http://globaleconomicanalysis.blogspot.com/2011/05/hyperinflation-nonsense-in-multiple.html
Every time the US dollar ticks lower, commodity prices tick higher, or the CPI rises two tenths of a percent, hyperinflationists come out of the woodwork with nonsensical predictions and silly comparisons to Zimbabwe or Weimar Germany.
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Similarities? What Similarities
What part of that remotely resembles anything that is happening in the US today?
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JW: Let's say the U.S. wants to sell debt to Japan, but Japan doesn't like the way the U.S. is running fiscal operations. It can say, "We don't trust the U.S. dollar. We'll lend you money, but we'll lend it in yen." Then, the U.S. has a real problem because it no longer has the ability to print the currency needed to pay off the debt. And if you're looking at U.S. debt denominated in yen, most likely you would have a very different and much lower rating.
Mish Response: Williams makes a fundamental mistake regarding trade. Several of them in fact. The US does not go about wanting to sell debt to Japan or China. Rather Japan and China buy US debt as a mathematical consequence of trade imbalances.
Moreover, Japan and China are more dependent on the US for their export model than the other way around. The odds China or Japan would not take US dollars is virtually zero. Both economies would crash without exports to the US. China's unemployment would soar and so would political unrest.
I keep stating, and it keeps falling on deaf ears, that as long as the US runs a trade deficit, it is a mathematical certainty that some country is accumulating US dollars or US dollar denominated assets.
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Myopia
Hyperinflationists have myopia. They only see (or only focus on) problems in the US. They ignore overheating in China, enormous problems in the UK, and huge structural issues in the EU.
The US may have more problems than elsewhere (or not), but that does not imply the dollar might collapse to zero against the currencies of other countries.
Intermediate-term, I actually expect the dollar to rise, but should it sink, it will not be a sign of impending hyperinflation.
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In the final analysis, it's all about attitudes. The Fed cannot force consumers or businesses to borrow or banks to lend (and it wouldn't for reasons stated, even if it could). In a fiat credit-based system, that is what matters.
Every time the US dollar ticks lower, commodity prices tick higher, or the CPI rises two tenths of a percent, hyperinflationists come out of the woodwork with nonsensical predictions and silly comparisons to Zimbabwe or Weimar Germany.
----
Similarities? What Similarities
- Germany lost World War I
- The Treaty of Versailles imposed repayment conditions on Germany that could not be met
- To enforce the treaty, France occupied parts of Germany
- Germany printed money so fast people burnt stacks of money for heat
What part of that remotely resembles anything that is happening in the US today?
-------
JW: Let's say the U.S. wants to sell debt to Japan, but Japan doesn't like the way the U.S. is running fiscal operations. It can say, "We don't trust the U.S. dollar. We'll lend you money, but we'll lend it in yen." Then, the U.S. has a real problem because it no longer has the ability to print the currency needed to pay off the debt. And if you're looking at U.S. debt denominated in yen, most likely you would have a very different and much lower rating.
Mish Response: Williams makes a fundamental mistake regarding trade. Several of them in fact. The US does not go about wanting to sell debt to Japan or China. Rather Japan and China buy US debt as a mathematical consequence of trade imbalances.
Moreover, Japan and China are more dependent on the US for their export model than the other way around. The odds China or Japan would not take US dollars is virtually zero. Both economies would crash without exports to the US. China's unemployment would soar and so would political unrest.
I keep stating, and it keeps falling on deaf ears, that as long as the US runs a trade deficit, it is a mathematical certainty that some country is accumulating US dollars or US dollar denominated assets.
---------
Myopia
Hyperinflationists have myopia. They only see (or only focus on) problems in the US. They ignore overheating in China, enormous problems in the UK, and huge structural issues in the EU.
The US may have more problems than elsewhere (or not), but that does not imply the dollar might collapse to zero against the currencies of other countries.
Intermediate-term, I actually expect the dollar to rise, but should it sink, it will not be a sign of impending hyperinflation.
---------
In the final analysis, it's all about attitudes. The Fed cannot force consumers or businesses to borrow or banks to lend (and it wouldn't for reasons stated, even if it could). In a fiat credit-based system, that is what matters.
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