sexta-feira, 8 de julho de 2011

Is hyperinflation inevitable?

Is hyperinflation inevitable?, DETLEV SCHLICHTER,

"(...) That elastic money is a source of economic instability we should know since the British Classical economists demonstrated it more than 150 years ago, and certainly since the Austrian economists (Mises and Hayek) explained it even better a little less than 100 years ago. In a nutshell: investment funded with proper saving leads to sustainable gains in wealth; investment funded by money printing leads to boom-bust cycles. But our brave new system of unlimited fiat money is a system of super-elastic money. When the investment boom turns into a bust, the central bank can lower rates and print even more money. Debt deflations and bank defaults are things of the past, so are cleansing recessions. The business cycle can be extended. The super-credit cycle has arrived. The debt load never shrinks. It just keeps growing. Can this go on forever? No, it cannot. And the endpoint has been reached, I think.

In 2007, the dislocations created by easy money finally came back to bite the banks in a major way: U.S. subprime was the first domino, and then the larger mortgage-backed and asset-backed complex caved in. The banks had to call the cavalry: the state and the central bank. The socialization of the fallout has since been pushing state finances over the edge. Ireland and Spain, formerly states with relatively low debt-to-GDP ratios, are already insolvent or on the way to insolvency courtesy of the implicit backstop they provide to their overstretched banks. Complacent observers in the UK are still congratulating themselves for staying outside the euro, obviously missing the point that their own government is running deficits similar to those in Greece and Spain, as is the United States government. I don’t see that many differences between the various economies and major currency areas. Wherever I look I see similarities. Everywhere fiscal positions are unsustainable, and everywhere the central banks provide the ultimate backstop and stem themselves valiantly against the liquidation of the accumulated dislocations.

It is clear that in the paper money system the solvency of state and banks is ultimately underwritten by the printing press. The central bank is, according to the logic of the paper money economy, the designated ultimate bulwark, the final line of defense against bank runs and government bankruptcy. All that heavy borrowing by the states and banks over previous decades has accumulated massive claims against the printing press. These claims are coming due — now. (...)

The position the central banks have been maneuvered into is not an enviable one. They are boxed in. When rising inflation concerns and/or rising fears of defaults lift market yields and risk premiums, the central banks have to expand their balance sheets and print more money to keep the system from contracting – thereby adding to fears of inflation and even to fears of ultimate default, as easy monetary policy must obstruct the deleveraging process on the margin.

When more and more savers exit the bond market and the market for bank deposits out of concerns about inflation and excessive debt levels (something that, I may add, is not happening yet but that I consider a matter of time only), the central banks will have to step in and use the printing press to support the bond market and the banks – this will lead to the concerns of savers about the purchasing power of their savings to rise even further.

It is precisely such a vicious circle that is the main threat to a paper money economy at an advanced stage of debt accumulation. I hate to say hyperinflation is inevitable – few things are. But I consider it highly likely. Be prepared!"

1 comentário:

  1. É muitíssimo pouco provável que a hiperinflação não seja inevitável. Tão improvável como haver uma súbita transformação na mente dos cidadãos em relação a temas-chave* ou na direcção das políticas governamentais. O que vem aí não vai ser bonito. Se a causa liberal clássica e o raciocínio económico da escola austríaca conquistarem as mentes e os corações das gerações mais novas, então talvez tenhamos um futuro mais risonho no período pós-depressão.

    *tais como: o que é o dinheiro, como é que surge a riqueza, qual será o papel legítimo do estado, em que bases éticas e morais é que se baseia afinal o socialismo, será que a escolha entre um socialismo de esquerda e um socialismo de direita (ou qualquer outro rótulo) é uma verdadeira escolha, até que ponto é que o estado pode violar a liberdade dos indivíduos, será que a maioria eleitoral da democracia confere uma verdadeira legitimidade para uma opressão legal sobre os cidadãos, etc.…