Where is the supposed Hyperinflation?
Germany 1923, highest monthly inflation rate 30,000%. Time required for prices to double, every 3 days.
Hungary, 1945-1946, highest monthly inflation rate 4.19 * 10 raised to the 16th power %. Daily inflation rate 207%. Time required for prices to double 15 hours.
Yugoslavia, 1992-1994, highest monthly inflation rate, 313,000,000%. Equivalent daily inflation rate, 64.6%. Time required for prices to double, 1.4 days.
Zimbabwe, 2007-2008, highest inflation rate, 79 billion percent, equivalent daily inflation rate 98%. Time required for prices to double, 24.7 hours.
Jan 6th 2020- January 4th 2021, coming straight from the Fed, we started this period with around 4 trillion USD in the system. One year later that number is at 6.7 trillion dollars. Meaning that over 40% of all US dollars were printed in just the last 12 months. From the looks of it, no one seems to be in a rush to slow things down. Strangely enough, we haven't seen much inflation for everyday goods like petrol and food. Prices have definitely not gone up anywhere near 40%. So where's the inflation?
The reason we have not seen inflation is because of money being printed is only one of the factors that contributes to inflation. To get inflation, here's everything you need.
- Industrial Output: How much "stuff" an economy makes.
- Employment: Too much employment leads to employers fighting over workers, which leads to higher wages, which leads to higher prices.
- The Money Supply: Main reason for this article and the easiest to understand. More money when an economy is producing the same amount or less stuff equals higher prices.
- The Velocity of Money: If money is exchanging hands, and if so how fast it is exchanging hands.
In our case right now, the money supply has shot up a ridic amoun, but the other factors have been keeping inflation down.
- Industrial Output - This has been down from businesses not being able to operate, which means less stuff. There has also been less demand from you and I to buy those things.
- Employment - This has taken an hit. With less employment comes lower wages which means lower prices. Not inflation.
- Velocity of Money - It is pretty slow for everyone with all of the current uncertainty in the air. People do not want to spend a lot of money right now if they don't know if they are going to be able to find a job or keep their job.
However, you do know what people are going to spend money on...?
Things that only go up and to the ??. Like Bitcoin, Tesla stock, every other stock, real estate, and more recently, "meme" stocks. Instead of calling it inflation, we call it the stock market rally, the real estate bom, cryptos time to shine or the crypto bubble, depending who you talk to (guilty of this same hypocrisy, as I too hold, Bitcoin, Tesla and Palantir).
Should the money printer keep going on? Can Central Banks keep printing? With the pandemic still causing major headwinds and with stimulus packages being dished out, where is all that money going to go?
Do I think we are going to see hyperinflation? No. I am just here for the ride, baby!