If Hyper Inflation arrives ........

bendix

The hyperbole here is ridiculous.

What is happening right now is a well overdue correction to several years of asset bubble growth - nothing more, nothing less. It's happened before and it will happen again.

Take a look around you. This is not the end of the world. Some crappy businesses are going bust, and rightly so - they were obviously bad businesses producing things that not enough people wanted to buy when they have to pay for it with real money, not credit. Does anyone really care that Dolland and Aitcheson or Whittards of Chelsea are sinking? There are less than two million people unemployed - far too many, for sure, but nowhere near the 3.1million in the early 80s when i left university.

Stock markets and house prices are down. Good. Now they are being brought back to normal realistic levels as measure by yields, after being hyperinflated for so long.

The fact is we are not going into hyperinflation - we've already had it, with the asset bubble. All that is happening now is a natural correction, and we'll get through it.

People think QE literally means printing more money. It doesnt . . it's simply creating the illusion of more funds in the system to try to get banks to relax their credit a little, and kickstart the economy again.

To talk seriously about hyperinflation is to do a gross disservice to people who are genuinely living with it in places like Zimbabwe now, and in the Wehrmar Republic in the 1920s.

piggeh

I find your post slightly contradictory (no offence intended) - If talking seriously about hyperinflation is doing a 'disservice', then why mention that it's already taken place in the form of the house price bubble? It was hardly hyperinflationary.

I do agree it's a correction but then how will QE help?

1echidna

bendix wrote: »

The hyperbole here is ridiculous.

What is happening right now is a well overdue correction to several years of asset bubble growth - nothing more, nothing less. It's happened before and it will happen again.

Take a look around you. This is not the end of the world. Some crappy businesses are going bust, and rightly so - they were obviously bad businesses producing things that not enough people wanted to buy when they have to pay for it with real money, not credit. Does anyone really care that Dolland and Aitcheson or Whittards of Chelsea are sinking? There are less than two million people unemployed - far too many, for sure, but nowhere near the 3.1million in the early 80s when i left university.

Stock markets and house prices are down. Good. Now they are being brought back to normal realistic levels as measure by yields, after being hyperinflated for so long.

The fact is we are not going into hyperinflation - we've already had it, with the asset bubble. All that is happening now is a natural correction, and we'll get through it.

People think QE literally means printing more money. It doesnt . . it's simply creating the illusion of more funds in the system to try to get banks to relax their credit a little, and kickstart the economy again.

To talk seriously about hyperinflation is to do a gross disservice to people who are genuinely living with it in places like Zimbabwe now, and in the Wehrmar Republic in the 1920s.

I dare say that big UK banks requiring tens of billions of public money would have been thought of as hyperbole two years ago. There is no harm in examine a disaster scenario if people wish, unfortunately disasters do sometimes happen.

Its rather a cheap point to say that it is crappy businesses going under, rather adding insult to injury.

We may have less unemloyed than back in the early eighties but this recession depression is still unrolling and there is no saying what the peak will be.

It is true that the bursting of the property bubble was probably inevitable and that there are benefits in more resonable house prices but the decline in stock markets is more an indication of the parlous state of the economy in general and I personally struggle to see a silver lining in this.

OK it is electronic money the gov't are initially printing with QE but if the desired aim of making the banks freer with there credit is achieved it will result in more actual money circulating. It has only been justified on the basis that dangerous levels of deflation are developing, but the term 'quantitative' is a misnomer as everyone seems to be saying that the amount needed is largely guess work.

Why the heck does discussing hyperinflation do a diservice to those experiencing it, or have experienced it?

dopester

dopester wrote: »

And QE may even have the effect of increasing the power of the forces of contraction.

Manipulating numbers of the Fed's or the BoE's balance sheets isn't going to make any difference at all.

While the UK housing market needs an injection of mortgage financing to kick-start sales, the Bank of England's Monetary Policy Committee expressed concerns today that a very low official interest rate could actually reduce lending in the financial system.

The MPC is worried that successive interest rate cuts could be counter-productive as banks struggle to set savings rates high enough to attract the thrifty. Banks still need to keep attracting savers to shore up their balance sheets.

guardian.co.uk - ‎39 minutes ago‎
continues..

MrFonzerelli

bendix wrote: »

What is happening right now is a well overdue correction to several years of asset bubble growth - nothing more, nothing less. It's happened before and it will happen again.

There is more...QE is taking place to ensure there isn't as significant a correction as there might otherwise be. It brings the currency down in value, i.e. the thing assets are priced in terms of.

bendix wrote: »

Take a look around you. This is not the end of the world. Some crappy businesses are going bust, and rightly so - they were obviously bad businesses producing things that not enough people wanted to buy when they have to pay for it with real money, not credit. Does anyone really care that Dolland and Aitcheson or Whittards of Chelsea are sinking? There are less than two million people unemployed - far too many, for sure, but nowhere near the 3.1million in the early 80s when i left university.

Good businesses are going to the wall too.
Economics teaches us that gradual growth in an economy is preferable to boom and bust.

bendix wrote: »

The fact is we are not going into hyperinflation - we've already had it, with the asset bubble. All that is happening now is a natural correction, and we'll get through it.

You may find that the cost of food and necessities continues to inflate.

bendix wrote: »

People think QE literally means printing more money. It doesnt . . it's simply creating the illusion of more funds in the system to try to get banks to relax their credit a little, and kickstart the economy again.

They don't think it's printing money.
Nor is it just an illusion of more funds in a system.

samsuka

I am yet to understand why people think hyper inflation will ever arrive. We have just been through the biggest global bull market in commodity and house prices ever, and it didn't push inflation much above 5% and now everyone is worried more about deflation.

So where on earth is this hyperinflation going to come from? its going to take a long time for the global economies to pick up and a bull run in commodities like we have seen is unlikely as you need growth to fuel it.

Japan has had rates at 0% for years and been pumping money into the economy and they still can't get away from deflation, and certainly don't have any inflation problems.

stevetodd

samsuka wrote: »

I am yet to understand why people think hyper inflation will ever arrive. We have just been through the biggest global bull market in commodity and house prices ever, and it didn't push inflation much above 5% and now everyone is worried more about deflation.

So where on earth is this hyperinflation going to come from? its going to take a long time for the global economies to pick up and a bull run in commodities like we have seen is unlikely as you need growth to fuel it.

Japan has had rates at 0% for years and been pumping money into the economy and they still can't get away from deflation, and certainly don't have any inflation problems.

Hey if you are going to cheat by using logical arguements instead of fear monegring I'm not playing any more

Really2

Really2 wrote: »

Well with recent thinking we have found out the world to be bannana shaped.

I am quiet worried.........................


Do we not have any Monty Python fans left?

If not I am off, I will have to start posting about house prices and the economy otherwise.

bigheadxx

Hyper-inflation is a real threat and it would actually be in the governments interest for it to happen. The best way and maybe the only way of reducing the national debt as a proportion of income would be to allow inflation to rise significantly for a period of time. This would, over time see heavily indebted householders see the value of that debt fall in relation to their income.

QE is similar to this:

You are selling a car for £1000. No-one wants to buy so the government creates £1000 and buys the car off you. This scenario is repeated throughout the economy and as the money supply increases demand for your car increases. You are now able to easily sell your car for £1000 so increase the price to £1500. Demand is still high and you continue to increase the price. This is repeated throughout the economy and you can now sell your car for £2000. Prices have doubled.

Consequence for average person:

Your pay increases in line with price rises increasing inflationary pressure
Your income does not increase that much and you accept a lower standard of living

QE will lead to higher inflation in the future. The only reason prices are falling at the moment is because businesses have huge quantities of old stock to clear which is falling in value faster than the fall in prices.

Also dont forget that the Governments 2% inflation target is for CPI not the RPI. CPI is currently above 2% and in normal times interest rates would now be increasing not decreasing.

Generali

bendix wrote: »

The hyperbole here is ridiculous.

What is happening right now is a well overdue correction to several years of asset bubble growth - nothing more, nothing less. It's happened before and it will happen again.

When was the last time destruction of wealth happened on the same scale as now, internationally would you say?

It's a pretty casual use of words.