Looking only at these examples of hyperinflation, there are two obvious answers. Two to three years, or as long as the idiot stays in charge (Argentina and Zimbabwe being the prime example).
Not listed in that article is Mexico, and its whopping 150% inflation in 1987. Now this is every bit as dangerous to savers as it is to spenders. If your life savings are in a bank earning 4% interest while the inflation is at 150% interest, you will lose 75% of the VALUE of your nest egg over the course of a year. Yes the amount of money in the bank will still go up, but it will only buy a quarter of what it used to due to rising costs. What happened in Mexico was hyperinflation, however this isn't shown by the numbers here because of the transition from the peso to the new peso in 1982. If you adjust solely against a 1970 peso the Mexican inflation crisis was hyperinflation.
Moderate inflation is something that politicians like. After all inflation is the only tax that doesn't have to be approved by Congress (by making things cost more people have to spend more and therefore more taxes are gathered).
So, if you are worried about hyperinflation, either things will be better in about two years, or things will last a lot longer (Mexico, Zimbabwe, Argentina). Since it is impossible to plan on an infinite period of crisis/disaster, it makes a lot of sense to plan for a two year currency crisis.
I am not a fan of George Soros, but my opinion does not change the fact that the man knows how to work markets to profit himself. So when the man who brought down the Bank of England predicts that things will get worse, I listen.
“I think the dollar is now under question and I think the system will need to be reformed, so that the United States will be subject to the same discipline as is imposed on other countries,” said Soros, whose famous bet against the British pound earned his Quantum Fund $1 billion in 1992. “Being the main issuer of international currency, we have been exempt and we have abused that because we have effectively consumed 6.5 percent more than we have produced. That is now coming to an end.”
Of course Soros is predicting that it won't just be an isolated country here and there with financial problems, but the whole ball of wax melting down. And like I wrote before, I am not a fan of Soros. I think the man is both vile and evil, and unfortunately I think he is likely right.
3 comments:
Good post sir... I would like to point out though that the economic downturn brought on by the peanut farmer still took 2 years of Reagan's policies to fully correct, '81 and even '82 were pretty tight years. I'm thinking we'll have several hard years even after we remove our current, illustrious president.
That is a good point about recessions or depressions. But the "stagflation" of the Carter era never slipped into hyperinflation.
I guess I might have to write a post on long term economic survival during a recession/depression as a follow on....
Moderate inflation is something that politicians like. After all inflation is the only tax that doesn't have to be approved by Congress This is often regarded as a big secret, but the Bernank himself says he's trying to engineer a 2% inflation rate.
The problem is, when the fed.gov leviathan passed a law adding a COLA to Social Security, it gave them the incentive to lie about inflation - and they lie like crazy! They report an official inflation rate now of around 2% when anyone knows it's worse, probably at least 10%.
That's making the value of your savings suffer even more because it isn't tagged to the real inflation, just the make believe number (if that).
Another reason to listen to Dr. Evil (Soros) is that he knows darned well the world currency system is going to collapse: he's pushing on it like crazy trying to collapse it!
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