Hyperinflation

Generali

There's a very good piece on the FT website written by the very excellent and readable Tim Harford, aka The Undercover Economist:

http://www.ft.com/intl/cms/s/2/1ebea080-17f2-11e2-8cbe-00144feabdc0.html#axzz29uAaIvFl

(requires free registration)

Unexpected inflation moves money to debtors from creditors. It creates a variety of minor costs associated with redrafting contracts and rewriting menus and price lists; but it creates some benefits, too, by eroding stubbornly high wages and promoting job creation.


Hyperinflation, though, is a different beast from ordinary inflation. Hyperinflation shreds every monetary contract, makes much of modern economic life impossible, and all but guarantees that a totally different form of money, anything from foreign dollars to cigarettes, will be pressed into service. Yet the historical record is in some ways encouraging.

To summarise his summary of the work of the Cato Institute (no not that one), hyperinflation is caused by failed politics not bad economics. In other words, Greece is at far greater risk of hyperinflation than the US or UK.

JonnyBravo

:rotfl:

God I love the Pink Panther.

Oh and yeah, surely it's just a matter of time til we get high inflation. Mind I've been saying it for a while now. I think I'm turning into a variant of brit. :eek:

My reckoning is simple. At some point after all this printing the banks are gonna say to themselves "****, we're loaded, let's give it the plebs".
I intend to make sure I'm ready to be highly indebted when that happens.

Wookster

That sounds reasonable, however, inflation at the relatively low levels we've seen has been extremely damaging to the UK economy for the sheer destruction of disposable income over the last 4 years.

I shudder to think what 10% inflation for just one year would do to the UK.

zagubov

Generali wrote: »

There's a very good piece on the FT website written by the very excellent and readable Tim Harford, aka The Undercover Economist:

http://www.ft.com/intl/cms/s/2/1ebea080-17f2-11e2-8cbe-00144feabdc0.html#axzz29uAaIvFl

(requires free registration)


To summarise his summary of the work of the Cato Institute (no not that one), hyperinflation is caused by failed politics not bad economics. In other words, Greece is at far greater risk of hyperinflation than the US or UK.

When I was taking the train axcross Europe back at the end of the cold war/late 80s I once converted 20,000 drachmas to 880,000 Yugoslav Dinars at the border when they had hyperinflation (Yugolsavia was neutral but communist). The counting machine automatically banded the notes into wads as they came out!

The supermarket prices were being changed in front of me real time. Guys with pricing guns were going down the isles and changing the prices, and weirdly, the prices weren't being rounded up like they were here. e.g. a tin of something might be 32,595 dinars.

After a few purchases my pockets were stuffed with vast numbers of low-denomination notes but I didn't feel any worries about being robbed! Got very difficult to work out what anything cost.

In the same holiday I also passed though Czechoslovakia, also communist but more "hardline" .
Prices were understandable and low but I know which country I preferred. Also you could only buy good stuff with hard currency whereas at least in Yugoslavia you could buy anything with dinars (inlcuding foreign holidays in the west. Hyperinflation's not the worst situation to have in a country.:)

ILW

zagubov wrote: »

When I was taking the train axcross Europe I once converted 20,000 drachmas to 880,000 Yugoslav Dinars at the border when they had hyperinflation. The counting machine automatically banded the notes into wads as they came out!
The supermarket prices were being changed in front of me real time. Guys with pricing guns were going down the isles and changing the prices, and weirdly, the prices weren't being rounded up like they were here. e.g. a tin of something might be 32,595 dinars.
After a few purchases my pockets were stuffed with vast numbers of low-denomination notes but I didn't feel any worries about being robbed! Got very difficult to work out what anything cost.

In the same holiday I also passed though Czechoslovakia, also communist but more "hardline" .
Prices were inderstandable and low but I know which country I preferred. Also you could only buy good stuff with hard currency whereas at leats in Yugoslavia you could buy anything with dinars (inlcuding foreign hoilidays in the west. Hyperinflation's not the worst situation to have in a country.:)

Never did Zimbabwe any harm.

zagubov

Just recalled a conversation I had with a mate who'd done a Politics degree. He'd said the communist countries all had terrible inflation but it never showed up as price rises but showed upo as queuing and shortages. Too much money chasing too few goods.

People in Czechoslovakia and Russia had plenty of cash, paid very little tax (it was actually 0% in Albania I think) and had stacks of cash sitting idly in bank accounts and finaincial products like insurance policies (door-to door insurance salesman was one of the few generally approved private jobs you could do) mainly for insuring your property and consumer goods.

Another mate used to go on holiday every summer to stay with grandparents in Poland and his stories seemed to match this.

People in those countires memorised or carried a paper list of clothes sizes for all thier family or firends and automatically joined any queue no matter what it was for. That's an even worse kind of inflation than the kind the western world and yugoslavia had.

i certainly noticed that only Yugoslavia could send whole village teams to play in "Its a Knockout" and expect them to return. Never heard of Poland or Hungary risking sending anyone, which speaks volumes!

grizzly1911

zagubov wrote: »

Just recalled a conversation I had with a mate who'd done a politics degree. He'd said the communist countries all had terrible inflation but it never showed up as price rises but showed upo as queuing and shortages. too much money chasing too few goods.

People in Czechoslovakia and Russia had pleney of cash, paid very little tax (it was actually 0% in Albania I think) and had stacks of cash sitting idly in bank accounts .

Another mate used to go on holiday every summer to stay with grandparents in Poland and his stories seemed to match this.

My farther use to work extensively in the Eastern Block providing western technological expertise in the 70s.

He would be away for several months at a time and half his suitcase was long life food stuffs to keep him going. He stayed in "western" hotels but the offerings were still meagre.

Whilst being paid at home he would also be paid in local currency. He couldn't really use it there apart from some local specialties such as coloured cut class vases and goblets, which he brought home much to mums angst.



He couldn’t bring us any presents back or though I did get an army penknife from Romania and a compass from East Germany.


It was a criminal offence to swap western currency for local currency apart from the government exchanges.
He was often asked to take in western contraband e.g. Levi Jeans but the risk didn’t justify it.


He also recounted the stories of people queuing at shops when a particular item came in , food generally but also banal items like alarm clocks for example. What was on the shelves such as shampoo or soap was of one type only.


He used to take in a few vacuum packed fresh coffee in “gold” briquettes which he gave as gifts to those who had looked after him. When he stopped going to the different countries he would simply give his bundles of cash to them to, but it was of little use.

zagubov

grizzly1911 wrote: »

My farther use to work extensively in the Eastern Block providing western technological expertise in the 70s.

He would be away for several months at a time and half his suitcase was long life food stuffs to keep him going. He stayed in "western" hotels but the offerings were still meagre.

Whilst being paid at home he would also be paid in local currency. He couldn't really use it there apart from some local specialties such as coloured cut class vases and goblets, which he brought home much to mums angst.

He couldn’t bring us any presents back or though I did get an army penknife from Romania and a compass from East Germany.

It was a criminal offence to swap western currency for local currency apart from the government exchanges.
He was often asked to take in western contraband e.g. Levi Jeans but the risk didn’t justify it.


He also recounted the stories of people queuing at shops when a particular item came in , food generally but also banal items like alarm clocks for example. What was on the shelves such as shampoo or soap was of one type only.


He used to take in a few vacuum packed fresh coffee in “gold” briquettes which he gave as gifts to those who had looked after him. When he stopped going to the different countries he would simply give his bundles of cash to them to, but it was of little use.

My parents visited the Soviet Union and noted that on internal flights everybody was carrying stacks of goods because different republics had different shortages and also internal flights were subsidised. People often brought back good for resale when visiting other Soviet republics and even more so the Warsaw Pact countries which had better goods but in a patchy way.

The exception was Albania which apparently at some stages had almost no cousmer goods at all and visitiors had to bring everything with them.

Visiting Yugoslavia was difficult for easterners and DW knew people from there. They often had summer jobs as tour guides and when they got Warsaw pact tourist groups they used to plauy a game called Spot the KGB agent". There was always in every group a clever confident quiet person they always seemed to be wary of.
:eek:

grizzly1911

zagubov wrote: »

They often had summer jobs as tour guides and when they got Warsaw pact tourist gropups they used to plauy a game called Spot the KGB agent". There was always in every group a clever confident quiet person they always seemed to be wary of.
:eek:

That was the reason dad didn't take stuff in from the west, to "trade" or exchange currency because you just didn't know who you were dealing with - even co-workers.:eek::eek:

Th one hotel he stayed in couldn't provide basic food, that he god enjoy, but the waiter could find caviar from somehwhere for a price.

Kennyboy66

Wookster wrote: »

That sounds reasonable, however, inflation at the relatively low levels we've seen has been extremely damaging to the UK economy for the sheer destruction of disposable income over the last 4 years.

I shudder to think what 10% inflation for just one year would do to the UK.

its only modest inflation that has kept the UK going.

The only way we could have experienced lower inflation would have been

1) a much stronger exchange rate.
2) lower pay (a nominal reduction in wages).

With the second point you get lower disposable income anyway, with the first point you destroy exports, you reduce disposable income for debtors by jacking up interest rates, and eventually your currency collapses anyway.

The reason disposable incomes have fallen, is that collectively we have lived well beyond our means for roughly a decade up to 2007. Its the inevitable unwinding of this.

Modest inflation is part of the solution not part of the problem. You only have to see how hard it is in europe to cut nominal wages - at least we can cut real wages without cutting nominal wages.

Loughton_Monkey

Generali wrote: »

.....hyperinflation is caused by failed politics ....

So! Something to look forward to when Miliballs is voted in.