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Inflation Economics: Should you be worried about hyperinflation in the U.S. economy? Comparing America today to Germany in 1923.

Posted on: 09-Dec-2009 Page Views: 2229
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Summary Should you be worried about hyperinflation in the U.S. economy? I keep running into people who are deeply concerned about America’s spending and the threat that it might turn into something like Germany’s hyperinflation, where people stopped using wallets to carry their money and switched to suitcases and wheelbarrows. Fortunately, Germans are sticklers for records and detail and the data needed to understand what happened was collected. So let’s dig in . . .
Posted By
Dan Hutcheson (Fellow)
Post Date 2009-12-28 09:42:02
Comment Interesting note on purchasing power parity: There is a huge difference
between the PPP value of China's Yuan and its exchange rate value. A Yuan
in China is worth far more than it can be exchanged for. This disparity,
the result of fixing exchange rates, is why China has an inflation problem.
Posted By
Dan Hutcheson (Fellow)
Post Date 2009-12-28 09:32:32
Comment Good catch Venture Gene, I checked and the data is not a typo. It's not
the math that's fishy, it's the measurements. 1st, the RM/egg figure is
purchasing power and the RM/$ is exchange rate rated. There is no
purchasing power parity equivalent. 2nd, The data was probably measured at
different times of the year, which with the rapid price changes could
account for much of the difference. 3rd, exchange rates couldn't keep up
with the internal changes due to information latency.
Posted By
Dan Hutcheson (Fellow)
Post Date 2009-12-28 09:21:24
Comment True Warren, My point was to drill deeper into fears that the US situation
could turn into a German Hyperinflation. The real lesson to learn though is
that the money supply must be managed.
Posted By
Meo @venturegene.com (Member)
Post Date 2009-12-09 17:42:39
Comment Dan, you wrote: "By 1923, a dozen eggs cost 428 billion Marks and a
dollar would buy you 5.7 billion Marks." Something fishy with the math
here... A dozen eggs for $75? I mean, I understand BIG German eggs, right?
Posted By
Warren Edwards (Member)
Post Date 2009-12-09 13:56:10
Comment Dan - Good article as always. I agree with your conclusions in the final
paragraph. One point of distinction, however: high inflation that does not
meet the definition of "hyperinflation" is still enough to destroy quality
of life for many Americans. 8-12% inflation (such as we had in the 70's)
can quickly wreck quality of life for retirees even if it is a small blip
on a log-scale graph.
About weQuest:
weQuest's are written by G Dan Hutcheson, his career spans more than thirty years, in which he became a well-known as a visionary for helping companies make businesses out of technology. This includes hundreds of successful programs involving product development, positioning, and launch in Semiconductor, Technology, Medicine, Energy, Business, High Tech, Enviorntment, Electronics, healthcare and Business devisions.
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