I received an email from a friend on Monday touting a plan featured at ZeroHedge as “the only way to make money this year.” The plan, proffered by one Eric Peters, a fund CIO, seems like a good one: “Bet that…the central bankers will continue getting everything wrong, and double down when they do.”  However, it is the hyperinflationary endgame predicted by Peters with which I would disagree. I argued as follows:

I loved this plan until the last paragraph, Mike. Even if  hyperinflation were possible — which I seriously doubt, for reasons I’ve been writing about for more than 20 years — it would be over in a matter of days, bringing in its wake a deflation that could conceivably last for generations. In such circumstances, the best hyperinflation “play” would be to pay off one’s mortgage in the blink of time available between hyperinflation’s onset and deflation’s coup de grace; and/or to exchange a fistful of Krugerrands that might very fleetingly spike to $50,000 for choice farmland owned by an incredibly stupid farmer.

Helicopter Money? Impossible…

Meanwhile, anyone who talks about a ‘paradrop’ — a.k.a. helicopter money — hasn’t worked out its instrumentalities, which are flat-out refuted by Weimar’s methods and experience during the 1921-23 hyperinflation. Success, if you can call it that, required massive collusion between government and a very heavily unionized work force. This time, one might ask, where and to whom would the weekly boxcars of money be sent?  (Were you aware that the biggest German employers were allowed by the government to print and distribute their own scrip, lest workers riot when the boxcars failed to arrive on schedule, as sometimes occurred?)  Another practical concern, and not a small one, is this: How would hyperinflation remedy the juggernaut of manifestly unpayable liabilities of pension trusts, life insurance companies, Social Security and Medicare?  And, which lucky beneficiaries would be so politically privileged as  to continue receiving their monthly checks?

Hyperinflationists talk as though the politicians were capable of deliberately triggering, then micro-managing, the deflationary collapse of a quadrillion-dollar derivatives bubble. As for the ZeroHedge guys who would attempt to follow Peters’ advice, they might as easily surf a tsunami.  The most deflationary event I can conceive of — i.e., the banks not opening some Monday morning because of a panic that has occurred overnight in global financial markets — is arguably the least farfetched of all the endgame scenarios to ponder.  The branches keep no more than $25k-$50K on hand, and the flimsy digital system that clears credit-card transactions would unravel in an hour.  Thereafter, in the week (month?) that it would take for the boxcars of money to reach us, deflation will already have caused the banking system’s exquisitely delicate machinery to seize.