Hyperinflation

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Lemonyellowschwin's picture
Lemonyellowschwin
Status: Platinum Member (Offline)
Joined: Apr 22 2008
Posts: 548
Hyperinflation

Chris (and other fans):
Loved the new section (17(c)) as usual. Chris, I think your presentation and site is the best thing going.
Here is my question, and maybe since we know Chris is excessively busy, others could comment:
In earlier chapters, it was made clear that the money supply is expanded through the extension of credit. If the economy shrinks how does it follow that we get hyperinflation? In other words, why is there not an implosion of the money supply though defaults as opposed to an explosion of the money supply?
Enlighten me! :)

Demi.Moaned's picture
Demi.Moaned
Status: Member (Offline)
Joined: Aug 24 2008
Posts: 2
Bailouts
I guess there would be an implosion if the defaults were realized. Isn't that what all these bailout programs are for? We keep hearing about institutions that are too big to be allowed to fail. Doesn't the government essentially cover the debt (creating more money)?
Lemonyellowschwin's picture
Lemonyellowschwin
Status: Platinum Member (Offline)
Joined: Apr 22 2008
Posts: 548
Is "Bailouts" the answer to the "Hyperinflation vs. Deflation Is
Can this be? Chris, I and others have wondered how you conclude that hyperinflation is the likley outcome as opposed to deflation. Demi.Moaned suggests that it is because of bailouts covering the defaults. It seems to me that this might be a partial answer, but would bailouts really cover even a small fraction of the likely defaults caused by the unwinding of the credit bubble? All of Chris's conclusions in 17(c) make perfect sense to me except that hyperinflation will result. I see an economy that may either die by fire (hyperinflation and destruction of the dollar) or by ice (deflation and a collapse of the credit-based economy) and the question is why you predict hyperinflation as opposed to deflation. It seems to me that the answer is essential to knowing how to protect ourselves. Although I could see that holding gold would offer some protection in either direction, it seems that I would be much more willing to hold cash if deflation has a reasonable chance of occurring.
MaxThrax's picture
MaxThrax
Status: Member (Offline)
Joined: Sep 12 2008
Posts: 9
Lemonyellowschwin, the govt
Lemonyellowschwin, the govt seized private gold reserves in the Great Depression....wouldn't they do the same the next crisis?

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