Like nearly all who have argued the case for inflation/hyperinflation in this forum, “Mary,” who posted here last week, failed to describe a plausible mechanism to make it happen. Like so many others before her, her argument rests on the assumption that the Fed can simply ‘gun the money supply’ to produce a desired quantity of inflation at any time. If it were that easy, one might ask, then why haven’t Japan’s and Europe’s desperate attempts to do so failed to stimulate any inflation whatsoever — other than in the price of homes, stocks and sovereign bonds? Below is my response to Mary’s post, which can be read in its entirety by clicking here.
(Hyper)inflationists never like to discuss the nitty-gritty details of how it could happen, Mary. They seem to think they can win arguments by throwing around vague phrases like ‘gunning the money supply.’ But what, really, is this supposed to mean? Central-bank stimulus to date amounts to perhaps $20-$30 trillion, but the only inflation it has created is in the housing market, stocks and bonds, which are all vulnerable to a collapse — i.e., deflation — at any time.
Why ‘Plastic’ Will Fail
Having read Adam Fergusson’s insightful work, When Money Dies, you must be aware that the Weimar hyperinflation was propagated with physical cash money. We don’t use much of that any more, and that poses a key problem for the ‘helicopter-drop’ crowd. You could always argue that the fraudsters at the Fed would simply have the banks add a zero or two to everyone’s credit line. But just try to play that forward. As I’ve noted here many times in the past, the clearing system that makes plastic money “work” is exquisitely fragile, based as it is on ignorance, self-deception and egregiously misplaced trust.
Anyone who would argue the case for hyperinflation should be made to explain first of all what will happen to mortgage debt. Will we someday be able to peel a few megabills from a money clip to pay the balance due on our homes? And when you’ve finished with that question, please tell me how a hyper-expansion of credit would interact with such incipiently deflationary black holes as pension funds, Social Security, Medicare and life insurance? They all pay recipients in cash, as you know, and trying to hyperinflate away their obligations — i.e., stiffing beneficiaries — would start riots.
Central bank buys all of it’s countries issued debt via QE (already well on our way in many countries). Central bank then wipes away all debt they own with the stroke of a key. Mortgage forgiveness act of 2018, “Make America Strong” Pension reform (bailout) of 2019. This makes the countries debt level high again. Central bank beings buying debt via QE… Central bank then wipes away that debt with another stroke of a key.
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Politically, economically and socially, TC, there may be more to it than that. RA