I cringe each time I hear some inflationista — you may have met that guy who insisted there was no inflation during the 2000s as the dollar plunged 41% but now sees inflation everywhere — brings today up the Weimar Republic every chance he gets.

Here is a look at long term Inflation we spoke about earlier on the US, FRANCE, JAPAN, UK and SPAIN to 1868

 
click for larger graphics

 

GERMANY to 1820 in a separate chart because of that WEIMAR REPUBLIC hyper inflation.

 

And for South America including, Brazil, Argentina, Chile and Peru who experienced massive inflation in the 1960’s – 1980’s…

 

Source:
Global Financial Data
Ralph M Dillon, rdillon@globalfinancialdata.com  globalfinancialdata.com

Category: Inflation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

19 Responses to “Long Term Inflation: Wiemar, Europe, US, South America”

  1. capitalistic says:

    Yep, most people including experts don’t understand the different kinds of inflation and the underlying causes of each.

  2. gloeschi says:

    You saying that, compared to other countries, US shouldn’t really complain? 98% loss of value since 1913 not enough?

  3. NoKidding says:

    1) It happened suddenly
    2) In hindsite the reasons are obvious
    3) In real time, people were clearly not aware it was coming – else point 1 would be invalidated.

    I don’t think hyperinflation is coming, but as the charts show what most of us expect is irrelevant until its too late. Except for the super smart ones who have correct answers ready for everything.

  4. bonzo says:

    I find it convenient to use the old money equation (MV=PT) to remember the different ways price level can rise/fall.

    a) increase/decrease M while keeping V and T the same. Except what is money? Short-term debt by XOM is almost as good as Fed reserves/currency to most people as a store of value, which is the main use of money, and long-term Gov debt is almost as good as Fed reserves/currency. Thus credit creation/destruction by the private sector can increase/decrease M as surely as government actions. This is classic monetary inflation/deflation.

    b) increase/decrease V while keeping M and T the same. The main use of money is as a store of value. If businesses sense a good investment opportunity and so engage in investment spending, velocity can soar. Likewise, if people distrust money as a store of value and start to dump it for something else, which is how hyperinflations occur. Conversely, if businesses and households are worried about the future, but not worried about money as a store of value, they may hoard money and velocity plummets. Velocity is driven by irrational sentiment, which can change rapidly and violently in either direction. Keynesian economics strives to manipulate M to adjust to this rapid and violent changes in V, so as to keep the product MV stable. This is demand side inflation/deflation.

    c) increase/decrease T while keeping M and V the same. Increases in capacity due to productivity or discoveries of new resources or new sources of labor in the developing world can all increase T and thus force down P. Conversely, destruction of capacity due to natural disasters (that tsunami in Japan) or exhaustion of resources (peak oil) or reduced labor supply (aging population) will raise P, all other thing being equal. This is supply side inflation/deflation.

  5. gman says:

    Housing glut, global labor glut, productivity increasing, Shale oil and gas finds. increasing solar yields and debt overhang.
    Some inflation? Pretty please!

  6. AHodge says:

    nice
    having done most everything in my checkered career
    i did history/ forecast latin america spreadsheets for W R Grace
    no graphs
    but just like the axes on your charts
    you could see the hyperinflation correlation
    inflation currency money supply
    just by seeing the magnitudes of the index increases for all of them which ran in line
    how many digits the indices had

  7. willid3 says:

    wasn’t Germany hyper inflation caused by some thing out side of economics? like loosing a war. and having to repay debt created by the victors (that was extremely punishingly high)? and I bet they also had to repay it in the victors currencies instead of their own too . and i dont recall where i saw it, but some where i saw that economists only really count wage growth as inflationary since without it price increases tend to be self defeating. and of course today we large decreases in actual income by most potential consumers. which makes them much more sensitive to any price hikes. and really hyper sensitive to tax increases even if they don’t impact them anbd in favir of tax cuts even if they dont help them.

    ~~~

    BR: Gold Standard, War reparations, and a recession . . .

  8. bonzo says:

    Just to follow up on what I wrote above, there are clearly changes occurring to all of M,V and T.

    1) M is going up due to the budget deficit but down as the private sector deleverages. On balance, M is up, however.
    2) V is clearly way down as both businesses and households are pessimistic about the future and prefer to hoard money rather than spend.
    3) T is up for the most part. We are starting to see resource shortages on the one hand (peak oil), but also new technologies that increase resources (fracking), so its something of a wash there. The developed world population is aging but not retiring yet and the developing world population continues to enter the labor market, so on balance labor supply is up. China has been building factories like crazy for many years and at some point these factories come online, which will cause gluts of capacity. Japan reconfigured pretty quickly after that tsunami. The internet continues to be a tremendous source of productivity gains. There will probably be big productivity gains due to robots and changes in the education and healthcare complexes in the future.

    Putting it all together, we get the implication that P is down, meaning we are facing deflation rather than inflation. And indeed that is what we are seeing with house prices, wages, technology and many other sectors of the economy. That has been offset by the rise in commodities, healthcare and education costs, but these rises may be weakening in the future, for reasons I noted. Unless something changes to make V go up (another investment or consumption boom), it will take continued large government deficts to prevent deflation from spreading throughout the economy.

  9. ByteMe says:

    Just waiting for the Glenn Beck listener who will say that the government is just cooking the numbers so that inflation doesn’t look so bad right now even though it’s horrible! terrible!! a disaster!!!

    Sigh.

  10. efrltd says:

    The graphics beg the question: Inflation is if the line slopes up. Period. Stable prices, if the slope is down. Deflation, the slope is down. Definitely the USA has had inflation. Tossing some straw men onto the page that had hyperinflation doesn’t make the fact of USA inflation less. It’s like that fellow who’s 6’5″ posing for a picture with an NBA team and loudly saying, see I’m not tall. Plus the worry is the overhang of newly printed dollars, yes, I know it’s on some computer drive, but it’s the same thing. Right now it’s setting in the US Treasury through either direct Fed purchases, or in banks in the form of Treasury securities purchased with the free money. If that money ever takes wing, now it’s on the roost, the latent inflation can fly. Given the 20-20 foresight of the O’ Admn. and Fed. is not up to to Mr. Magoo’s 20-500 vision who’s to ssy the inflation bird can be netted or shot down before it escapes some day in the future. I’d prefer not to gamble because of Argentine inflation decades ago. They, and the other countries noted, found it easier to inflate themselves out crisis after crisis. What’s to prevent that in the USA? A mighty thin line in the O’ Admn and the Congress backed up by a phalanx of Fed and Treasury bureaucrats.

  11. flakester says:

    @ByteMe
    A True Believer!

  12. bonzo says:

    “overhang of newly printed dollars”

    I’ll take short-dated high-quality commercial paper at a very small discount to t-bills and so will everyone else based on credit spreads. In other words, that paper counts as money for all intents and purposes. Private sector credit is NOT booming. On the contrary, it is being paid down. That is money destruction, which offsets much of the money creation by the government. Same thing happened in Japan over the past 20 years. Corporations were deeply in debt in Japan in 1990, now their balance sheets are mostly cleaned up. Massive money supply shrinkage by the corporate sector in japan, in other words.

    “If that money ever takes wing, now it’s on the roost, the latent inflation can fly.”

    True, and if pigs ever grow wings, they too can fly. There is always the potential for hyperinflation, even in an economy with very little government debt and very little money supply and otherwise with a very strong balance sheet. All it takes is for people to lose confidence in the currency and that typically only happens after a war like in post war Germany or Japan, or when there is great risk of revolution and debt repudiation like in South America in days of old. Like you, I’d also love not to gamble. Unfortunately, the risk-free rate is never very good.

    “What’s to prevent that in the USA? ”

    What’s to prevent Obama from declaring war on Russia and launching a nuclear first-strike and destroying the whole world? Rational analysis of democratically elected governments assumes a ruling class whose members look out for individual interests first, class interests second and interests of the broader society last. How are the individual and class interests of the ruling class in the US right now best served? Methinks by moderate inflation (under 5%), though quite a few cash-rich members of the ruling class would like outright deflation so they can buy up distressed assets cheap. Not many members of the ruling class would benefit from high inflation. Maybe a few business owners who are overleveraged, some demagogic politicians who could take advantage of social breakdown to grab hold of the reins of power, owners of companies in the business of selling gold, guns and underground bunkers, etc. High inflation at this point would primarily help the student loan debt serfs, the home debtor serfs, and the working class shmoes who will ultimately have to pay off most of the government debt via a reduced living standard. Do you really think the ruling class which owns all the debt will sacrifice their interests to benefit these peons?

  13. Permabear says:

    I give Ben Bernanke all the credit for his mastery of monetary policy, creating the not too hot, not too cold economy. But I also think he’s playing a very dangerous game with no great precedents in history to draw from. Bernanke is buying around 60 percent of Treasury bonds issued. The American government continues to run trillion dollar budget deficits year in and year out. The economy is clearly totally hooked on all this monetary and fiscal stimulus like a drug addict. What is the endgame? How does the American, much less the Japanese and European economy break free of their addiction to artificial stimulus? While doom and gloom talk is easy to ridicule, I just don’t see the evidence that America, Japan or Europe have solved any of our underlying problems. And I think a slowdown here or a black swan event there, could send the world economy into another nosedive. And it doesn’t necessarily have to be the deflationary kind the next time. I think with all the money printing we’re seeing the world today, it wouldn’t take all that much to take one of the currencies into meltdown and hyperinflation mode. From everything I’ve read, of the three, Japan is most at risk.

  14. markbc says:

    These comparisons are misleading. Firstly, those previous hyperinflations were for individual countries only. The significance of this is that capital could quickly pull out and be re-invested in another country providing a real return on its debt bonds. That can’t happen now because it’s the entire world’s monetary system that’s in this boat. All fiat currencies will go down the toilet together.

    Furthermore, back in the last century there were enough resources available to power real economic growth. The world economy has now stopped growing and is probably beginning to contract now. Certainly, the US has been in contraction mode for at least a decade (don’t believe the CPI lies). This means that back in the last century, capital not only COULD pull out of overly indebted countries, but it had a real incentive to do so, because other countries back then were genuinely growing and provided an enticing investment opportunity alternative.

    Now, however, the only country that’s growing is China, and even that’s debatable as well. But you can’t just go out and sink a billion dollars into that economy when you dislike what the US offers. So, basically, absent colonization of Mars facilitating further economic expansion, there is nowhere for the existing capital to go. It has to put up with negative real returns, because there is no alternative. Furthermore, many funds have legal requirements to stay invested in certain sectors, and there is nothing available providing real returns within these sectors. And they can’t bail out into other sectors.

    Therefore, we are seeing slow motion hyperinflation, more like matrix-3D-inflation. This will come to an end at some point when either China and India have bought all of the US’s gold, or the banskters in charge of the US gold decide that it has been bled enough and they put a halt to it.

    We will get either hyperinflation or a new gold standard. In the case of the former, the purchasing power of the dollar will go down by about somewhere between a quadrillion to infinity times. In the case of the latter, the value of the dollar will go down at least 10 times.

    There are not enough resources available in the world to satisfy the purchasing power of all the existing dollars out there, and one way or another that apparent wealth illusion WILL be destroyed. Deflation seems to be drifting farther and farther away as the way that this will happen. And you don’t get prolonged deflation (resources getting cheaper) when the world’s running out of resources.

  15. V says:

    Look at the scale, 1,2,4,8,16,32,64,128,256 etc

  16. constantnormal says:

    Wow there musta been a fire sale on blinders at the entrance here. A number of folks seeing things in only one way (their way) and that being an overly simplified (which means a lot of the time it will be at odds with Reality) view of these factors.

    Price is influenced by more things than inflation/deflation. Hard to believe, I know, but if nobody wants to buy a product, or has the money to buy it, it gets cheaper. Exactly the same as if the money gets devalued. These situations are not the same.

    And yet the demand for goods, money availability and money valuation fluctuates all the time.

  17. constantnormal says:

    My bad … my prior post should read …

    “Exactly the reverse as if the money gets devalued”

    I know what I meant, but the rest of you may find it difficult to tell that from what I wrote … apologies.

  18. constantnormal says:

    Or perhaps it would be clearer if I wrote:

    “Exactly the same as if the money gets deflated” .. that is more comprehensible.

  19. Greg0658 says:

    markbc thats well rounded roundabout .. deflation inflation is in the eyes of the beholder of credit and desires .. I see your inflation to the point of this statement that I will butcher:
    “when the ramifications are to hard to swallow – we humans will find a solution”
    PayPal?

    slow motion hyperinflation and the slow to boil frog are stories that modern man is reading/thinking about – and why guns are the issue they are

    I think your deflation kicks in (for some eyes) new human standards are arrived at – which will create a new inflation of something .. gold? I don’t think so. maybe IF a century of knowledge can be wiped too. Gold corn. maybe.
    I do think storytelling and the opsys to hold/send them will deflate tho.