[dia80]

There are two obvious ways in which expanding the money supply can go wrong.

1) Bernake et al. are feckless idiots and will leave the money presses running long after inflation rears its head, a la Zimbabwe, causing hyper inflation and the destruction of the world economy

2) The economy picks up a bit and they stop printing. However, that huge pool of money they have created is enough to drive inflation so high that they are either faced with allowing a period of high inflation 70's style or breaking the economy again with restrictive monetary policy.

Outside wild conspiracy theories I don't think 1 is plausible and 2 is hardly likely to lead to the huddled masses attempting to warm themselves around a pile of burning trillion dollar notes. So I think confidence in the dollar is safe for the interim.

[OldSchool]

IMO true hyperinflation is extremely unlikely since the US can also "unprint" money at will due to it being mostly digital debt. They will however continue to inflate as much as they think they can.

Related, "gold bugs" may have had a good decade but I also believe that gold's value comes from nothing more than tradition: you can't eat it and you can't defend yourself with it.

[jerguismi]

1) is not plausible unless it happens. Hyperinflations tend to happen only once in a history of a fiat currency.

It sounds a little bit crazy to propose that hyperinflation would happen to one of the really big world currencies (euro, dollar, yen...). But I don't see any technical reasons why it couldn't happen at some point in the future.

[nhaehnle]

You may be interested in this paper on hyperinflation: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1799102

The tl;dr version: The root cause of hyperinflation has never in history been runaway printing of money. Rather, the root cause is always some mixture of foreign-currency denominated debt, political chaos, and collapse of a country's productive capacity.

To give a bit more detail: This analysis applies to both the Weimar republic hyperinflation (excessive reparations demanded by the victors of World War I denominated in real goods and foreign currencies, combined with a military occupation of Germany's steel and coal industrial center) and the recent Zimbabwe hyperinflation (high USD-denominated government debt combined with a collapse of domestic production due to stupid economic reforms).

The hyperinflation is simply a result of such untenable economic situations. They tend to be "cleansing fires" in some sense: especially in the Weimar republic case, the hyperinflation made it very obvious to everybody that the war debts need to be backed off.