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June 12, 2019 | Is Hyper-Inflation Likely? Let’s Think!

Donald B. Swenson: Born January 24, 1943, Roseau, Minnesota. Graduated H.S. 1961, Moorhead High, Minnesota. Graduated College 1968, Moorhead State University, Minnesota. Designated member of Appraisal Institute (MAI), 1974. Employed with Western Life Insurance Company, 1968 – 71; Iowa Securities Company, 1971 – 73; American Appraisal Company, 1974 – 81. Part-time teacher/valuation consultant/bartender, 1979 – 2008 (taught workshops at Waukesha County Technical Institute, Wi. and Madison Area Technical College, Wi.). Retired 2008 (part time teacher/blogger), AZ. Self educated economist/philosopher/theologian: http://kingdomecon.wordpress.com.

John Williams, economist/pundit, believes that the U.S. economy will evolve into hyper-inflation down the road. John Williams is a well known critic of our Keynesian monetary system and I do follow some of his logic. Yet what I sense is just the opposite. The dollar markets IMO are much different from most fiat currencies. Hyper-inflation (that is price inflation) has occurred in markets like Zimbabwe, Venezuela, and similar countries (with weak and mostly national currencies). But the dollar economy is much different IMO.

 

Some 67% of all global currency debt is denominated in dollars. This huge number means that our central planners would need to consciously create trillions of money units to create a hyper-inflationary situation for our general economy. QE did create some asset inflation (stocks) but general price inflation (goods) has not occurred. Asset inflation within our electronic stock markets is much different from general price inflation. Consumers view inflation of goods as key to their pocket book issues (not central bank asset inflation due to QE and similar operations).

 

My sense is that the dollar index (a weighted average number) could decline substantially down the road yet this may not create any real price inflation for consumers. Price inflation could only occur if consumers (some 67% of all GDP) would have more money units to spend in our markets. Today, robots create most of our goods which consumers purchase. Production of goods can continue even if the dollar index declines. So we need to differentiate between the types of inflation which might occur down the road.

 

John Williams and others who think that the dollar index will decline substantially believe that this situation will lead to hyper price inflation. I do not see this as a likely scenario. A more likely scenario is a collapse within our hyper debt economy (including all the various derivatives) and this could lead to hyper deflation within many dollar markets. Our central planners would need to offset the debt deflation by creating hyper QE for all asset classes. I don’t see this happening!

 

We could witness some asset inflation in select sectors of our economy but not in the general overall economy. These past ten years we have experienced hyper asset inflation within our stock markets. But this type of asset inflation did not create any real price inflation for consumers. Consumer goods are mostly in ample supply and price declines happen as demand is less than supply. I just purchased a new smart phone (a Pixel 3) and the price has dropped some $200 recently. This is happening within our goods economy even as I witness asset inflation within the electronic stock markets.

 

So my view is that we will NOT experience the Hyper-Inflation which John Williams predicts. My sense is that a general overall debt deflation is on the horizon. Debt liquidation and a run to safe-haven assets will actually produce general deflation for a season. I see this for the U.S. economy. Other economies (such as Sweden) could experience hyper-inflation if their central planners desire this result. I don’t see this happening within the American economy. Think for yourself on this difficult issue. Have a great day!

 

P.S. Check out this website for why our markets could deflate as debt continues to grow: http://www.usdebtclock.org.

 

I am: https://kingdomecon.wordpress.com.

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June 12th, 2019

Posted In: Kingdom Economics

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