Is hyperinflation coming to the U.S., Britain or Japan?<\/p>\n
Hyperinflation in the eurozone would be a better bet.<\/strong><\/p>\n So says James Montier, of investment management firm GMO, in a new Montier picked up an interest in hyperinflation as a child as a Montier examines hyperinflation episodes in:<\/p>\n And after going through this laundry list of hyperinflation episodes and causes, Montier concludes:<\/p>\n To say that the printing of money by central banks to finance It takes something much worse than simply printing money. To Money printing alone does not light the hyperinflation fuse. Something major has to go haywire<\/a><\/strong> — courtesy of an outlier such as war, supply shock or crushing external debt load.<\/p>\n This is why Montier concludes the eurozone is actually a larger hyperinflation risk than the U.S., Britain or Japan.<\/p>\n This is because, although these three countries are racking up huge The eurozone, on the other hand, is made up of multiple countries There is a lot of hype these days about hyperinflation in the U.S. When giant corporations can borrow for 20 years at 2% banks only This makes it hard for hyperinflation to kick in, as monetary Some prophesy a bond crash will usher in U.S. hyperinflation, as the That means, in the event of a bond “crash,” rates would spike, For mature economies such as the U.S., stealth inflation is a far The best protection is hard assets. Make sure some of your wealth is And be careful of going long European stocks or the euro itself. If Carpe Divitiae,<\/p>\n Justice<\/p>\n
\nwhite paper titled “Hyperinflations, Hysteria and False Memories.”<\/p>\n
\nresult of his father’s smoking habit. At the time, exotic bank notes
\nwere packaged with cigarettes. Montier senior passed a collection of
\nthese on to his son… including a 1 million mark note from the Weimar
\nRepublic.<\/p>\n\n
\ngovernment deficits creates hyperinflations is far too simplistic
\n(bordering on the simple-minded). Hyperinflation is not purely a
\nmonetary phenomenon. To claim that is to miss the root causes that
\nunderlie these extraordinary periods. <\/em><\/p>\n
\ncreate the situations that give rise to hyperinflations, history teaches
\nus that a massive supply shock, often coupled with external debts
\ndenominated in a foreign currency, is required, and that social unrest
\nand distributive conflict help to transmit the shock more broadly. <\/em><\/p><\/blockquote>\n
\ndebts relative to their output, all three also borrow in their own currency<\/a><\/strong> and have relatively stable politico-economic regimes.<\/p>\n
\nwith huge external debts denominated in currencies they do not control
\n— think Greece, Spain and Italy — coupled with great anger at “the
\nsystem,” high potential for civil unrest (over 50% youth unemployment in
\nGreece and Spain), and serious breakdowns in basic stability
\nmechanisms.<\/p>\n
\nBut extreme amounts of government borrowing are more likely to slow down
\nthe U.S. economy than speed up the arrival of hyperinflation, as
\ngovernments “crowd out” more entrepreneurial uses of funds and near-zero
\ninterest rates cause capital to languish in stagnant pools.<\/p>\n
\nchoose to make super-safe loans. More dynamic businesses can hardly get
\ncapital at all. This leaves the real economy (as opposed to the paper
\nWall Street version) in a quagmire.<\/p>\n
\nvelocity — the speed at which money changes hands from one transaction
\nto another — falls.<\/p>\n
\nworld decides to sell all its bonds overnight. But this is unlikely
\nbecause of what happens when bond prices fall: Long-term interest rates
\ngo up.<\/p>\n
\nleading to an economic crash… which in turn would pummel risk assets
\nand scare everyone into buying bonds again!<\/p>\n
\nmore realistic outcome than hyperinflation. This is usually how the
\nbuying power of a currency goes down — not in great hysterical swoops,
\nbut in humdrum dribs and drabs.<\/p>\n
\ninvested in stores of value such as gold and precious metals and real
\nestate. These are the best way to counteract the slow death of the
\ndollar.<\/p>\n
\nhistory is any guide, it could be the next economy to fall foul of a
\nhyperinflationary episode.<\/p>\n