[murgindrag]

Avoiding hyperinflation is about maintaining faith in fiat currency. Announcing inflation is a self-fulfilling prophecy. I think everyone paying any attention expected inflation, but downplaying it was exactly what the ruling class had to do to avoid hyperinflation.

[betwixthewires]

This is not actually correct. Hyperinflation is not caused by loss of faith in currency, the causal chain is actually the other way around, hyperinflation causes loss of faith in currency. But when that loss of faith occurs you get a runaway positive feedback loop because behavior changes once the faith is lost.

The sticker value of everything in an economy in aggregate is a function of 2 things, the total value of everything in aggregate and the total circulating money supply. When the money supply increases, as it moves around this increase is reflected in the economy as an increase in prices. It is this increase that causes loss of faith. This is not evenly distributed across different industries and goods and services, as these price changes change peoples buying habits asymmetrically. Usually the things that rise in price first and the most are goods with inelastic demand.

They always try to downplay it because of what you said, they think they can keep the game going if they maintain faith, but it never works.

[imtringued]

Hyperinflation... are you joking? Hyperinflation has always had an external cause. [0]

The deflationary forces in most fiat currencies are so strong the central bank can choke the entire economy to death with the snap of a finger. Central banks are scared of raising interest rates, not inflation.

[0] https://youtu.be/_uQpyFda6I8

[betwixthewires]

I want to ask you the same question, are you joking? Your citation is a video of a guy making claims with 0 citations himself.

Hyperinflation can be caused by printing of money, and in fact in the example video the case of Zimbabwe was cited as caused by a collapse in food production but was actually caused almost exclusively by the printing of money. You should read into the details of the Zimbabwe hyperinflation case for a good laugh at how ridiculous it was. The only way that could've happened for any other reason would be a complete disappearance of all domestic commerce and industry overnight.

As far as Weimar goes, the logic behind how he explains it holds no water. External debt in gold caused hyperinflation in a free floating currency? This doesn't stand to even the least bit of scrutiny. "Don't owe in any currency other than your own" is sound advice for some reasons but not to prevent hyperinflation. If you could draw me a picture of how the Deutchmark under the Weimar republic inflated away not as a consequence of debasing the currency I'd like to see it. They debased to pay debt, but the hyperinflation was caused by the debasing.

As far as Venezuela goes I'm not too familiar with the details but I will say I'm usually skeptical of arguments that amount to a finger pointing at America.

[mc32]

Ok, so why didn't they start addressing the situation then? Why wait till now to start "thinking" about doing something?

In any case, it's not like it was a secret and you risk jinxing it -it's not "magic". People other then the administration were saying it for at least six months.

[murgindrag]

You do risk jinxing it. Once people believe high level of inflation are coming, they move wealth out of fiat for other assets. That leads to inflation. And it cycles in on itself.

The classical example is the Weimar Republic. The government printed money to get out of financial problems, but that initially led to inflation, not hyperinflation. What led to hyperinflation was when people started dumping papiermarks for other assets.

Imagine: You believe the US will see 50% inflation, and Canada will see 5%. What do you do? Swap all your USD for CAD before that happens. What does that do? Devalue the dollar. Now, everyone expects 60% inflation. People start investing in stocks, property, or just about any other store of value. That devalues the currency. And so on.

All inflation requires is a sudden loss of faith.

[mc32]

All Inflation requires is a copy of the printers used in Zimbabwe and 90s Brazil. Come to think of it, it looks like we took them and added capacity.