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(hyper) Inflation & LOCG
HOCG = High order Capital Goods (real estate, machinery).
LOCG = Low Order Consumer Goods (energy, food)
Hyperinflation is caused not by facts but by an intangible: the sudden realization of what had been there all along but hadn't been recognized. Today inflation is rising slower because the velocity of the growing money supply is momentarily coming down. This is a normal phenomenon in an inflation and hyperinflation cycle. April 15, some talking heads pretend the US has fallen into Deflation and the UK is to follow. This happens because they have no understanding of what Inflation, Deflation and Hyperinflation is.
Important is to UNDERSTAND a hyperinflationary depression sees simultaneously and FALLING prices (HOCG) and rising prices (LOCG). [HOCG = High order capital goods (ex. Real Estate) - LOCG = Low Order Consumer Goods (ex. energy and food)
The most difficult concept for the professional public to understand is that hyperinflation can exist along with a totally disastrous economic environment. Hyperinflation falls flat because it fails to take into account the infinite velocity of money that a Weimar creates during a depression economy as a product of throwing monetary discipline at the wall. |
Prices = Money Supply x Velocity of the money Basically, there are 3 inflation fazes:
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The expansion of the Money Supply in the Western world has been explosive [this is the least one can say]. Yesterday the G20 agreed to expand it by another 5 TRILLION DOLLAR. Contrary to the 1930's (Great Depression) in the USA where the opposite happened. Only Germany did the same what they are doing today and the policy resulted in the Weimar Hyperinflation.
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The lesson? whatever the authorities do, one the economy and the financial system has been violated (and it has) it snaps. It does so because the system because more and ore unstable. It start to rock more an more until something snaps and it crashes.
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NO FINANCIAL SYSTEM has survived FRACTIONAL RESERVE BANKING (usury) and the creation of FIAT PAPER MONEY out of thin air EVER. Such a thing is simple impossible.
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Hyperinflation ALSO results in parabolic rising stock markets (Zimbabwe) as people apply Gresham's law: the bad money chases the good and exchange Fiat paper for Equities which are participations in REAL ASSETS.
December 2008 the velocity of Money is still negative. Hyperinflation will start once this trend reverses....like it did in Argentina
to stop inflation, they should stop Fractional Reserve Banking and the creation of Fiat Money.
Price increase of LOCG y/y
1 year
3 years *
Steel
40% to 70%
150%
Chemicals
25%
75%
Shipping costs
375%
Crude oil
43%
129%
Ethanol
21%
63%
Heating oil
44%
132%
Natural gas
77%
231%
Unleaded gas
40%
120%
Corn
60%
180%
Soy beans
26%
78%
Aluminum
35%
105%
Copper
26%
78%
* extrapolated over 3 years
Price decrease of HOCG
Real Estate
-20% to -60%
The Calendar of Modern Hyperinflations:
For the moron financial TV hosts claiming that major inflation is well down the road because inflation requires a business recovery to occur:
Angola 1991-1999
Bosnia – Herzegovina 1992 – 1993
Chile 1971 – 1981
Greece 1943 – 1953 At the high point prices doubled every 28 hours. Greek inflation reached a rate of %8.5 billion per month.
Israel 1971 – 1985 (price controls instituted)
Japan 1934 – 1951
Romania 1998 – 2006
Turkey 1990 – 2001
USA 1773 – not worth a Continental
Yugoslavia 1989 – 1994
Zaire 1989 – present (now the Congo)
Zimbabwe – 2000 to present. November of 2008 – inflation rate of 516 quintillion percent
From https://en.wikipedia.org/wiki/Weimar Republic