Home > Uncategorized > Hyperinflation is the course of action

Hyperinflation is the course of action

This is a controversial statement and I speak for myself, not this blog.

Many people have a fear of inflation, which means that hyperinflation is beyond their comprehension. Under normal circumstances, I too would be fearing inflation. However, these are not ordinary circumstances.

We have just come out of a recession, and we might be going back into one too, debt levels are at a record high! The recovery is weak, in fact it’s almost non-existent.

Inflation is currently 4% – relatively high compared to what has been experienced in the recent past. The Bank of England base rate is 0.5%, the lowest it will ever be and the longest it has ever been held so low. The average credit card interest rate is 18.9%, the average mortgage interest rate is 3% and the average loan is 9.2%.

Household debt levels are at a record high, having breached the £1 trillion mark around the beginning of the year. Corporate debt levels are not that far behind.

Inflation, theoretically, eats into the debt. So to adjust for inflation, credit card interest rates are 14.9%, mortgages are -1% and loans 5.2%. So the people that benefit from the current inflation rate are homeowners.

Because of the high levels of debt and the high interest charged on the debt, I advocate hyperinflation of 100% or more. This means that debt will effectively be wiped out within a year and we can rebalance and restructure the economy. Suffer a temporary hardship now in order to enjoy lasting prosperity and stability at a future date.

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Categories: Uncategorized
  1. Edward
    February 19, 2011 at 15:07

    Was this post written in jest?

    In case not, a couple of quick points, as it’s hard to imagine a situation where hyperinflation is a good fix for excessive levels of household and public debt.

    – This policy effectively transfers wealth away from the creditors (those who lent the money) to the debtors (those who borrowed money).

    – Many of those creditors are those individuals that have net savings – do you really want to transfer resources away from these households?

    – Some might object to this on the principled ground that it’s a form of redistribution that wasn’t voted on.

    – How do you propose to subsequently wring the inflation from the system? Look at the UK’s experience after the oil shocks in the 1970s and the ensuing stagflation, or Argentina in 1989/90. It requires a pretty serious contraction in monetary policy and most likely a recession to bring inflation expectations back down to a reasonable amount.

  2. Mr Oldfield
    March 1, 2011 at 17:36

    It wasn’t written in jest.

    I am well aware of what it will do to savers, however the problem that faces the majority is more pressing than the minority.

    Redistribution is never voted on and, arguably, no policy is ever voted on outside of Parliament or the relevant body. In this case the MPC. If we take this government, as an example, the policies they are enacting are largely without an electoral mandate as is the case with every government.

    To write off inflation would require an abandonment of Sterling, preferably creating a new currency with a fixed rate, such as land. One only has to look at Weimar Germany to realise that the creation of a new currency is not beyond the realms of possibility.

  3. Ust Oldfield
    January 23, 2012 at 10:18

    Reblogged this on The Guerrilla Economist.

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