Hyperinflation Is The Only Option

Hey Jesseconmist

As you may well know I tend to focus on macroeconomic trends and looking at charts I have come to the sound conclusion that we're deep in the shit, not knee-deep, but neck-deep and it's slowly moving higher to hit the fan. Governments either know this, or they are too stupid to realise it, but either way, the results remain the same.

Government spending has always been out of hand ever since 1971, where we handed over the keys to the printing press and allowed them to deficit spend future income now to try and drive economic growth. Each year it didn't work, they kept doubling down, and it keeps getting costlier to drive growth with money with around $4 of debt needed to create $1 of production.

Now that we're under a global lockdown, the house of cards has begun to fall and to prop it back up governments are throwing everything they can at it, with trillions added to the financial economy every month.

Stagflation looks like the end game

Governments around the world are going into Japanification and outspending their GDP, which will cause stagflation as we've seen in Japan over the last 30 years.

To avoid going into stagflation and a weird hybrid depression governments need to use their printing press to wind down the support to the financial economy to drive actual value and drive production, so private capital can be put to work as it goes long on output and not on speculation.

That's most likely not going to happen, but I've put together four options apart from the radical change of CBDC's, which I've touched on in previous posts.

The non-correlation gets bigger

As governments keep spending while the economy keeps shrinking, you're pushing debts further and further into the future and damning generations who have yet to be born. So while government spending was always out of hand there was once a floor of production it could learn on and predict GDP growth on to try and keep things in a sort of acceptable level of theft, but now as GDP is crushed that balance is entirely out of wack.

So what can governments do?

Decrease spending

First, off they can decrease spending, stop propping up specific industries that aren't profitable and start to cut back on non-performing assets. Then slowly allow that debt to default and refinance it and over time reduce the money supply by destroying the debt.

This is NEVER going to happen!! So I won't waste time going deeper into this option.

Increase the revenue

This is what they are trying to do with the stimulus packages, but the financial sector does not seem to be finding productive places to allocate the capital given,. Therefore there isn't an uptake in production.

As production continues to fall, it means less revenue, and while they can increase tax to make up the shortfall this will only drive slower money transfer over time and net them even less revenue the higher they move up taxes, so this one is a bust.

Default on the debt

They could call their bullshit and default on the debt and wipe out all the creditors and speculators, which are their friends and family who enjoy the nepotism and the benefits of the Cantillon Effect.

This would effectively see is plugged into a mega depression due to a global reset and see unrest all over the world, which isn't going to be allowed to happen, the show needs to go on, everyone needs their bread and circus.

Hyperinflation

The way I see it now is the governments around the world only have one option left in their arsenal and that's hyperinflation. You see debts are nominal value so they only need to be paid back based on that and not their purchasing power so once you debase the currency you can pay back the debt.

What governments could do is serious helicopter money either through a debt-based CBDC if they don't want backs to go bust and provide stimulus money directly to the public and force them to keep spending it in the real economy through deadlines for spending and such.

This will allow governments to control and push inflation as high as they need to for them to suck up new tax revenue and pay back the nominal value of debt they are sitting with and reduce their balance sheet over time.

Death from the bottom up

This hyperinflation will see anyone with any sort of savings be stripped of value if they do not pile into a non-correlated asset like gold of bitcoin and further push up prices like homes and stocks as a store of value.

This WON"T help the poor, in fact, it will push more people into the spending holes they cannot get out of, even when the government is giving them money to spend.

While you may not see the effect short term in the US and developed nations, you'll see it happen from the bottom up. Developing nations like my own will have to hyperinflate to service their dollar-denominated debt or default in which the currency collapses altogether.

So I guess it's safe to say hyperinflation, here we come!

Have your say

What do you good people of HIVE think? It looks like hyperinflation is the option, what do you think?

So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."

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