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Hyperinflation vs. Deflation: I Concede


FOFOA blogspot has taken pains to lay out the most cogent, exquisitely nuanced and, ultimately, persuasive argument for hyperinflation that I have read to date.  You can access it by clicking here.  I’ve responded as follows but plan to write later, in agreement, at greater length.

Sheesh!  Where to begin?  It’s difficult to give up a belief system that took root 30 years ago, but I find your arguments irresistible.  I took notes as I read the essay, thinking to rebut you point-by-point; instead, halfway through it I found myself overwhelmed by the clarity of your thoughts.  The real power of this essay is that each step of the hyperinflationary endgame you foresee is entirely consistent with human nature, particularly where self-interest and self-preservation are fated to play out.

I will need to find a way to break this gently to my readers, perhaps starting with the old joke you’ve mentioned about not having to outrun the bear.  It goes a long way toward explaining how the Masters of the Universe will actually benefit from hyperinflation. You’ve also helped me understand how I could have been so bullish on gold over the years even though I considered myself a hard-core deflationist. It was a conflict between head and heart, really, but you’ve resolved it with the most persuasive argument I’ve seen in favor of gold. Even better, you’ve provided a sound basis for arguing that at $1500 per oz., gold has barely begun to discount the dollar’s final fall.

I especially appreciate the patience and humility you showed in walking readers through your argument one gentle step at a time. By not trying to overpower your opponents, you have produced a treatise that is certain to engage many minds.  Thanks for engaging mine — at a depth that had eluded me for three decades.

Comments on this entry are closed.

raj raj May 20, 2011, 2:05 am

muy bueno. see f.e..k..e..t..e
only Au extinguishes d e b t s.
amero new funds for N amer. is hoax.
y bother?
p s s a m ‘s gdp $14t/yr. all pub + pv
borrowings + boomer i ou s = US$187t, trillion= thomas, 13x gdp.

Bruce Culver April 27, 2011, 5:02 pm


Wow! First, I agree your concession is most gracious, and you have generally been more civil than many of your opponents.

As you know, I have been a fence sitter, leaning towards the inflation camp. Maybe I missed something, but it seems FOFOA’s case is pretty much in line with, though more detailed and supported than what I have always seen as the weaknesses in your deflation argument. That is, not every dollar of debt will be repaid, because so much of it, maybe I could say all of it now that the dollar is 100% fiat was drawn out of thin air. I mean if a bank loans out a $1000 for every $100 it has in deposits, and is then repaid in money that is worth even just 20% of what it was when it was loaned out, have they really lost anything? If say 20% of the borrowers default, then who paid back the borrowed money. Nobody, right?

Also, I’ve argued that the banks would be hurt more by massive defaults than by repayment in depreciated currency. FOFOA explains why that is the case.

Your conversion makes me feel more confident in my leaning towards the inflationist camp, but I’m still on the fence I’m afraid, and the conversion of a hardcore deflationsit such as you is almost enough to get my contrarian side imagining an immanent deflation scare.

Also, isn’t the whole dollar short squeeze still something on the table. We certainly saw the reality of that during the ’07-’08 crisis, and all the alternatives besides precious metals are doomed fiat also, no?

Shell Game April 27, 2011, 1:04 am

Thank you for playing a vital role in this wonderful debate. I’ve learned so much from listening in as you and others returned volley to one another. You always kept it on a high road, well done. And a very gracious and humble concession, you’ve earned a new fan here..

Mike April 26, 2011, 6:38 am

I appreciate the strength of a man who can admit his wrongs much more so than the genius of someone who hasn’t been wrong yet. I had no doubt about your personality (somehow), even though I never agreed with your former deflationist view (only the future can say which is right).

I pointed to Gonzalo, btw, who has shown himself to be very unlike you, in the way that he treated you lately, that he must admit he was unfair. He is young, and we might still see him getting wiser. So far he has not done what he ought to do, admitting that he wronged you.

About FOFOA. I’ve been reading that blog for a long time. Couple of things. Unlike you (or Gonzalo), he is very afraid of critique. He had closed, anonymous commenting, because he was getting uncomfortable with tough questions. Consequently, he has built up an idyllic view around himself, and will not meet the critique until it is too late. Note the overly-idolating tone of registered posters.

I think he is right on inflation (but he is far from being alone on that), and I find a lot of value in Another’s and FOA’s writings. But, the thoughts of FOFOA himself, are mistaken. I posted why, after which he switched to comments by registration (tracked). I could have sacrificed my anonymity and register to continue to present my argument, but that would not be fair, as weakness of soul deserves no caring hand.

You’re the best, Rick! Keep up the good work.

F. Beard April 26, 2011, 5:52 am

The application of game theory to currency theory is clearly not worth your consideration and will not help you to consider what the free market will actually decide. Bob

I don’t care what the free market picks; I just insist we have one. That means that government must only recognize its own fiat as money. The private sector would then be free to use PMs, common stock, store coupons, futures contracts or whatever for private debts without ANY of them being privileged by government by being accepted for government debts (taxes and fees).

As for the stealth inflation tax (the big problem that PMs as money are supposed to solve), that is eliminated by repealing the capital gains tax in addition to repealing legal tender laws for private debts.

The idea of separate government and private money supplies is implicit in Matthew 22:16-22.

brutlstrudl April 26, 2011, 3:50 am

Rick, Thanks to thinkers like you, I’m as prepared as I’ll ever be for either scenario

Zombo April 26, 2011, 3:47 am

I agree that it’s very classy of you Rick to change your mind but even more I congratulate you for being able to change your mind about something. That is an amazing feeling though isn’t it.

Only very smart and open minded people can change their mind especially on topics one is passionate about.

FOFOA though is certainly patient and I’m glad you found that it was all worth your time.

silver is rarer than gold April 26, 2011, 3:44 am

So Rick,
How does silver play into your thought process now?



Gordon April 26, 2011, 2:59 am


You are a class act and, I believe, you exemplify why some of us have turned to alternative news sources for our information. Bravo!

JamesT in MA April 26, 2011, 2:40 am

Kudos to you Rick. I’m tremendously impressed. I don’t say this in a patronizing way. I’ve been on the inflation side of the argument but more as a feeling than with well thought out conviction. But I understand how hard it can be for an intelligent man to not let vanity or insecurity about that intelligence prevent him from admitting error.

You’re not only smart. You have huge balls, Rick. I was only a very infrequent reader of this site. In the future I will not miss it.

Nick April 26, 2011, 2:40 am

In this era when literally nobody publicly admits being wrong or responsible for anything, it speaks volumes for your credibility. In these fun-house times, we’re all trying desperately to preserve anything we can survive with. It’s important to hear your’ respected voice change publicly. That takes guts, you have class Rick.

cocoablini April 26, 2011, 2:16 am

The dollar has been on a devaluation trainwreck since the FED was invented. 100 years of 95% loss in buying power.
As all human systems are based on a pyramid of greater fools, the financial system is no better or worse than if you sold a used car to a sucker. Everyone is trying to extract more value for themselves. This is why the human race will probably have a short run-it’s inherently self-destructive and communal by fiat or necessity-not out of want.
Inflation is a desired outcome as the pool of greater fools and currency needs to expand. It all gets bad when the system runs in reverse in a deflationary depression. That’s when the Madoffians start hoarding their gains and everyone runs for the exits.
Keynesians are apologists for a failed human trait of constant growth need. And if the private system cannot do it, then the government will take your savings and blow it on silly projects and wealth distribution. The system is a duality of socialist wealth distribution for the middleclass and poor. The rich live in some anarchist, greater fool swimming pool and make the rules to suit their world view.
So, WE ARE DEFLATING morally and financially while at the same time inflating assets for a select elite who can stomach some mild price appreciation of gas and food. Its a drop in the bucket for these alpha wealthy cretins. The political system is completely deflated of any value. So, they got what they want-and ungovernable playpen for corporate anarchist raiders

Bc April 26, 2011, 2:06 am

Good comments. Historically, hyperinflation occurs when government has been utterly co-opted by elites, not just where voters have been temporarily bamboozled. Banana republics where elections are a farce and voting is a waste of time are classic set ups for hyperinflation. Some think we are there now but I see no evidence of elections being stolen outright so far. Voters will not be fooled much longer now that fuel prices are moving up. For bad governments, the time lag between printing money and price increases is a Godsend. Unless our elites follow through with a putsch or military junta the winds will soon blow back the other way, and the second Great Depression will begin.

F. Beard April 26, 2011, 1:59 am

I strongly suggest you actually read FOFOA’s writings. Bob

And join the PM worshipers? 🙂

Whatever the merits of gold as money, they are irrelevant to the question of government money. Government money, for ethical reasons alone, must remain pure fiat else we essentially allow private counterfeiting of government money.

The ONLY ethical place for PMs as money is the private sector where I doubt they could survive for practical reasons. However, that is for the free market to decide.

Government recognition of anything but its own fiat is fascist however that fiat must only be legal tender, in fact as well as law, for government debts, not private ones. That would require the repeal of the capital gains tax and of course legal tender laws for private debt.

Bob April 26, 2011, 5:27 am

“And join the PM worshipers? :)”

Do not educate yourself. That is fine by me. The application of game theory to currency theory is clearly not worth your consideration and will not help you to consider what the free market will actually decide.

Mark V April 26, 2011, 1:34 am

Following you for years and observing your deflation stance and your willingness to listen to inflationists, showed real moxey. Had the feeling that you would grasp the complex aspects of this eventually; because I knew that you wanted to really understand; more than you wanted to be “right”.
But that is not the only important development here; there is the far more rare character quality of humility that you have demonstrated; to the rest of us, who are “enlightened” about the issues, but fall way short in humility; and you did it here on your own web site!!
FOFOA is a very skilled writer/thinker/teacher and we are fortunate to have access to his efforts. I know you can’t help it but thank you Rick for being the kind of person you are.

Cocoa April 26, 2011, 12:21 am

Theres no shame in this- the economy is not inflating at all. Its a total disaster and on lifesupport. If your definition of inflation is an increase in mo ey supply, credit and asset value inflation Rick would have been right.
If your definition of inflation is just the price appreciation of goods and increase in currency then he’s flat out wrong. Deflation doesn’t mean the delevered and savers get off and have a great time. Deflation, in the 30s, involved lots of havoc including FDR stealing gold from savers to pay the banks for their over levered positions in a gold standard system.
Its the same today. The FED is stealing not by confiscation of a hard asset but by devaluation of savings. The political system will take money from you via taxation or helping the banks rig the system to extract wealth from those who cannot game the system.
The point is, getting money by large institutions has always been a sure sign of deflation. Its all about increasing THEIR money supply not yours. If this was truly an inflationary economy, we would be doing .
Hyperinflationary is probably the point for us when the treasury market collapses, the states begin their inevitable default and secessions and the US Federal government is printing paper like the confederates in the Civil War.
A total dissolving of the US federal government.
And the FED and banks hyperinflating the dollar and system doesn’t help them at all. They will be completley valueless institutions. Bernanke may get us hyperinflation, but not because he wants to but because he has the intelligence of a hamster

cocoablini April 26, 2011, 12:03 am

One problem is that this whole stupid argument is about semantics, not events.
Deflation would be an excellent outcome, as defined by inflationistas. Things cost less and debt is expunged.
But Deflationary is NOT the opposite to inflationary according to inflationists.
A deflation is an event with many moving parts. Price inflation is what everyone is talking about today. The business climate and many assets like homes, clothes, technology are still getting cheaper.
And the more the FED prints, the less spending the consumer can do as they struggle to pay for food and gas and other necessities run up by devaluation.
Also, a hyperinflation is a political event as well. Not pinned to money supply but a complete unfaith in the US to pay any bill at the same dollar value as the principal that was borrowed.
Deflationary Depression is when the credit and financial system hit the eject button-and everyone slumps in buying and wealth value-except those who create the money and hoard it. This will last decades, and the outcome could involve wars,government failures and currency failures. Its all an avoidable mess fomented by the FED and idiot Americans who vote for the braindead politicians we have today

Marc Authier April 25, 2011, 11:54 pm

Persons still holding US treasuries or US dollars are imbeciles.

MichaelGr April 25, 2011, 11:04 pm

An enlightened man experiences no shame in adjusting.

Chris April 25, 2011, 10:49 pm


What a class act. You’ve risen to the rare ranks of a genuine thinker.


Bc April 25, 2011, 10:48 pm

Just remember, central banks always lie. For the past three years Ben B has been swearing at the top of his voice he intends to inflate. It didn’t work. Psychological belief in asset inflation has not resumed. The debt driven party is over. Now he will change course. Rates will climb. The pain will be unbelievable.
The Boomers have always called the tune in American politics. Sex drugs and rock and roll in our youth of the sixties, conspicuous consumption and status seeking in middle age of the eighties, rampant investment preparing for retirement in the past twenty years, largely stupid, but here we are. If you think the boomers are going to watch passively as the fed prints their savings into oblivion I don’t. There will be debt deflation and there will be hell to pay because hyperinflation is a demographically impossible political option. Bone up on Fisher debt deflation because here it comes. Steve Keen is still the go to guy for this.

George April 25, 2011, 9:57 pm

Rick, Kudos for this. You are very intelligent and a wise man. FOFOA, I am convinced, is the closest we might get to being on the inside of this subject. The “competitive life style retention in the face of austerity” he lays out resonates with me. It explains the complacent attitude and calm.

Dale M. April 25, 2011, 9:57 pm

I have always enjoyed reading your posts and respected your opinion even though it didn’t always match mine. My respect for you has gone parabolic after reading this post, not because it is now closer to mine, but because so few people have the guts to do what you did. Bravo!

David April 25, 2011, 9:32 pm


This is a difficult issue with intelligent men and women on both sides of the argument 100% sure they are correct.

I applaud you being smart enough to view the issue with your ego checked at the door and humble enough to now admit that you see the issue differently.

If the world were full of more people willing to do the same instead of simply posturing and throwing rocks back and forth, we might actually start solving some of our problems or at least begin making progress toward solutions.

You are a better (and wiser) man than most.

David B.

S Wolf April 25, 2011, 9:27 pm

Blah,blah,blah, F Beard.What’s fascist is claiming that we presently are functioning in a sound/stable free market.Government intervention has exacerbated our problems not solved them.All of the greatest economic minds of the 20th century-Henry Hazlitt,Murray Rothbard,Ludwig von Mises,et al advocate minimal government involvement in economic affairs as they apply to the free market.You completely miss the point about the importance of gold and silver.Individuals like me are purchasing PMs because it’s obvious that the days of the USD as the world’s reserve currency are about to reach their expiration date.Furthermore,I could care less about what new fiat currency system is implemented worldwide.As long as the international banking cabal continues to profit from usury free printed money and continues to impose fiscal austerity on the global population without any substantive reform or regulation,REAL MONEY like gold and silver will continue to appreciate in price,and as Bachman Turner Overdrive said,”You ain’t seen nothin yet.”The current monetary system has been completely corrupted and is rotting from the inside out.Any model,chart,historic precedent,graph,or educated guess DOES NOT take this into consideration thereby rendering any type of extrapolated data suspect and completely devoid of sound logic.And I,for one,can’t wait for the day when the world puts Richard Nixon’s 1971 fiat system to the sword.Why must the oligarchs get it all,and why must I pay for it?

F. Beard April 25, 2011, 9:34 pm

.All of the greatest economic minds of the 20th century-Henry Hazlitt,Murray Rothbard,Ludwig von Mises,et al advocate minimal government involvement in economic affairs as they apply to the free market. S Wolf

A minimal government except for enforcing a gold standard? But if gold is genuinely money then what does it need government recognition of it as such? And what is libertarian about a government subsidy for someone’s favorite shiny metal?

F. Beard April 25, 2011, 9:23 pm

When that seal is broken, a new era will begin. Matt

Based on liberty in private money or slavery to a primitive money form?

Got gold? Matt

I bought gold at $262/oz. Much of its existing price is speculation that gold will be remonetized by government fiat (intentional irony). But that would be a fascist subsidy for the price of gold. But fascism is wicked.

Bob April 26, 2011, 1:38 am

I strongly suggest you actually read FOFOA’s writings. You will find that gold is the Nash equilibrium (Game Theory) solution to the problem of saving.

KP April 25, 2011, 9:10 pm

Rick there is no shame here. We live in times unlike any other yet similar to many. A position that is fluid is probably a better way to go anyway, because the Bernank interventions cannot be planned nor thought out.
Only guessed at

Michael M. April 25, 2011, 8:57 pm

Dear Rick:

Thanks for having the humility to admit your mistake. I have read your column for quite some time, despite disagreeing with the ultimate conclusion of deflation. You clearly have an affinity for language which makes your writings a joy to read, and I have found myself in agreement with many of the things you have said over the years. Keep it up.

Michael M.

F. Beard April 25, 2011, 8:16 pm


One may be a gold-bug to his heart’s desire. However any attempt to make gold or anything else legal tender for government debts is FASCIST. Government money should ONLY be pure fiat (government is force) but ONLY legal tender for government debts, taxes and fees, not private ones.

Some gold-bugs, such as Gary North*, are seeking to make gold legal tender for government debts. That is pure hypocrisy for someone who claims to be a libertarian. Why? Because requiring gold for taxes is essentially a government subsidy for gold and by extension for usury itself since PMs require usury to generate a return or worse risk-free hoarding.

*“The government does have the right to establish the form of money that citizens must use to pay their taxes. The government should limit itself to a statement regarding the weight and fineness of the tax coins. If private enterprise produces coins that meet these standards, the government must accept such coins as valid for the payment of taxes. The government lawfully controls the form of taxation; but it should not have any power to monopolize the production of coins. Governments have always asserted this authority, and they have always done so to the detriment of liberty.”
Gary North from http://www.lewrockwell.com/north/north895.html

Matt April 25, 2011, 9:10 pm

Dear Sir,
you might want to consider reading some of FOFOA’s writing. Then you will understand that a goldstandard indeed always was impossible, but that point is irrelevant. Freegold is something else, and as Rick writes it is made inevitable because of how human nature works. A ratio of 100 fantasy gold oz for every existing physical oz gold is the only thing that stands in the way of Freegold. When that seal is broken, a new era will begin. Got gold?

Patrick April 25, 2011, 6:30 pm


Thumbs up !! A while ago I started reading the writings of Another and FOA…you should do this also… it takes a while to find the path… but I am sure you will…

Mike Kowolski April 25, 2011, 5:49 pm


You are a scholar and a gentleman. I regularly visit your site and will continue to recommend it to everyone I care about.

Best regards.

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