leads to inflation. Printing money because you are broke and can’t service your debts is what leads to hyperinflation. Recently Jim Rickards wrote about how a change in velocity can trigger hyperinflation or severe inflation.           |
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