# Is hyper inflation on the way?



## Airtight

Is hyper inflation on the way as a result of all the eoconmic stimulus government world wide are gifting.

Surely, if it is an even bigger crash is coming our way in the next 5 - 10 years.

What do you think?


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## Damian85

I think it is a very strong possibility.

It is unlikely that US will get themselves out of an inflation spiral. We in the Eurozone may also be in danger. Although the Euro governments aren't as spend happy and print happy as the US, we could experience an inflation backlash.

Also, it is worth bearing in mind that a couple of billion people from up and coming emerging economies will soon become consumers. This will increase demand for every day commodities - something which we haven't seen in history in such a grand scale.


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## dub_nerd

Bear in mind though that they are trying to spend their way out of a deflationary spiral. If they got it just right, things could balance out. Chances are a gazillion to one against it, unfortunately.

I see little chance that the Eurozone would be unaffected in the case of US inflation. Exporters to the US would find that their income from there would be worth less and less ... indeed a very weak dollar anytime soon would mean the end of _my _job, and a lot of others.


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## Airtight

How do we take advantage of hyper inflation?


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## Simeon

Buy wheelbarrows before the price goes up!


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## lemur

Airtight said:


> How do we take advantage of hyper inflation?



Buy gold.


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## Happy Girl

Better still buy Gold Wheelbarrows!!!!


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## dub_nerd

What about buying property in the event of hyper-inflation?


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## Damian85

To take advantage of hyper inflation in extreme cases- plenty of fixed rate debt to purchase income producing investments such as foreign rental property or dividend paying stocks.

Inflation pays off the debt for you!!


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## Guest124

No.


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## Airtight

When is hyper inflation likely to happen and how long should it last?

Don't worry I am not going to invest on the basis of the content of your replys.


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## Sunny

Looks like deflation is becoming less of a risk in the US at least

http://www.bloomberg.com/apps/news?pid=20601087&sid=aHESXISgcg64&refer=home


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## Damian85

People seem to think it will happen when the current increasing rally on the US dollar ceases and when the Middle East, Japan, and China stop funding the US consumption by buying their bonds. It would then start to plunge downwards. How low it may go is anyones guess, likewise with the timing of when it will occur.

How long it could last is also guesswork. This depends on the quantity of money that will be printed and how long authorities insist on keeping the hyperinflated currency as the given country's primary legal tender. It is likely that the people would have long switched to an alternative form of money to carry out their dealings before the authorities would accept a change in the now damaged primary currency.

Apologies for the vague opinions on the timing!


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## Purple

High (if not hyper) inflation could be on the way for the UK as they import much of their raw material requirement.


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## Damian85

Yes I've heard that. Apparently the North Sea oil reserves are drying up, making the UK a major importer.

Whether examples like this will lead to hyper inflation in the UK poses an interesting question.


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## jhegarty

Purple said:


> High (if not hyper) inflation could be on the way for the UK as they import much of their raw material requirement.




+1 

Has to be a problem for the UK. Imports have to go up inversely with the drop in sterling.


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## george.shaw

Morgan Stanley analysts think hyperinflation is a possibility:

*Hyperinflation is a possibility, say Morgan Stanley* 
Kaminska, FT Alphaville
Morgan Stanley's Jocahcim Fels and Spyros Andreopoulos look at the possibility of hyperinflation hitting the western shores of the UK, Europe and the US in their latest note. Their conclusion is a little scary:
"* we believe that buying some insurance against the black swan event of high inflation or even hyperinflation makes sense and is relatively cheap currently."
[broken link removed]*


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## Airtight

When does high inflation become hyper inflation?


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## Padraigb

Airtight said:


> When does high inflation become hyper inflation?



When does a stumble become a fall?


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## george.shaw

Low hyperinflaton is in the 20%+ per annum range - high hyperinflation is in the 1,000's of percent.  see 
http://en.wikipedia.org/wiki/Hyperinflation
http://www.shadowstats.com/article/292


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## partisan

Airtight said:


> How do we take advantage of hyper inflation?




Hopefully it won't come to the Eurozone. The best way to take advantage of it is to move all your funds to a currency / store of value that is safe (Euro? Yen, Swiss Franc ?, Gold ?). Once hyper-inflation takes hold, share prices in external currencies tend to fall to ludricously cheap levels. If you think the government of the state affected can reign in the problem, then you have a massive buying opportunity.


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## george.shaw

Peter Schiff has called these markets right for a long time and is now warning that if the Federal Reserve and other central banks do not start increasing interest rates soon there is a risk of hyperinflation:
Peter Schiff: Stimulus Bill Will Lead to "Unmitigated Disaster"
[broken link removed]


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## Damian85

Peter Schiff has been predicting hyper inflation for years. He predicted both the subprime lending crash and the housing bubble with great accuracy, but he presumed high interest rates and inflation would prevail as a result, and not low interest rates. Interestingly, he predicted a period of deflation before rapid inflation.

Schiff's main thesis is to get out of the US Dollar as he feels it is going to crash and a prolonged depression is going to set in the US. He also feels once the rest of the world stops supporting the US consumer binge, they are going to be able to thrive by staying away from the US.

A lot of the international news channels are now getting Schiff on their shows, which may show that the hyper inflation threat is been taken more seriously not just by the mainstream media, but also the normal individual?


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## george.shaw

John Williams is the acknowledged expert on hyperinflation and has been interviewed on CNN and other major financial media:


$100 Bills As Toilet Tissue?
[SIZE=-1]Motley Fool - 17 Feb 2009[/SIZE]
[SIZE=-1]Efforts to avoid a deflationary depression will probably produce the opposite — a nasty bout of inflation, says *John Williams* of *Shadow* Government *...*[/SIZE]
http://caps.fool.com/blogs/viewpost.aspx?bpid=146687&t=01007146184382914537

Hyperinflation Special Report
http://www.shadowstats.com/article/292


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## MichaelDes

Damian85 said:


> Peter Schiff has been predicting hyper inflation for years.


 
Economics is a social science with no right or wrong answer. It is the same as politics and completely subjective. For proof of a subjective socio-science look no further than the Dail with loads of arguing. If you were to put a bunch of high class economists in a room they couldn’t agree on the time never mind a complex matter. What good did all the highly paid economists do in the last 12-18 months who were employed to make forecasts on behalf of large investment houses, hedge funds and banks?

Basically it is clear that forecasting to the medium term on something like inflation IMO is nigh impossible since there are so many interdependent economic factors at play, globally, and these factors are changing on a second by second basis. Short term its likely deflation will continue, especially looking at Japan's economic landscape at present. Wages are deflating globally and order books shrinking with inventories rising therefore the outlook IMO remains inflation free. 

Btw inflation is more welcome than deflation since the latter is a jobs killer.

Also since the unprecedented level of easy money sloshing round circa 2006-07 has dried and will likely rebalance at a lower tolerable level following probable banking standards and regulation [no more 8 times salary loans etc] then the capacities in many economies will be reduced by 10%+ according to a recent article in Money week. Not supportive of inflation.

If anyone can predict hyperinflation which is a possibility, maybe they could also advise me if it will be raining next week in London - Friday. Should I take a brolly?

Finally gold IMO may be a bubble and since the abolition of FIAT it's as useful a speculative instrument as pigs testicles. If you invest in Gold then (i) be prepared for it to break the $1000 barrier but (ii) also be prepared to have a nose bleed should it freefall [just as likely an oucome as rising]- trending like other pm’s or commodities yoy.


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## Damian85

No, I wouldn't agree with that.

Inflation is the most likely outcome for two main reasons;

1) Money is/will have to be printed to bridge deficits and bail out banks as well as stimulating economic activity.

2) Commodities- We will enter a stage never before encountered in human history over the coming years. India, Brazil, and China will have a couple of billion new consumers looking to purchase oil, wood, food etc. Many will be limited resources. 

Deflation is not the issue. Deflation has been over exaggerated due to a housing bubble and overvalued stock market.

Schiff has predicted rampant US inflation long before this economic meltdown, and his rationale has been based on housing bubbles, laxed consumer credit, trade deficits, and the US monetary system (eg. power of the Fed). I suppose one could argue that he got lucky as inflation is bound to happen as part of a business cycle, but he's precise predictions have lead to his increased credibility.


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## jhegarty

Damian85 said:


> Deflation is not the issue. Deflation has been over exaggerated due to a housing bubble and overvalued stock market.




And oil. That is a major reason for the recent drops in inflation.


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## MichaelDes

Damian85 said:


> Commodities- We will enter a stage never before encountered in human history over the coming years. India, Brazil, and China will have a couple of billion new consumers looking to purchase oil, wood, food etc. Many will be limited resources.


 
Can you explain why the Pearl Delta the engine of China's economy is falling apart at the seams. The lax credit economic model is being rethought by many sources including the America administration with increased regulation. Credit is not wealth - an illusion many fools have just realised through asset depreciation and leverage trapping.


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## Damian85

MichaelDes said:


> Can you explain why the Pearl Delta the engine of China's economy is falling apart at the seams. The lax credit economic model is being rethought by many sources including the America administration with increased regulation. Credit is not wealth - an illusion many fools have just realised through asset depreciation and leverage trapping.


 
China is a developing giant. It is worth noting that the US encountered 15 depressions in the 19th century. China is experencing the economic slowdown tidal wave now because of their over dependency on the US consumer market and hoarding of US bonds as reserves. Once they cut this lending tie with the US over a number of years, they will prospere even more. The short term economic slowdown is irrelevant to the inevitable emergence of the Chinese commodity consumer in the coming decades.

Lax credit standards are just being replaced by stimulus plans to keep consumer binges perpetually constant. Obama stated a few weeks ago that "_when your heading for a cliff, you need to change direction_". He doesn't seem to be following his own advice. Instead he's just slamming on the accelerator. And the new Treasury Secretary Geithner has been talking about restoring the asset backed securities market!! So I wouldn't put a lot of hope in that administration or proposed regulatory change.

While credit may have tightened up, printing money has not, which could prove detrimental to the value of money.


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## MichaelDes

> It is worth noting that the US encountered 15 depressions in the 19th century


Not meaning to be pedantic but since 1797 to date there has only been 19 recessions in America and only three of these were depressions. Under Thomas Jefferson of 1807, protectionist Embargo Act caused a depression that lasted seven years. Next in 1897 a worldwide depression was caused principally by the collapse of the Wiener Börse AG or commonly known as the Vienna Stock Exchange this conker lasted 22 years and finally the Great Depression of 1929 to 1939 caused by margin bets by the man on the street thinking stock markets were a one-way ticket to wealth. Seems cannily similar to today’s recession with property and leverage replacing equity and margin. It had devastating deflation that affected rich and poor alike. The market oracle has recently written an article predicting the globe is in the midst of a second great depression. Google its revealing finding. However hyperinflation may only happen IMO if the tin-foil hat brigade is correct and the giant financial Ponzi deleveraging scheme cannot handle the great unwinding and M0-M4 becomes irrelevant.

However if you want to name the 15 depressions never mind recessions during the 19th century in America then name away and list. All ears eyes.




Damian85 said:


> China is a developing giant. It is worth noting that the US encountered 15 depressions in the 19th century. China is experencing the economic slowdown tidal wave now because of their over dependency on the US consumer market and hoarding of US bonds as reserves.


 
This economic wave sounds similar to Japan – what happened there over the last 17 years. The Yanks put the brakes on them.





Damian85 said:


> *Once they cut this lending tie with the US over a number of years, they will prospere even more*. The short term economic slowdown is irrelevant to the inevitable emergence of the Chinese commodity consumer in the coming decades.


 
Subjective but IMO flawed. America has used China for its own end in exchange for tradable paper contracts yielding 2.5%. The same miracle on the Tiger economies was touted during the 1980's when the East was set to dominate trade and eclipse the West, notably America. America then quickly stopped them in their tracks. H. Clinton has talked on renegotiating GATT /NAFTA and protecting American interest so China's miracle is far from sure. Anyway most of its citizens remain destitute ill-educated farmers and those in the cities are losing jobs at a faster rate than Ireland - their present model only works at 8%+ GDP growth AFAIK. 




> Lax credit standards are just being replaced by stimulus plans to keep consumer binges perpetually constant. Obama stated a few weeks ago that "_when your heading for a cliff, you need to change direction_". He doesn't seem to be following his own advice. Instead he's just slamming on the accelerator. And the new Treasury Secretary Geithner has been talking about restoring the asset backed securities market!! So I wouldn't put a lot of hope in that administration or proposed regulatory change.


 
Did you study the great stimulus plan in Japan. It led instead of an accelerated consumer binge to nothing but a lost decade in the wilderness. US admin is undertaking this along with 0% IR to stave the delationary monster from gripping like 1930's America.

On the second point Abx markets have been around since the Roman times, and because of recent implosions will more than likely have stiff increased regulation to prevent past forrays happening so close again. Re money printing - name me a country not at the presses. The effect is relative albeit it's still a problem. In general commodities over the medium term will probably increase due to supply demands ratios. But to be the cause of hyperinflation is debatable. The oil spike caused the bubble prick in ABX firstly [credit derivatives] then went on to affect the real economy quickly, so how could commodities break through such levels and be sustainable [wage inflation never matches RPI anyway]. The market at certain prices simply says "No" - as what US consumers did when oil spiked i.e. curtailed consumption, considerably.


IMO the great miracle of China has always been touted. But it is the last huge economy that has the possibility of a fracture. A miracle it never did so since the building of its Great Wall.

Because this is a social science it is best to agree to disagree. **Amen


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## badabing

Damian85 said:


> No, I wouldn't agree with that.
> 
> Inflation is the most likely outcome for two main reasons;
> ..............
> 
> 2) Commodities- We will enter a stage never before encountered in human history over the coming years. India, Brazil, and China will have a couple of billion new consumers looking to purchase oil, wood, food etc. Many will be limited resources.



The economist ran an article last week about the emerging middle class. They could easily get banished back to poverty in the future environment. That would put demand for commodities in the crapper


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## partisan

MichaelDes said:


> Because this is a social science it is best to agree to disagree. **Amen



You'll forgive me, for sort of disagreeing here. The problem is not only does the sheer complexity of the system make it impossible to wholly analyse, many billions of people around the world are working away at innovations that may change everything (for good or bad). 

The different analyses (if they are well grounded & intellectually robust) are all still worth something, as a huge element of managing an economy (or your finances) has got be about managing risk / preparing for large scale previously unforeseen change.

There are many economists and investors out there arguing we are facing deflation (e.g. Roubini) and others arguing that we'll end up with high global inflation (e.g. Jim Rogers). Both scenerios are plausible, and it's worth making sure your well informed enough to recognise them as they emerge & agile enough to respond appropriately.

While it will offend the sensiblilities of those who prefer the mathematical certainty of newtonian physics, the key addition to your armoury in understanding the future impact of "social science" is therefore an understanding of randomness and the impact of the unforeseen.


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## george.shaw

Liam Halligan is one of the sharpest around and unlike The Telegraph does not have an anti Euro agenda.

Halligan believes that inflation is the real danger and not deflation:


Inflation is the greatest danger to the British economy
http://www.telegraph.co.uk/comment/personal-view/4742855/Inflation-is-the-greatest-danger-to-the-British-economy.html 
Deflation is being used as a spectre to cover a power grab on the Bank of England and the failure to force the banks to come clean, says Liam Halligan.


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## queenlex

Firstly I know all the economies are linked but how can we not have deflation here with all the pay cuts, job losses, etc. until we get competitive again.  I reckon its going to take years to get off this threadmill of bailing out banks, eventually in the not too distant future clear income tax increases, etc.

What about corportaion tax being increased too?   Surely thats going to have to be increased soon too lots of these foreign companies will find it cheaper surely to go elsewhere regardless of the low corporation tax, I am just amazed there are as many still here!  Someone will have to explain to me how hyper inflation can come about is this if taxes like VAT increase?


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## Joody1

The reason why inflation is in UK is because sterling has drop in value so much during the last few months therefore it costs a lot more to import goods from abroad which they relay on so much.


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## Padraigb

Joody1 said:


> The reason why inflation is in UK is because sterling has drop in value so much during the last few months therefore it costs a lot more to import goods from abroad which they relay on so much.



It's *one* reason, not *the* reason.


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## Purple

Padraigb said:


> It's *one* reason, not *the* reason.



It is the main reason though.


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## partisan

queenlex said:


> Someone will have to explain to me how hyper inflation can come about is this if taxes like VAT increase?



Inflation is a product of the amount of money available, the rate at which it is being spent (e.g. the same €50 note being spent in a lot of different shops by shop keepers on the same day has the same economic effect as many €50 notes) and the demand for goods and services. If the supply of money increases faster than the demand for goods and services, the value of each unit of currency will decrease and prices will rise (inflation, because there are more currency units chasing the same goods and services).

In order to stave off the threat of deflation, due to the massive destruction of money largely due to the collapse of the shadow banking system in the US, Central Banks around the world, but not yet the ECB, are creating money and using it to purchase bonds. At some point in the future, if demand for debt returns, this excess money could begin circulating quite rapidly, leading to high inflation.

Fractional reserve banking allows banks to increase the amount of money in an economy when there is demand for debt. For example, during the bubble, Irish banks lent out €150 for every €100 they had on deposit, presumably keeping €10 as capital reserves and borrowing €60 on the European wholesale markets. When the borrowed €150 get spent and deposited, the banks deposits increase from €100 to €250 and they can now lend €375 (in total, an additional €125) out if they go back to the wholesale markets. This is probably why Irish property got so overpriced, and with cheap Asian goods keeping the general price level low, you could argue we already had hyperinflation in Ireland.


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## george.shaw

Very good article on increasing likelihood of hyperinflation in the US:
The Joys of *Hyperinflation*
[SIZE=-1]HoweStreet.com, Canada - 18 Feb 2009[/SIZE]
[SIZE=-1]Welcome to the credit deflation prelude to *hyperinflation
[broken link removed] *[/SIZE]


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## UptheDeise

I've just read today that AIG of Aemerica needs another bailout of 60 Billion dollars. This is the thrid bailout they're asking for. More printing of money by the Fed and a clear indication that the bailouts have failed.


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## george.shaw

Smart money of Buffett and Soros is now warning of serious inflation in the medium term and some are now even warning of hyperinflation:
*Brace For Hyper-Inflation Blodget, Yahoo
The economy is cratering, so the Fed is printing money. When the Fed prints money, this eventually produces inflation (more dollars, same amount of goods).*


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## jhegarty

george.shaw said:


> Smart money of Buffett and Soros is now warning of serious inflation in the medium term and some are now even warning of hyperinflation:
> *Brace For Hyper-Inflation Blodget, Yahoo
> The economy is cratering, so the Fed is printing money. When the Fed prints money, this eventually produces inflation (more dollars, same amount of goods).*




That is about the danger of the feds printing more money. Don't think there is any talk of the ECB doing similar.


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## george.shaw

If the global reserve currency of the world hyperinflates then we will all experience severe inflation and stagflation - hence Buffet's and Soros recent warnings:

Soros Likes Gold and Says Fed in a Bind: Beware Stagflation, Bursting of Bond Bubble
http://finance.yahoo.com/tech-ticker/article/226767/Soros-Says-Fed-in-a-Bind-Beware-Stagflation-Bursting-of-Bond-Bubble?tickers=dia,spy,GDX,GLD,TLT,TLB,TIP?sec=topStories&pos=5&asset=TBD&ccode=TBD


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## Afuera

george.shaw said:


> If the global reserve currency of the world hyperinflates then we will all experience severe inflation and stagflation - hence Buffet's and Soros recent warnings:
> 
> Soros Likes Gold and Says Fed in a Bind: Beware Stagflation, Bursting of Bond Bubble
> http://finance.yahoo.com/tech-ticker/article/226767/Soros-Says-Fed-in-a-Bind-Beware-Stagflation-Bursting-of-Bond-Bubble?tickers=dia,spy,GDX,GLD,TLT,TLB,TIP?sec=topStories&pos=5&asset=TBD&ccode=TBD


Would you care to explain the logic you used to reach the conclusion that hyperinflation in a reserve currency would trigger inflation in another currency?

The way I see it, hyperinflation in a reserve currency effectively breaks that currency's status as a reserve. Hence, you would get a flood of money into other currencies or assets.

You seem to have already made up your mind that gold would become a new reserve under such circumstances. Have you thought about the consequences if it were the Euro instead and how this would affect the portfolio you currently hold?


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## Firefly

It seems to me (from reading this post at least) that the US are worried about deflation (from previous depressions) and therefore printing more money, wheres the EU are more worried about inflation (from post war German hyper-inflation). If these 2 administrations move in opposite ways, how do people see this panning out?


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## jhegarty

Firefly said:


> It seems to me (from reading this post at least) that the US are worried about deflation (from previous depressions) and therefore printing more money, wheres the EU are more worried about inflation (from post war German hyper-inflation). If these 2 administrations move in opposite ways, how do people see this panning out?




Increased chance of US inflation , reduced chance of it in Europe. This will however make Europe very uncompetitive.


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## Airtight

How?


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## Purple

Airtight said:


> How?



Because the dollar gets very weak against the euro.


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## UptheDeise

Airtight said:


> How?


 

Because our exports to the USA would become incredible expensive.

BTW, isn't the ECB already printing money???

http://www.rte.ie/business/2009/0313/ecb.html


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## DerKaiser

Purple said:


> Because the dollar gets vert weak against the euro.



This is where I always got confused in Economics!

If there is high inflation in the US, their exports will cost more in dollars, so a weakening of the dollar would only offset this and the relative impact on competitiveness would be low?


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## Purple

DerKaiser said:


> This is where I always got confused in Economics!
> 
> If there is high inflation in the US, their exports will cost more in dollars, so a weakening of the dollar would only offset this and the relative impact on competitiveness would be low?



In this case (the US) they will just increase the money supply ahead of inflation. Anyway, they are devaluing their currency at the moment and there's bugger all inflation since their economy is in the toilet.


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## UptheDeise

Ok, I'm no economist but here's what I'm thinking.

The US will devalue it's dollar because of it's printing excess. This will mean it's creditors like China, Saudi Arabia, South Korea et all will off load their dollar reserves as they see the value of the dollar reserve plummet.

This will cause:

A. Decrease in the value of dollar will lead to inflation as you need more dollars to bump up purchasing power.
b. Increased number of dollars in circulation will mean too many dollars following an infinite amount of products which will further increase inflation.


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## badabing

We all agree that for hyperinflation to happen, the billions being printed now must find its way into the economy and chase the same amount of goods.

Two problems with this
1. There seems to be a problem with the money reaching the wider economy, as the banking system is a little dysfunctional
2. Chasing the same amount of goods. Obama has announced the greatest spending program since 1930's. This creates a new market for new money to chase after


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## sunrock

The U.S. can get away with printing more of their currency than the other central banks.As the dollar is a world currency,any inflation that is caused is just spread around the globe...even russia uses the dollar as the main exchange currency . Not to mention the middle east and developing and emerging economies.As oil is priced in dollars, buyers of oil in the middle east have to pay for oil in dollars.
All the major western currencies do their fair share of "printing"...it is just that the U.S. can do a lot more without causing damage.Of course behind the scenes ,this is managed so that it doesn`t cause too much inflation or real loss of confidence in the dollar. People in the U.S. and elsewhere still need to spend  to buy food etc, and they need dollars or other fiat currencies to do this.Inflation may rise but hyperinflation imo will not happen as the major western governments have too much control over their economies.They aways have the option of having 5% inflation over a number of years in which to reduce the bad debts.
Countries like Zimbabwe cannot solve their problems by printing.


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## UptheDeise

> The U.S. can get away with printing more of their currency than the other central banks.As the dollar is a world currency,any inflation that is caused is just spread around the globe...even russia uses the dollar as the main exchange currency . Not to mention the middle east and developing and emerging economies.


So you think the US can get away with printing money because the dollar is the reserve currency? The more money the US prints the more they devalue the dollar. Over the last few years the dollar has devalued by 30%. Why would the Russians, Saudi Arabians, Chinese and South Koreans continue to purchase US dollars when the Fed simply prints this money out of thin air and further devalues it? 




> As oil is priced in dollars, buyers of oil in the middle east have to pay for oil in dollars. Already we are beginning to see cracks appear in this fiasco of printing money with the Chinese demanding that the US is obliged to shore up its currency so it does not fall further in value. Both the Russians and Chinese want a new reserve currency and a move away from the dollar.


 
True but how long will this last? Pricing oil in euros would be far better than dollars. The Iranians have already cottoned on to this.




> All the major western currencies do their fair share of "printing"...it is just that the U.S. can do a lot more without causing damage.


 
Again you are correct in your assertion about other western currencies but you are wrong to suggest that the US can do this without causing damage. Printing money that's not backed up by anything will devalue that currency and cause rampant inflation. 



> Of course behind the scenes ,this is managed so that it doesn`t cause too much inflation or real loss of confidence in the dollar.




Yes, well they haven't being doing a good job of managing the economy and currency over the last few years, which is why we are in this financial mess. It is exactly what they are doing behind the scenes that worry me. Besides China and Russian want a move away from the dollar and have called for a new international reserve monetary unit.




> People in the U.S. and elsewhere still need to spend to buy food etc, and they need dollars or other fiat currencies to do this.Inflation may rise but hyperinflation imo will not happen as the major western governments have too much control over their economies.They aways have the option of having 5% inflation over a number of years in which to reduce the bad debts. Countries like Zimbabwe cannot solve their problems by printing.


 

Printing money will devalue the currency, therefore reduce spending power. People will then need more dollars to follow an infinite amount of goods. This will lead to inflation. Countries around the world that hold US dollars will realise that the dollar is a busted flush; they will dump their dollars unto the market. The dollar will further devalue and lead to more inflation and now with so many dollars on the market, this will lead to even more inflation.

How bad this inflation will be, is any body's guess.


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## ollie323

Here's a history lesson: [broken link removed]
I'd say hyperinflation is one of many things on the way! Start clearing your debts.


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## Firefly

ollie323 said:


> Here's a history lesson: [broken link removed]
> I'd say hyperinflation is one of many things on the way! Start clearing your debts.


 
You mean time to start borrowing?


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## ollie323

Firefly said:


> You mean time to start borrowing?


Depends on whether we are at the bottom of this cycle or not. Who knows??!!


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## sunrock

Well its all about size and power.The U.S. dollar is the de facto world currency and the other major world currencies flucuate against its gravitational pull.All these currencies are themselves fiat currencies..i.e. they are basically paper and not backed by gold or anythingThere is massive buying power in the dollar..this is why all the other major currencies want to be able to have an "exchange" with it thus giving these currencies buying power in turn and inturn reinforcing dollar power.
Its a bit like the U.S. military.. some country has to be the top dog.
Why are oil rich middle east countries like saudi arabia selling oil only in dollars and maybe using these dollars to buy american weapons systems.....well clearly there is a security deal in place wherby the u.s. looks after the country or at least its ruling class in return for being able to buy the oil for printed dollars.
What about china which holds billions of U.S. dollars,whose workers make a few dollars a day making goods for american consumers. You may wonder whats in it for them.The chinese realise that even a low paid job is better than nothing and the chinese gov. can spend this money buying mineral rights around the world etc
The fact is because the dollar is used  and accepted so much around the world ,the dollar can be printed more because the inflation you think it might cause is spread around the entire globe.If the dollar was only used within the U.S. inflation would show up much faster.


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## newyork

what do you reckon Ireland is top dog for.


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## UptheDeise

newyork said:


> what do you reckon Ireland is top dog for.


 
Cronyism, brown enevelopes, apathy, burying our heads in the sand and of course we're the world champions at brushing things under the carpet.


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## newyork

Are we top dog for anything of any value.


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## I.M.E.

Chinese can't sell their USD holdings in any great amount because:
- selling would depreciate the USD making their remaining holdings worth less
- it would mean an appreciation of the RenMinBi which they don't want as it would reduce Chinese competitiveness.
- depreciation in the USD would reduce demand for their produce from the US
They're more likely to diversify away from US Treasuries, which they have been doing (albeit not successfully).

Question:
- Is the USD going to depreciate against the EUR? Was considering investment in US company but realise that there's significant currency risk due to the FED and their quantitative easing.


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## mainasia

I'd say the risks have passed in general, system has stablised, manufacturing is coming back up again in Asia, stockpiles have cleared in many industries, layoffs have already been done overall...pent-up consumer demand will return just at a reduced pace to previously.

I don't see hyper-inflation happening, the Chinese won't offload their USD at this time...look at the way they controlled the reminbi for years, they are not into big changes, too risky...it will be a measured thing over many many years and I'd see the US coming out of recession as early as end of this year....

If you are going to invest, invest in China, Taiwan, Thailand, Korea...also some Japanese companies.


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## newyork

I think china is going to be in a very bad way shortly.


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## mainasia

Which countries are in debt up to their eyeballs and which aren't....it's common sense really. Sure Asian countries have a lot of pain going on too but their fiscal situation is much better.


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## I.M.E.

I know Jim Rogers is all on for investing in China, but the Chinese stock market is a casino. Honk Kong would seem like the best place to invest as they have the access to the Chinese market.


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## UptheDeise

I.M.E. said:


> I know Jim Rogers is all on for investing in China, but the Chinese stock market is a casino. Honk Kong would seem like the best place to invest as they have the access to the Chinese market.


 

When you think about it all stock markets are casinos. In fact, when people say they are investing on the stock market what they are really saying is they are gambling on the stock market.


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## Airtight

Is hyper inflation edging closer?


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## ringledman

Airtight said:


> Is hyper inflation edging closer?


 
Not for Ireland or the Euro where the currency is too strong and deflation is the current driving force (although low inflation was report this past month).

Hyperinflation is a distinct possibility in the US or UK where the appauling government intervention of quatitiative easing, bloated government and currency debasement are occurring.


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## Airtight

How does some one (me) profit from hyper inflation in another country, on the other side, how does some (me) loose from hyper inflation in another country i.e. UK & US


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## ringledman

Airtight said:


> How does some one (me) profit from hyper inflation in another country, on the other side, how does some (me) loose from hyper inflation in another country i.e. UK & US


 
Short their currencies?!

The way to loose from hyperinflation is to own any sort of asset in a country prone to hyperinflation. Stocks and property will soar in value in a hyperinflation economy however the debasement of the currency is always far greater than the potential gain you will make from the capital increase. 

If you live in a country prone to hyperinflation then the one positive would be that your mortgage would be reduced to virtually nothing but your property most likely will have fallen in value in 'real terms'.

Marc Faber in Tomorrow's Gold writes a great chapter on inflation. From what I remember he says to avoid hyperinflation economies at all costs. However I think he said that if you invest in an economy post hyperinflation occuring you can make some excellent returns as the currency rises again. 

I have punted a small sum into a UK AIM firm that invests predominantely in Zimbabwe's recovery. This could be a ten bagger IMHO. Then again it could be a high risk play and fail. 

Not one to stake all of one's wealth on but could be a great 10 year hold.


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## spursman

zimbabwea wont recover unless the govt is ousted man


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## ashlinn09

that was great insight into this problem @sunrock (and it is a global issue).  i think a really scary thought is what if the u.s. dollar is no longer accepted as the "de facto world currency" especially with the rate they're printing the dollar....just some food for thought


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