Is Hyperinflation On The Horizon?

[avromie7]

Which is also why this is germane to the OP. As long as the top earners accumulate most of the wealth, and the government is more focused on pacifying the masses with handouts instead of overhauling the system to enable real change, inflation (and hyperinflation) is a risk.

In what way is this part of the problem?

[Lurker]

In what way is this part of the problem?

When the people making the most money are able to utilize special loopholes only available to them to avoid taxes, but money is being given out to the masses by the government, new money must be acquired, either via loans or by printing more money. Furthermore, the rules favoring the rich getting richer lends credibility to the complaints of the masses that the system is rigged, creating social unrest, which causes instability and necessitates even more pacification and handouts by the elected officials.

[yos9694]

Which is also why this is germane to the OP. As long as the top earners accumulate most of the wealth, and the government is more focused on pacifying the masses with handouts instead of overhauling the system to enable real change, inflation (and hyperinflation) is a risk.

Inflation is almost a guarantee at this point, and hyper-inflation is becoming very likely too.

I studied communism as an economics subject (not politically) and what's fascinating to me now is that we are going right back towards the conditions that unbridled capitalism caused by the late 1800's. One of the biggest successes of capitalism was recognizing that Marx had made a lot of good points and it was necessary to capitulate. Cutting back on work days, giving leisure time/days, paying wages to ensure workers didn't have to live in hovels, developing public services for all- these things saved the capitalists, but this generation is turning back the clock.

[AsherO]

Personal use is a different animal than investment. IINM, as long as you live in a house for 2 years, you don't pay any taxes on gains. I don't think anyone has an issue with that.

And what if it’s the same equation for a business. Your revenue is from renting out residential/commercial/industrial space but when the market shifts you want to move ahead of it to keep making money, should work the same way IMHO.

Except.... That the tax code is one of the largest sources of power for politicians. It allows them to cater to special interests, put certain industries in favor and others out of favor. If COVID-19 is the politician's Opium, the tax code is there Carb Addiction. Good luck on getting rid of that.

Was going to say this but you said it better than I ever could. Congress would change forever (for this benefit of the people, IMHO) if this legalized/sanctioned corruption was done away with once and for all.

Inflation is almost a guarantee at this point, and hyper-inflation is becoming very likely too.

What’s your prediction for rate/timeline of hyperinflation?

[Lurker]

And what if it’s the same equation for a business. Your revenue is from renting out residential/commercial/industrial space but when the market shifts you want to move ahead of it to keep making money, should work the same way IMHO.

Not sure I'm following. Make money, but pay taxes. It's like that with every investment in every other business. RE is the only industry where you use your losses to cancel your tax obligations on other gains, but you can roll the profits into another investment without paying taxes. It's super lopsided, and is manipulated to the nth degree by all of the richest people in this country.

[yos9694]

What’s your prediction for rate/timeline of hyperinflation?

No clue on timeline. It could happen in a year from now, because the Fed is not trying to prevent inflation. But smart economists might find a way to hold it off and "kick the can down the road" for a long time as exgingi said.

Here's the powder keg though. If the stock market tanks, the Fed has no tricks left in the bag to stave off a recession. They're already buying more bonds than ever, buying trillions of etf's, and would not be able to lower interest rates or create an artificial stock price floor. So a bear market could cause a spike in interest rates and a decline in GDP. Rising interest rates with our current level of national debt is a death spiral, and what happens in that scenario is going to depend on what type of interventions are attempted (but a lot of vad outcomes are probable).

As for the rate, DB suggests we use the 1970's to set an expectation, which is roughly 7% annually on average

[AsherO]

No clue on timeline. It could happen in a year from now, because the Fed is not trying to prevent inflation. But smart economists might find a way to hold it off and "kick the can down the road" for a long time as exgingi said.

Here's the powder keg though. If the stock market tanks, the Fed has no tricks left in the bag to stave off a recession. They're already buying more bonds than ever, buying trillions of etf's, and would not be able to lower interest rates or create an artificial stock price floor. So a bear market could cause a spike in interest rates and a decline in GDP. Rising interest rates with our current level of national debt is a death spiral, and what happens in that scenario is going to depend on what type of interventions are attempted (but a lot of vad outcomes are probable).

As for the rate, DB suggests we use the 1970's to set an expectation, which is roughly 7% annually on average

7%/year is hyperinflation?

[yos9694]

7%/year is hyperinflation?

Averaged over a decade? Yes. It was double digits some years

[Kobe Bryant]

Averaged over a decade? Yes. It was double digits some years

Almost all hyperinflations have been caused by government budget deficits financed by currency creation.[citation needed] Hyperinflation is often associated with some stress to the government budget, such as wars or their aftermath, sociopolitical upheavals, a collapse in aggregate supply or one in export prices, or other crises that make it difficult for the government to collect tax revenue. A sharp decrease in real tax revenue coupled with a strong need to maintain government spending, together with an inability or unwillingness to borrow, can lead a country into hyperinflation.[3]

Although technically speaking ”Hyperinflation is generally defined at 50%+ a month.” I am referring to something similar to what happened in the US from 1973-1982 where inflation averaged 8.8% a year. Or even worse...

[AsherO]

+1

I have the full collection of uncirculated Zimbabwean banknotes, something like this:

https://www.ebay.com/itm/402765210338

It’s a cool collectors item, but it’s also more than tripled in resale value since I bought it.

So when people talk about 7% hyperinflation I laugh, OTOH it would destroy the US economy so maybe I should cry...

[CountValentine]

https://www.msn.com/en-us/money/markets/may-2021-consumer-price-index-shows-fastest-inflation-since-2008/ar-AAKTHku?li=BBnb7Kz

[moko]

+1

I have the full collection of uncirculated Zimbabwean banknotes, something like this:

https://www.ebay.com/itm/402765210338

It’s a cool collectors item, but it’s also more than tripled in resale value since I bought it.

So when people talk about 7% hyperinflation I laugh, OTOH it would destroy the US economy so maybe I should cry...

or you just go Israeli style and revaluate your currency several times in a few years

[Kobe Bryant]

“The debate between whether inflation is temporary (“transitory” in Fedspeak) or here to stay remains open. What’s no longer in debate is that we’ve got it now.

Consumer price index data this morning came hotter than expected. The headline reading for May showed a monthly rise of 0.6% while the core reading that strips out food and energy showed a 0.7% gain. A Briefing.com consensus had expected a 0.4% rise for both the headline and the core readings. The numbers are below the 0.8% and 0.9% headline and core monthly growth numbers from April.

On a yearly basis, the overall number rose 5%, which marked the biggest 12-month increase since a 5.4% rise in August 2008. The yearly core rise was 3.8%. While that yearly core rise could be troublesome as it’s well above the Fed’s 2% target—at least for core personal consumption expenditures inflation—keep in mind that the year-over-year comparison could look more dramatic because most of the economy was locked down a year ago and crude prices sank to record lows.” JJ Kinahan

[PlatinumGuy]

https://twitter.com/davidfrum/status/1404405216850632704

[yuneeq]

https://twitter.com/davidfrum/status/1404405216850632704

From the article:

“Still, while lumber prices may finally be pulling back from stratospheric highs, don’t look for a return to pre-pandemic levels any time soon, according to BMO Capital Markets.

“‘Nosebleed’ prices won’t last, but strong demand, a limited supply response and a rising cost curve all point to above-trend prices for at least the next 12-24 months,” BMO analyst Mark Wilde said in a note.

Lumber futures slid 5.6% in Chicago to $1,059.20 per 1,000 board feet on Friday. Prior to the rally that started in mid-2020, lumber futures traded mostly within the range of $200 to $600 since 1992.“

[aygart]

https://twitter.com/davidfrum/status/1404405216850632704

Why would that preclude it being inflation?

[AsherO]

Why would that preclude it being inflation?

Why does the entire price increase have to only have one explanation? Silly binary paradigm, where it either is or isn't inflation. Some of it was inflation, some of it was COVID recovery, some of it was futures hype, and some of it might be other factors that haven't been mentioned.

[Ver hut gazugt]

Why does the entire price increase have to only have one explanation? Silly binary paradigm, where it either is or isn't inflation. Some of it was inflation, some of it was COVID recovery, some of it was futures hype, and some of it might be other factors that haven't been mentioned.

All those are reasons but does not change the fact that it is inflationary. The core reasons will decide if it is transient or not.

[yelped]

https://www.cnbc.com/amp/2021/06/14/jamie-dimon-jpmorgan-is-hoarding-cash-because-very-good-chance-inflation-here-to-stay.html

[aygart]

https://twitter.com/SquawkCNBC/status/1404784519807447040