Hyperinflation

Generali

vivatifosi wrote: »

Merry Christmas Gen!

Cheers. We've done Santa and brekkie and will start on the prezzies under the tree once I can drag the kids away from the chocolate and balloons.

michaels

Its strange isn't it - people complain savings accounts are loosing accounts but with property prices falling deposit savings are actually gaining in value relative to the item they will eventually purchase.

I always like the economic theory called satisfising - classical theory says that a rationale individual works out how much they will earn over their lifetime and when, what relative prices will be at each point and maps out an expenditure plan. Satisfising says each time an individual is given a purchasing opportunitythey will judge said deal against a small set of experience and either accept or reject. I know which I find more persuasive but only the classical theory goes on to underpin most economic equilibrium theory

Cleaver wrote: »

You say that economics is really the study of people and psychology and I completely agree with this.

So with that in mind I could suggest that it's not just that people are 'happy to hold cash' at the moment, I think it's the case that a lot of people (and even those with a good amount of savings) don't really understand what inflation is and how inflation can erode savings.

I genuinely think that if you asked the average joe on the street what the connection is between your savings being at 4% gross and inflation running at 2.6%, you wouldn't have many who could tell you. And that's not me being patronising or insulting as I'm not sure I fully understand myself.

sabretoothtigger

property prices falling deposit savings are actually gaining in value relative to the item they will eventually purchase.

Finance is the biggest cost to most peoples housing. Im not sure its so straight forward, if people can get a good deal now then it seems best not to wait especially.
House prices are fairly steady over the last year is my impression so I'd not favour either bull or bear except as you say money saved isnt gaining so utilising it to reduce rent costs seems good to me

lemonjelly

This thread is insane, & I'm not sure I understand most of it...

However, in true "this board" stylee, I'm going to venture forth (part) of an opinion.

In my view, for the inflation to be hyper, it would need to have additional momentum behind it, in order to qualify it as hyperinflation, rather than simply inflation.

Asheron

vivatifosi wrote: »

The bad thing about guns... is when used in the name of democracy the end result is rarely democratic.

democracy = slavery

Generali

lemonjelly wrote: »

In my view, for the inflation to be hyper, it would need to have additional momentum behind it, in order to qualify it as hyperinflation, rather than simply inflation.

It's as good a way of looking at it as any.

My feeling is that, while it can be purely economic (eg Zimbabwe, Weimer Republic, Inter-War Hungary) it is usually psychological (eg South America countless times).

Mortabre_2

Generali wrote: »

It's as good a way of looking at it as any.

My feeling is that, while it can be purely economic (eg Zimbabwe, Weimer Republic, Inter-War Hungary) it is usually psychological (eg South America countless times).

True even if the central banks think they can control inflation they can not control the attitude of the public, or the free market.

Even if they bring in price controls to stop the prices of things getting out of control. Sellers will just stop selling or go underground.

If this happens and there is a black market selling things at free market price then this will enforce in peoples minds there is something wrong with their currency.

Generali

Mortabre wrote: »

True even if the central banks think they can control inflation they can not control the attitude of the public, or the free market.

Even if they bring in price controls to stop the prices of things getting out of control. Sellers will just stop selling or go underground.

If this happens and there is a black market selling things at free market price then this will enforce in peoples minds there is something wrong with their currency.

Often, IMO, hyperinflation is as much about there being an excess supply of money because people simply don't trust it to hold its value any more.

Once that happens, shopkeepers will want increasing amounts of untrusted cash in return for real goods which have a real use.

sabretoothtigger

Asheron wrote: »

democracy = slavery

Tyranny of the majority is the modern mans curse


Does higher inflation also mean less acceptance of credit.

Even expensive but now common credit cards by law must I think allow a no cost gap of upto 56 days between purchase and actual payment.
I presume this and all kinds of loose money would reduce in availability in response to instability.

That would be the opposite of what the Politicians say QE is supposed to be about I think.

Generali

sabretoothtigger wrote: »

Does higher inflation also mean less acceptance of credit. .

It means less acceptance of short term debt but more acceptance of long term debt. That sounds paradoxical as long term, the value of the debt would be eroded more but the longer the debt term, the less the return of the capital matters and the more the income stream is important.

It would be perfectly reasonable (from a bank's pov) to lend someone money I/O to buy a house over 100 years. If the payments are kept up you let them off the capital repayment. The only proviso is that you have to be reasonably sure that the person you're lending the money to will be around for 100 years to keep up the payments, after all it is a mortgage