7 Hyperinflaton Essentials

7 Hyperinflation essentials

Here are 7 hyperinflation essentials to consider when evaluating the commercial risk.

What is hyperinflation? Hyperinflation is the rapid loss of a currency’s value. In extreme cases prices can double every 15 hours.[1]
Cause. A currency looses its value when people no longer have confidence in it. This is usually the result of government over-issue.
What kind of money hyperinflates? Only fiat money, that is money issued by government that is not linked to the stable value of gold can hyperinflate. When a currency is pegged to the value of gold this discipline prevents hyperinflation.
Current Situation. Today we have an unprecedented expansion of fiat money. On 9th April 2020 legendary hedge fund investor Paul Tudor Jones said: We are witnessing the Great Monetary Inflation (GMI)—an unprecedented expansion of every form of money unlike anything the developed world has ever seen.[2]
Likely Result. In every historical period on every continent over-expansion of money supply has led to hyperinflation. In the words of currency historian Nathan Lewis: Those who claim “this time is different” simply have no idea how much it is the same.[4]
Speed. Once started hyperinfation happens very fast, often in a matter of months.[5] This speed makes Alasdair Macleod’s forecast of the USD hyperinflating by the end of the year more plausible.[6]
Mitigation. The single most important factor in managing a hyperinflationary environment is finding a stable means of exchange. Otherwise customers cannot buy and suppliers and staff cannot be paid. All other considerations are secondary to this overriding need.

[1] https://www.cato.org/sites/cato.org/files/pubs/pdf/hanke-krus-hyperinflation-table-may-2013.pdf

[2] https://www.zerohedge.com/markets/great-monetary-inflation-ptj-explains-why-bitcoin-will-dominate-gold-stocks-public-trust

[4] Nathan Lewis Gold the Final Standard p37. https://newworldeconomics.com/gold-the-final-standard/

[5] https://seekingalpha.com/article/4249657-hyperinflation-seldom-occurs-can-rapid-speed

[6] https://resources.redpillmoney.nz/blog/alasdair-macleod-usd-on-its-way-to-zero-by-the-end-of-the-year