So if the Federal Reserve printed $1 million for each American resident and gave it to them, that wouldn't cause hyperinflation? How interesting.pmward wrote: ↑Sun Apr 19, 2020 7:46 pmHyperinflation is impossible in a country with all of it's debts denominated in it's own currency. ESPECIALLY impossible for a country that is the global reserve and trade currency. We will never see hyperinflation. But, we may see high inflation, and that can be painful enough on its own. I do agree that if we got to a point of high inflation, going back on a gold standard, even temporarily until things settle, might be a bit easier to stomach than the Volcker way of jacking interest rates and intentionally sending the country into recession. Especially since our governments debt load is much larger in both absolute and relative terms than it was in Volcker's day. So yes, there is possibility they could do this some day.Libertarian666 wrote: ↑Sun Apr 19, 2020 7:20 pmIt's fine with me if they do that.pmward wrote: ↑Sun Apr 19, 2020 7:04 pmYou are correct in one way, that there is no reason currently to do so. Back in the Great Depression that was the only way they could add liquidity to the financial system. There was a dollar crunch, and the Fed couldn't do QE like it does today when there was a gold peg. We have had quite a few dollar crunches in the last 10 years, but the Fed is able to print. But that doesn't mean there aren't scenarios where they would look to use gold as a tool to devalue the currency. If the government devalues vs gold by saying they will buy any and all gold for twice the current price, it reduces the value of the dollar as a collateral instrument, and in turn makes our debt more manageable (and provides relief to foreign countries that have large amounts of dollar denominated debt).Libertarian666 wrote: ↑Sun Apr 19, 2020 6:33 pmEven assuming that is correct, it's impossible to devalue the dollar against gold today, because there is no link between the two.pmward wrote: ↑Sun Apr 19, 2020 4:16 pmAnd you can read Ray Dalio's Navigating Big Debt crisis here via free PDF: https://www.principles.com/big-debt-crises/Libertarian666 wrote: ↑Sun Apr 19, 2020 4:02 pmIf you want to know the truth, read Rothbard's book about the Great Depression. It's free at https://cdn.mises.org/Americas%20Great% ... sion_3.pdfpmward wrote: ↑Sun Apr 19, 2020 2:22 pmDefine the term "work". The very day they changed the gold peg was the day that the data shows that the economic recovery from the Great Depression began. I'm sure it's not ironic that those dates line up. It might not have created "inflation" but it sure did counter the deflation (which in a relative manner is generating inflation).Libertarian666 wrote: ↑Sat Apr 18, 2020 8:49 pm This has actually been tried before, by FDR.
It didn't work.
It won't work now either.
He does a very in depth study of the Great Depression, and all of the charts and figures in the book show the economic data from the time started to turn up and recover on the very day that they devalued the dollar.
So even if it worked then, it can't work now.
However, my prediction is that they will do no such thing but will keep printing wildly until they are forced back onto an actual gold standard by hyperinflation.
How Does Fixing the Gold Price Create Inflation
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Re: How Does Fixing the Gold Price Create Inflation
Re: How Does Fixing the Gold Price Create Inflation
Yes high inflation is like 10, 15, 20%. Hyperinflation is when inflation gets into the 100's or even 1,000's of percent.vnatale wrote: ↑Sun Apr 19, 2020 7:49 pmWhat do you consider to be "high inflation"? And, you can answer in a range, e.g., 10% to 15%, and for a period of time, e.g., at least five years.pmward wrote: ↑Sun Apr 19, 2020 7:46 pm
Hyperinflation is impossible in a country with all of it's debts denominated in it's own currency. ESPECIALLY impossible for a country that is the global reserve and trade currency. We will never see hyperinflation. But, we may see high inflation, and that can be painful enough on its own. I do agree that if we got to a point of high inflation, going back on a gold standard, even temporarily until things settle, might be a bit easier to stomach than the Volcker way of jacking interest rates and intentionally sending the country into recession. Especially since our governments debt load is much larger in both absolute and relative terms than it was in Volcker's day. So yes, there is possibility they could do this some day.
Vinny
Re: How Does Fixing the Gold Price Create Inflation
Let's be realistic here. It is even silly to say that the government would give away $1 million to each resident. And even if they did, it would create a one off burst of inflation... but it wouldn't necessarily create a pattern of hyperinflation over a long period of time. A developed country with all debt denominated in their own currency, especially one that has strong buying demand because of being global reserve and trade currency, simply cannot lose control of the currency enough to have a hyperinflation. It's simply not possible. Every case of hyperinflation in history happened because of large amounts of debt/reparations denominated in a foreign currency. Those countries had to print to pay their debt, yet at the same time the debt valued in their currency kept increasing. This is the cycle that needs to happen to truly get a hyperinflation. We have all of our debt in USD, so it is simply not possible. If we print to pay our debt, the value of our debt goes down instead of up. When your debt is in your own currency inflation helps pay the debt instead of hurting.Libertarian666 wrote: ↑Mon Apr 20, 2020 9:42 amSo if the Federal Reserve printed $1 million for each American resident and gave it to them, that wouldn't cause hyperinflation? How interesting.pmward wrote: ↑Sun Apr 19, 2020 7:46 pmHyperinflation is impossible in a country with all of it's debts denominated in it's own currency. ESPECIALLY impossible for a country that is the global reserve and trade currency. We will never see hyperinflation. But, we may see high inflation, and that can be painful enough on its own. I do agree that if we got to a point of high inflation, going back on a gold standard, even temporarily until things settle, might be a bit easier to stomach than the Volcker way of jacking interest rates and intentionally sending the country into recession. Especially since our governments debt load is much larger in both absolute and relative terms than it was in Volcker's day. So yes, there is possibility they could do this some day.Libertarian666 wrote: ↑Sun Apr 19, 2020 7:20 pmIt's fine with me if they do that.pmward wrote: ↑Sun Apr 19, 2020 7:04 pmYou are correct in one way, that there is no reason currently to do so. Back in the Great Depression that was the only way they could add liquidity to the financial system. There was a dollar crunch, and the Fed couldn't do QE like it does today when there was a gold peg. We have had quite a few dollar crunches in the last 10 years, but the Fed is able to print. But that doesn't mean there aren't scenarios where they would look to use gold as a tool to devalue the currency. If the government devalues vs gold by saying they will buy any and all gold for twice the current price, it reduces the value of the dollar as a collateral instrument, and in turn makes our debt more manageable (and provides relief to foreign countries that have large amounts of dollar denominated debt).Libertarian666 wrote: ↑Sun Apr 19, 2020 6:33 pmEven assuming that is correct, it's impossible to devalue the dollar against gold today, because there is no link between the two.pmward wrote: ↑Sun Apr 19, 2020 4:16 pmAnd you can read Ray Dalio's Navigating Big Debt crisis here via free PDF: https://www.principles.com/big-debt-crises/Libertarian666 wrote: ↑Sun Apr 19, 2020 4:02 pmIf you want to know the truth, read Rothbard's book about the Great Depression. It's free at https://cdn.mises.org/Americas%20Great% ... sion_3.pdfpmward wrote: ↑Sun Apr 19, 2020 2:22 pmDefine the term "work". The very day they changed the gold peg was the day that the data shows that the economic recovery from the Great Depression began. I'm sure it's not ironic that those dates line up. It might not have created "inflation" but it sure did counter the deflation (which in a relative manner is generating inflation).Libertarian666 wrote: ↑Sat Apr 18, 2020 8:49 pm This has actually been tried before, by FDR.
It didn't work.
It won't work now either.
He does a very in depth study of the Great Depression, and all of the charts and figures in the book show the economic data from the time started to turn up and recover on the very day that they devalued the dollar.
So even if it worked then, it can't work now.
However, my prediction is that they will do no such thing but will keep printing wildly until they are forced back onto an actual gold standard by hyperinflation.
- vnatale
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Re: How Does Fixing the Gold Price Create Inflation
What periods of time in our history do you think were then times of "high inflation"? Just trying to determine when it happened and what were its causes.pmward wrote: ↑Mon Apr 20, 2020 11:16 amYes high inflation is like 10, 15, 20%. Hyperinflation is when inflation gets into the 100's or even 1,000's of percent.vnatale wrote: ↑Sun Apr 19, 2020 7:49 pmWhat do you consider to be "high inflation"? And, you can answer in a range, e.g., 10% to 15%, and for a period of time, e.g., at least five years.pmward wrote: ↑Sun Apr 19, 2020 7:46 pm
Hyperinflation is impossible in a country with all of it's debts denominated in it's own currency. ESPECIALLY impossible for a country that is the global reserve and trade currency. We will never see hyperinflation. But, we may see high inflation, and that can be painful enough on its own. I do agree that if we got to a point of high inflation, going back on a gold standard, even temporarily until things settle, might be a bit easier to stomach than the Volcker way of jacking interest rates and intentionally sending the country into recession. Especially since our governments debt load is much larger in both absolute and relative terms than it was in Volcker's day. So yes, there is possibility they could do this some day.
Vinny
Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
Re: How Does Fixing the Gold Price Create Inflation
The only period post-industrial revolution that we have had high inflation was the 70s-early 80s. Back pre-industrial revolution when we were a developing country we had a long history of problematic inflation. But the country has changed so much that I'm not sure if those are still relevant for the sake of comparison.vnatale wrote: ↑Mon Apr 20, 2020 11:31 amWhat periods of time in our history do you think were then times of "high inflation"? Just trying to determine when it happened and what were its causes.pmward wrote: ↑Mon Apr 20, 2020 11:16 amYes high inflation is like 10, 15, 20%. Hyperinflation is when inflation gets into the 100's or even 1,000's of percent.vnatale wrote: ↑Sun Apr 19, 2020 7:49 pmWhat do you consider to be "high inflation"? And, you can answer in a range, e.g., 10% to 15%, and for a period of time, e.g., at least five years.pmward wrote: ↑Sun Apr 19, 2020 7:46 pm
Hyperinflation is impossible in a country with all of it's debts denominated in it's own currency. ESPECIALLY impossible for a country that is the global reserve and trade currency. We will never see hyperinflation. But, we may see high inflation, and that can be painful enough on its own. I do agree that if we got to a point of high inflation, going back on a gold standard, even temporarily until things settle, might be a bit easier to stomach than the Volcker way of jacking interest rates and intentionally sending the country into recession. Especially since our governments debt load is much larger in both absolute and relative terms than it was in Volcker's day. So yes, there is possibility they could do this some day.
Vinny
Vinny
From a hyper-inflation standpoint in the developed world, the Weimar Republic is really the poster child. BUT the problem there was that they had a large reparations debt that was denominated in foreign currencies. They had no choice but to print to pay the debt... and the very act of printing itself made the debt more expensive in their local currency. So they were basically screwed from both sides. They couldn't default without facing military action.
Re: How Does Fixing the Gold Price Create Inflation
I'm presuming you mean "the only peacetime period post-industrial revolution we have had high inflation was the 70s-early 80s"; the years during and immediately after WWI (1916 to 1920) were years in which US inflation averaged around 16-17% a year and reached over 20% a year in 1917.pmward wrote: ↑Mon Apr 20, 2020 12:24 pmThe only period post-industrial revolution that we have had high inflation was the 70s-early 80s. Back pre-industrial revolution when we were a developing country we had a long history of problematic inflation. But the country has changed so much that I'm not sure if those are still relevant for the sake of comparison.vnatale wrote: ↑Mon Apr 20, 2020 11:31 amWhat periods of time in our history do you think were then times of "high inflation"? Just trying to determine when it happened and what were its causes.pmward wrote: ↑Mon Apr 20, 2020 11:16 amYes high inflation is like 10, 15, 20%. Hyperinflation is when inflation gets into the 100's or even 1,000's of percent.vnatale wrote: ↑Sun Apr 19, 2020 7:49 pmWhat do you consider to be "high inflation"? And, you can answer in a range, e.g., 10% to 15%, and for a period of time, e.g., at least five years.pmward wrote: ↑Sun Apr 19, 2020 7:46 pm
Hyperinflation is impossible in a country with all of it's debts denominated in it's own currency. ESPECIALLY impossible for a country that is the global reserve and trade currency. We will never see hyperinflation. But, we may see high inflation, and that can be painful enough on its own. I do agree that if we got to a point of high inflation, going back on a gold standard, even temporarily until things settle, might be a bit easier to stomach than the Volcker way of jacking interest rates and intentionally sending the country into recession. Especially since our governments debt load is much larger in both absolute and relative terms than it was in Volcker's day. So yes, there is possibility they could do this some day.
Vinny
Vinny
From a hyper-inflation standpoint in the developed world, the Weimar Republic is really the poster child. BUT the problem there was that they had a large reparations debt that was denominated in foreign currencies. They had no choice but to print to pay the debt... and the very act of printing itself made the debt more expensive in their local currency. So they were basically screwed from both sides. They couldn't default without facing military action.
Re: How Does Fixing the Gold Price Create Inflation
Rickards explains his thesis at the 53 minute mark.
https://www.youtube.com/watch?v=xu4gd_r1tsY
<edit> Here as well: https://www.youtube.com/watch?v=UqPdCkMw-pk
https://www.youtube.com/watch?v=xu4gd_r1tsY
<edit> Here as well: https://www.youtube.com/watch?v=UqPdCkMw-pk
Last edited by Hal on Sun May 03, 2020 7:29 am, edited 1 time in total.
Re: How Does Fixing the Gold Price Create Inflation
WWII as well, right?D1984 wrote: ↑Mon Apr 20, 2020 5:39 pmI'm presuming you mean "the only peacetime period post-industrial revolution we have had high inflation was the 70s-early 80s"; the years during and immediately after WWI (1916 to 1920) were years in which US inflation averaged around 16-17% a year and reached over 20% a year in 1917.pmward wrote: ↑Mon Apr 20, 2020 12:24 pm The only period post-industrial revolution that we have had high inflation was the 70s-early 80s. Back pre-industrial revolution when we were a developing country we had a long history of problematic inflation. But the country has changed so much that I'm not sure if those are still relevant for the sake of comparison.
"Policy makers have repeatedly called the battle against the novel coronavirus a war. As in wartime, federal expenditures are rising sharply while tax revenues are being hit by the lockdown. Both World War I and World War II—and, indeed, the Vietnam War—were followed by nasty bouts of inflation."
https://www.wsj.com/articles/get-ready- ... lead_pos10
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Re: How Does Fixing the Gold Price Create Inflation
I'm pretty sure that the current money printing event is unprecedented in the US, even in prior wars.Tortoise wrote: ↑Fri Apr 24, 2020 12:10 pmWWII as well, right?D1984 wrote: ↑Mon Apr 20, 2020 5:39 pmI'm presuming you mean "the only peacetime period post-industrial revolution we have had high inflation was the 70s-early 80s"; the years during and immediately after WWI (1916 to 1920) were years in which US inflation averaged around 16-17% a year and reached over 20% a year in 1917.pmward wrote: ↑Mon Apr 20, 2020 12:24 pm The only period post-industrial revolution that we have had high inflation was the 70s-early 80s. Back pre-industrial revolution when we were a developing country we had a long history of problematic inflation. But the country has changed so much that I'm not sure if those are still relevant for the sake of comparison.
"Policy makers have repeatedly called the battle against the novel coronavirus a war. As in wartime, federal expenditures are rising sharply while tax revenues are being hit by the lockdown. Both World War I and World War II—and, indeed, the Vietnam War—were followed by nasty bouts of inflation."
https://www.wsj.com/articles/get-ready- ... lead_pos10
I can't imagine how it can end well.
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Re: How Does Fixing the Gold Price Create Inflation
Imagine if you held a lot of gold. That could end well.Libertarian666 wrote: ↑Fri Apr 24, 2020 1:54 pm I'm pretty sure that the current money printing event is unprecedented in the US, even in prior wars.
I can't imagine how it can end well.
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Re: How Does Fixing the Gold Price Create Inflation
Yes, for me personally. But I would prefer the general public to do at least reasonably well too.Mark Leavy wrote: ↑Fri Apr 24, 2020 2:03 pmImagine if you held a lot of gold. That could end well.Libertarian666 wrote: ↑Fri Apr 24, 2020 1:54 pm I'm pretty sure that the current money printing event is unprecedented in the US, even in prior wars.
I can't imagine how it can end well.