Hyperinflation: A Survival Guide
By Guest Author - December 26th, 2008, 10:30AM
Aaron Krowne at the Implode-o-Meter passes this along: Despite being business-oriented, there is something in there for everyone, and it is written in plain language. And the insights and relevance to our current predicament are deep (even if we don’t experience /hyper/ inflation, I expect a pretty severe inflation/dollar devaluation). The book was almost exactly 20 years early — but the message is timeless.
Pass it around; it’s free (though I don’t think the publisher ever envisioned internet distribution, as it predates the web).
Hyperinflation: A Survival Guide (Strategies for American Businesses)
Copyright notice: Reprinted with permission
(Thanks to Sean M. for lending me the physical book).
December 26th, 2008 at 10:51 am
It’s an old book but at long as everyone is ramping up to hyperinflation; try reading Chris Farrel’s Deflation. He offers a good perspective that’s worth having now. Hyperinflation will require a level of transactional “velocity” I doubt will return to many markets. Iceland is more than an isolated incident and the 12/23 story in the FT says a lot.
December 26th, 2008 at 12:06 pm
Japan had ZIRP policy for more than a decade and incurred lots of public debt bailing out its financial system, where is its hyperinflation? It would be happy to see 2% inflation.
America post WWII incurred a lots and lots of public debt fighting the war. I also believe the Fed did eventually easy during the Great Depression and kept rates low for a long time. Where was its hyper inflation??
DaveM is right. Inflation is not just “too much money”, its “too much money chasing too few goods”. And we might have a too much money now, but its not chasing anything. And if it ever does, as DaveM says there won’t be a level of “velocity” to create hyperinflation. Also, just like the Fed has the power to create money, it can also destroy it.
Are we going to see some increased level of inflation? Yes. This is actually what the Fed is trying to do right now, inflate out of this crisis. But hyperinflation is a small risk.
December 26th, 2008 at 12:33 pm
Is it possible to print this out?
December 26th, 2008 at 12:34 pm
Thanks Barry,
I look forward to reading it on my upcoming vacation
December 26th, 2008 at 12:48 pm
Mach, too much money not chasing anything? have you looked a bonds lately? gold under $300 was the buy of the 21st century; but even $850 is going to seem like a bargain before the central banks are done…
December 26th, 2008 at 1:44 pm
jsgarber:
subscribe to Scribd, then you can download the pdf file.
December 26th, 2008 at 1:56 pm
No hyperinflation. But a 5% increase in the CPI every year for 10 years can do a lot of damage. Especially if the CPI is understating “real” inflation by 4 percentage points.
(Bernanke will be happily ensconced at Princeton before any inflation becomes obvious).
December 26th, 2008 at 2:32 pm
BR: “I expect a pretty severe inflation/dollar devaluation”.
If this is what you expect, you should lever up and load up on TIPS (they have been extremely cheap lately)
Fear of hyperinflation fell out if fashion this year. Fear of deflation is a new trendy gloom.
Do you have any deflation survival guide? (Just kidding)
It is funny that this guide was written more than twenty years ago. The authors (the gloomers) were convinced that the US would face hyperinflation in the near future. Here we are twenty years later fighting completely opposite deflationary forces. The odds of guessing it right we 50/50 (like flipping a coin), yet the gloomers have managed to guess it wrong.
Chronic pessimists are cracking me up (like Dr. Gloom Faber); they always find something to scare people about (first, it was global cooling scare, then it changed to global warming; first it was hyperinflation, now it is deflation). LOL
December 26th, 2008 at 3:13 pm
“I expect a pretty severe inflation/dollar devaluation”
Seems to me that calls like that require a time frame or else are fatuous. I, for example, expect the sun to go supernova.
December 26th, 2008 at 3:33 pm
Stagflation, stagflation, STAGFLATION.
We will have deflation until foreign creditors draw a line in the sand and say “NO MORE” to our soaring bail-out spending. Then the dollar will resume its plunge, and commodity markets will blossom anew, sparking serious inflation in the midst of shy-high unemployment.
Raising rates to combat the inflation (compressing the demand for money) will go against the goal of the government’s being the employer of last resort (unless the government manages to figure out how to give jobs to the unemployed that produce output in excess of the debt being used to pay them), and we will live in the House of Stagflation forever and ever, world without end.
Over the long haul, inflationary expectations imply full employment, or something approaching full employment. That just ain’t gonna happen. Yes, we will have inflation, but it will be entwined with sky-high unemployment.
And that’s a bit different that merely “just” an inflationary outlook.
December 26th, 2008 at 3:37 pm
One thing of particular interest in that nice little tome — if you look at the chart of government debt vs time on page 2, the projected path has eerily followed the actual path that transpired of the subsequent 20 years.
Back in 1989, this was certainly treated as (and probably written as) extremist nonsense, no one would believe that we would allow things to have progressed so far down the road to doom as we have.
But there you have it, Truth is Stranger than Fiction.
December 26th, 2008 at 4:37 pm
constantnormal, full employment was not achived in Argentina, nor Zimbabwe…but yet they both had massive bouts of hyperinflation after printing fearlessly. But what I fear most is that the majority of people here in the States have the frame of mind, “it cannot happen to us!”
December 26th, 2008 at 4:51 pm
GDX has more than doubled from its 10/24/08 intraday low of $15.83
December 26th, 2008 at 9:23 pm
@ JustinTheSkeptic — I stand corrected.
But I think that, so long as we still have the ability and will to throw out leaders who are screwing up, that we will *not* follow Argentina and Zimbabwe toward the example of Weimar Germany.
That’s why I see us as being “stuck” in stagflation, caught between unemployment and moderate inflation (i.e. not hyperinflation) — both around 10% — for a *very* long time. We may oscillate between leaders that fight inflation with high rates and those that fight unemployment with low rates, with a few flip-flop types that try each, for two or three decades.
December 27th, 2008 at 2:17 am
This was not the most enjoyable read I’ve ever had, but there are points made that you ignore at your own peril. I think everyone should realize that there are many examples of history rhyming:
Financing goes away, which means the notion that something like home equity is as good as cash is a mistake.
Pensions become worthless (and that’s one of those conveniently ignored stories right now).
Stock market upswing on hope of a plan (even if the plan has more holes than Swiss), then collapse.
Negative real interest rates, Government lying about inflation, etc. Government becoming a bigger and bigger part of the economy.
Any of this sound familiar?
Hyperinflation is like a tsunami, by the time you see it – you’re toast. Time and time again, it catches “smart guys” by surprise.
I think the deflationary dream is being kept alive by the vaporization of wealth that has occurred across the board. I think that vaporization continues for a while. So, we will continue to see what is perceived as deflation, until the moment when noticeable supply destruction occurs (and I think that happens in food first). Suddenly granite counter tops won’t seem so important.
Take advantage of this deflationary psychosis, and buy some things that will get you through a storm.
December 30th, 2008 at 9:21 pm
Gotta love the fact we can worry about inflation while getting a taste of deflation. A lot of folks called the mess we’re in and still blew their cash figuring the dollar was trash. The whole world took a bite of this apple — look at Credit Swiss: they swapped the Alps.
January 2nd, 2009 at 2:46 pm
I love the inflation vs. deflation debate. There are smart people on both sides of the debate who do a good job of making their case.
I personally see inflation / deflation as a monetary phenomenon. I don’t buy the wage / price spiral theory. We have seen that we can have full employment with low inflation 1990s and underemployment with high inflation ala 1970s.
The monetary expansion in the past few years has been astounding. That money will ultimately chase goods and drive up prices. Who knows how long it will sit around unproductively (in gov bonds). I agree moderate inflation (high single digits) is more likely than out of control hyperinflation. With moderate inflation in 2010 and beyond a good possibility TIPS are looking cheap to me right now as well as TBT.
January 24th, 2009 at 8:05 am
whatever happened to Figgie Industries? (slaps forehead) Oh yeah, they went bankrupt while the CEO occupied himself writing books about how the US would go bankrupt. Well pay closer attention next time.