When folks talk about hyperinflation, they often think it is just a case of governments printing too much money. And while that's of course part of it, nearly all cases (maybe all?) of hyperinflation are marked by supply destruction - the economy is no longer able to produce the goods and services needed by the population, so you have the same amount of money chasing fewer goods, and from there things can spiral. Cases in point:
1. In the Weimar Republic, Germany's productive capacity was devastated by WWI.
2. In Zimbabwe, which was "the bread basket of Africa", farm productivity famously plummeted due to the land redistribution policies of Robert Mugabe.
3. Looking at the current crisis in Sri Lanka, the forced switch to organic farming similarly destroyed farm productivity.
4. Though I wouldn't call it "hyperinflation", the COVID pandemic clearly caused shortages throughout the economy.
My point is that hyperinflation is rarely just caused by governments living beyond their means - the trigger is nearly always a supply shock, and then it's what governments do in the face of that supply shock that gives you hyperinflation.
Set this theory against the fact that there was zero net inflation in the US from 1800 to 1914, and endemic inflation since. What changed in 1914? The US switched to a fiat money system.
Clearly, it has something to do with fiat money.
(The Revolutionary Government also had massive inflation, and the Confederacy, too. What characteristic did they share? Fiat money.)
If shortages caused inflation, then one would expect to see corresponding deflation when those shortages eased. But that doesn't happen.
The 1800s were hardly an economic paradise though, the wild inflation/deflation cycles were destructive. Long-term stable, 2-3% inflation appears to be a good thing. It's not overly destructive to savings, but it's an incentive to invest in something productive in the long-term.
Deflation does occur when shortages ease in those sectors (see oil & gas prices), but inflation due to shortages does increase the general price level (including wage prices) and there is a degree of 'price stickiness' in the economy (workers generally don't get pay cuts - layoffs are easier perhaps) so the higher price level remains. You might expect below average inflation in the short term, but inflation expectations probably linger to some degree.
Deflation occurred on the gold standard, as prices are not that sticky. Besides, a general price increase doesn't occur without an increase in the supply of money relative to the value in the economy. That doesn't happen unless the printing press is run.
> The 1800s were hardly an economic paradise though, the wild inflation/deflation cycles were destructive.
Every one of those was caused by government meddling with the currency.
Why is 9% inflation (what we have today) not destructive? It certainly is destructive to my finances.
> a general price increase doesn't occur without an increase in the supply of money relative to the value in the economy.
It's still entirely possible for the value to vanish rather than the supply of money causing inflation. The disappearance of Russian gas from Western markets, for example. Energy is such a critical input that an energy price increase manifests as a general price increase.
A demand for zero inflation is a demand that $1 now and $1 in a decade should buy you the same amount of gas, which .. will not continue forever.
It doesn't actually require extra physical printed money? Have you heard of "petrodollar recycling?"
The money can come from a shift in the debt/savings profile, in the reallocation of business investment, or a shift in the demand for speculative assets. It's not really a coincidence that as the fuel price has gone up the gold price has gone down not up: https://goldprice.org/gold-price-history.html
There's a big spike around 2020 for inflation fears, but the gold price doesn't track the price level numbers in ways that hard money fans want it to.
> Besides, a general price increase doesn't occur without an increase in the supply of money relative to the value in the economy.
Not quite true, they are correlated but not linked 1:1 see 2020 and WW2. Think of economics a bit like the dual nature of light, not one theory can explain it. The 'Austrian'-school types believe this though, so maybe be where you have heard it?
> Why is 9% inflation (what we have today) not destructive? It certainly is destructive to my finances.
No, I didn't say 9% was good. It obviously reduces the value of savings materially, 2-3% y/y doesn't.
Inflation is not hard to understand. It is always a monetary phenomenon. When the money supply increases faster than the value in the economy, you get inflation (because of Law of Supply & Demand, which no government has yet succeeded in repealing).
The rising cost of gas does not cause inflation, because when gas prices go up, you have less money to spend, and hence other prices come down.
I'm guessing the underlying point both of you are making, re: 2-3% vs 9% you is that it's inflation... set against popular access to investments that meet or exceed that rate.
I don't mind 3% inflation, when I have low-risk investments that earn >3%.
I do mind 9% inflation, when my low-risk options earn <6%.
(To pull some random demonstrative numbers out of a hat)
And I think it's specifically the broadness of access to the sub- or supra- inflation investment opportunity that matters. If only some, limited-access opportunities exist, then it still hurts.
Which I guess is another way of saying economic-growth-vs-inflation is the important metric, with a dash of central bank policy.
In defense of fiat money... it is a powerful tool in the hands of a responsible macroeconomic manager. Emphasis on powerful & responsible.
We have approximately 0% inflation today (at least, the monthly—not the headline 12-month trailing, but the actual amount for the month—number for the last two months has been between 0% and 0.1%; 0% to a little over 1% annualized.)
The 12-month trailing is 8.3%, but it takes a while for the 12-month trailing to reflect current conditions, when there is a change, for reasons explained by the name.
> So whenever monthly inflation goes up, it's transitory, and when it doesn't, there is no inflation.
No, when consumer prices (not inflation) goes up, there is inflation, and when they don’t, as they have not (overall) in the last two months, there isn't. That’s the definition of inflation.
> Meanwhile, prices on a lot of things I buy doubled.
So... assuming that's over a 12-month period, there are some things that you buy that have been affected vastly more by inflation than even the highest overall sector of the CPI (fuel oil, +68.8% over 12 months.)
Not sure what general importance you want assigned to this or why.
The government changes the period of inflation as convenient. When inflation is rising rapidly, they push annual inflation figures. When inflation is moderating, they push monthly figures.
Inflation follows the money printing with a lag of around 13 months. The government just printed a trillion dollars to erase student loan debt. Get ready for another round of inflation. Also the "Inflation Reduction Act", another free-spending bill which will add another chunk to inflation.
> The government changes the period of inflation as convenient.
No, it doesn’t. At least, the present administration hasn't been.
> When inflation is rising rapidly, they push annual inflation figures. When inflation is moderating, they push monthly figures.
The present administration has been fairly consistently focusing on the monthly 12-month trailing figure, which has also been the headline number for, well, ever.
> Inflation follows the money printing with a lag of around 13 months.
Looking at the history of monetary policy changes, QE rounds, and monthly inflation rates, there’s absolutely no support for that at all.
That's just obvious enough that we might have already done it. We might, for instance, have looked at the inflation data 13 months after Q1, Q2, Q3, and Q4. And based on that data, we might have reached conclusions that are spectacularly different from yours.
If you want to convince us, you're going to have to do more than just say "look at the data" and repeat your previous point. Specifically what data are you looking at, and over what time frame, and how do you think it demonstrates your position?
The CPI is not calculated honestly. If you use the CPI tabulation from the 1970s inflation will be way higher than what the current govt statistics from BLS state. For example, Owner’s Equivalent Rent is used, not actual rent that many families are struggling to pay. In addition, the Fed’s core inflation number is ex food and energy prices, which is also misleading.
None of your argument supports that it isn't calculated honestly, just that you don't like the particular choices. And it doesn't help that you misrepresent them.
> For example, Owner’s Equivalent Rent is used, not actual rent that many families are struggling to pay.
Actual rent is used for renters. Owner’s equivalent rent (imputed rent) is used instead of asset purchase costs to assess the consumption cost of housing separate from the cost of acquiring a durable asset for homeowners.
> In addition, the Fed’s core inflation number is ex food and energy prices, which is also misleading.
The headline number is the full CPI, not core CPI. Core CPI is also reported, and may be used for some purposes by certain consumers of CPI data, but it's not the headline figure/main measure, so disagreement with its appropriateness as the main measure is fine, but a beating a strawman.
> For example, Owner’s Equivalent Rent is used, not actual rent that many families are struggling to pay.
This is simply false. Firstly CPI includes both rent and owners equivalent rent, weighted in proportion to the people that rent and own houses respectively. Secondly, OER is calculated based on estimates of current rental prices. Plus of course including OER rather than treating rent as something homeowners don't have to worry about tends to increase CPI when rents rise fast...
> In addition, the Fed’s core inflation number is ex food and energy prices, which is also misleading.
"Core inflation" is a separate time series to the CPI, clearly reported as an alternative measure excluding volatile energy and food prices to compare with CPI.
The only "misleading" is people ranting about how a separate dataset created specifically for comparison purposes proves dishonesty on the part of those calculating CPI...
This is not symptomatic of hyperinflation, it's symptomatic of supply being lower than demand, causing an increase in supply or a decrease in demand, which takes time
Gas isn't the only input into prices. Salaries are up 10% in a year for example.
Changes in costs also take time to filter through the economy, and indeed in the last 2 months prices have come down (CPI in June was 296.311, in August it was 296.171)
Yes, I have. I greedily want to keep as much of my money as I can so I buy the cheapest goods available, sending money to the greedy corporation who offers goods at the lowest price.
This stubborn hand-wavy argument that prices stay high due to greed smacks of economic illiteracy and White House propaganda.
Charging prices the market will bear is considered "hand-wavy" or propaganda now?
If I raise the price of a gizmo I'm selling by 20% because my costs went up, why would I reduce the price when my costs go down but demand is still high? I like my increased profits, and so does my competition. The myth of perfect competition is a exactly that: established companies do not engage in races to the bottom, "cartel" behavior is emergent.
You've cherry-picked 2 outlying low-margin, high-velocity products where there is a race to the bottom. I counter your gas with smartphones, where Apple and Samsung are ratcheting up the price year over year, while competitors like LG are bowed out. Why couldn't LG compete at lower prices, and chose to exit the smartphone market entirely?
How does your perfect competition theory explain why tuition prices have been going up over 5+ decades, vastly exceeding inflation?
> Why couldn't LG compete at lower prices, and chose to exit the smartphone market entirely?
Because Apple keeps making the phone better.
> How does your perfect competition theory explain why tuition prices have been going up over 5+ decades, vastly exceeding inflation?
I didn't espouse a "perfect competition" theory. That's your strawman. Anyhow, tuition prices have gone up because the government provides rivers of cash to prospective students. The pool of students thus has gone up drastically, and because of limited supply of colleges, and vast demand by students with fistfuls of cash (and little sense), the tuition went up. A lot.
Only because energy (which is more volatile) is way down the last two months. What happens when energy swings back the other way? Anyways 0.6% MoM for all items less food and energy is very far from success.
That's not for you to decide. Also, by that logic you should be fine with 100% inflation since it would stimulate the economy like crazy with full spending of everything earned?
During most of human history, before there were banks, "saving" usually meant saving some form of grain from one year to another. More likely, more than that would be lost to rot, virmin or brigands.
Gold did perhaps not decay the same way, but if the harvest was bad one year, the price of grain could go up radically, so saving grain directly was safer. Also, grain was harder to steal.
As society became more complicated, one could pay a goldsmith to store the gold in a vault, though there was still a risk that the gold would be lost to fraud or robbery, eventhough the vault was still probably safer than to store gold in private homes (if you did not live in a castle).
Up until this point, the time preference of money would tend to be negative whenever people were saving. Better to eat normal today and be sure to have enough next year, than to eat double today and maybe starve next year.
Some goldsmiths would lend this gold to lenders, at an interest, and the honest ones would pay the depositors an interest in turn, to compensate for the increased risk. Still, it did happen that banks went bankrupt, and deposits would be lost.
Only in the last handful of generations have governments guaranteed the bank deposits, and only for a limited amount.
Meanwhile we had the industrial revolution, and the population and economy was booming more or less for 200-250 years. This, combined with the growing banking system, caused a positive time preference for money, and people started to expect that saving was not only safe, but should also produce profit, not just safety.
Lately, however, both the economy and population have stopped growing, more or less, and the time preference of money is roughly back to neutral, if not slightly negative.
In such an economy, it simply doesn't make sense to have a currency that allows people, without risk, to "teleport" wealth from now into the future. We already tried that in 1929, with deflation causing mass economic destruction. A lot of savings were still lost when banks went bankrupt.
With a moderate interest rate (ideally around 2%), the economy can handle a somewhat negative time preference for money as much the population gets older and less in need of instant consumption. When the interest rate for deposits is lower than cash savings, the difference can be seen as the insurance premium for relatively risk free storage of value. Those who want a profit (or at least lose less), have to accept some more risk, and invest in other, riskier asset classes in such times.
As long as the interest rate is low, the currency still functions as intended as a medium of exchange and measure of value, while still being tolerable as a short term store of value.
Clearly, though, as the inflation goes to 10% and beyond, all features of the currency are hurt.
But next time you're annoyed that your deposit falls in value about 2% in a year, just imagine how it would be if you were saving grain in a silo, and found that the rats had been eating half of it.
I'm sorry, but this is just another gobbledygook non-explanation of why inflation is good for the economy, such as:
> it simply doesn't make sense to have a currency that allows people, without risk, to "teleport" wealth from now into the future.
Your explanation of banking is incorrect, too. Banks pay depositors to deposit money, because the bank makes money on those deposits by loaning the money out (banks often give away things like toasters and even guns to attract depositors). Some of that is in the form of a service ("free checking"). Larger amounts of money, the bank will pay you interest.
Depositing money in a bank is literally loaning it to the bank, and the depositor expects a return for that. Loaning money for interest goes back to the very beginning of money.
What inflation actually is is a tax on money, and that tax revenue is collected by the party that is inflating the money (i.e. the government). It is not good for the economy any more than any other tax is.
You could argue that taxing money is a reasonable way for the government to raise money, and that would make sense.
> Larger amounts of money, the bank will pay you interest.
Adjusted for inflation, I doubt there is a single depositor in the western world that receives a postive interest rate this year.
> Depositing money in a bank is literally loaning it to the bank, and the depositor expects a return for that. Loaning money for interest goes back to the very beginning of money.
Again, adjusted for inflation, even banks receive a negative (real) interest rate these days. The only way for them to create real profits this way, is to make sure the depositors loose more real purchaing power through their deposits and they do through their lending.
> What inflation actually is is a tax on money, and that tax revenue is collected by the party that is inflating the money (i.e. the government).
This is partially true, but oversimplified. Only if ALL the inflation is due to money printing can this be considered a tax, in that it is a transfer of purchasing power from the populace to the government. And even then, negative money (debt) get a negative "tax".
For the part of inflation that is caused by changes in supply or demand, but unrelated to money printing, the government is not benefitting from the inflation, and may even end up losing. And this is the kind of situation where inflation is needed to even out real changes in the economy.
Also, nobody is forced to store their wealth in a currency. And I actually think it is a good thing that people have an incentive to do long term storage of wealth in real assets, whether those are real estate, stocks or even commodities such as gold and silver, if you're longing for the gold standard.
The true fallacy is when people expect more from a currency than is possible. Currency is not real wealth, only some kind of representation of a debt that some anonymous other must pay in the future. A gold bar, house or a company, THAT is real wealth.
And corresponding deflation which netted out to zero.
Two interesting periods of inflation were during the California gold rush, and the Yukon gold rush. It turns out, when gold is the currency, flooding the market with newly mined gold causes inflation, just like fiat money printing.
"It was valued at 12,500 korona, and defined as 3,800 to one kilogram of fine gold – which meant that the pengő was pegged to the gold standard, but without exchange obligation."
Which means it can be inflated at will. The US did the same thing, pegging the dollar to gold, then inflating the paper money. The result was fiscal collapse leading to the Great Depression. The fix was to make it illegal to exchange dollars for gold, making the "gold standard" a complete fiction.
I think you are conflating a few things. What you have to remember with the gold standard is that the supply (or probably more correct, holdings) of gold determine the money supply when a gold standard is in place, as does the price of gold (the conversion rate). A reduction in the money supply (fear of deflation, leading to bank runs) and a massive withholding of production are generally the two key events cited as causes of the Great Depression. The later being the reason for the massive public works programs of the time were started.
The inflation of the US currency happened much later. Roosevelt banned private holdings of monetary gold and gold certificates, incentivized gold imports and gold production which lead to the inflation. That was nearly 5 years into the depression though.
> supply (or probably more correct, holdings) of gold determine the money supply when a gold standard is in place
It does not when the money is not convertible to gold. Such is a fictitious gold standard.
The bank runs in the Depression were caused by inflation devaluing the value of a dollar by about half since 1914, yet was still convertible to gold. People suddenly realized they could DOUBLE THEIR MONEY by converting their paper money to gold. So they ran to the banks to do this. Of course, there wasn't enough gold to support that, and the banks collapsed. The runs did not stop until FDR made it illegal to exchange dollars for gold.
> The inflation of the US currency happened much later
Check the historical inflation figures. The dollar lost half its value 1914-29.
You need to re-read your history. European nations suspended the Gold Standard in 1914 due to the buildup related to WWI...but the U.S. did not. And we still had 100% inflation. In fact, the U.S. remained on the Gold Standard until 1933, and being on the gold standard did not prevent the Great Depression or decades of inflation. In fact, it played a large part in making it a "great" depression instead of just a regular downturn, and getting off the gold standard was what ended the Great Depression.
Similarly, everything you've said about the Great Depression is completely wrong. It was caused by a stock market crash known as Black Tuesday, which was the result of rampant speculative trading on margin. After a series of relatively small dips, a number of investors faced margin calls and had to sell their shares. A few of them decided to liquidate all of their stock holdings, triggering a 12.8% drop in the Dow (Black Monday), which led to many more speculators panic-selling the next day (Black Tuesday).
I recommend you read "Monetary History of the United States" by Friedman. I have.
We've had stock market crashes before and after. None resulted in a Great Depression. Something else was going on to cause the Depression.
The 100% inflation from 1914-1929 indeed was not prevented by the gold standard, but in 1929 people realized they could double their money by converting their dollars to gold. This caused the bank runs which did not stop until all gold exchanges were stopped.
The gold standard ended in 1933, the Depression did not begin to end until 1939 when foreign countries flooded the US with armaments orders.
What the US did in 1914 was called "pegging". It wasn't really a gold standard, the fiat money was just pegged to gold. Pegging has been tried over and over throughout history, a sham that tries to inflate money while pretending not to. It works for a while, and then always results in a massive and destructive correction. The US's correction was the Great Depression.
I've read that book. My professor suggested using it as toilet paper after we were done, and I agreed with him.
The Great Depression bank runs were not caused by people trying to swap their cash for gold. Because you couldn't...after 1913 banks generally did not maintain their reserves in gold, and they certainly did not maintain local reserves in gold. At best you could get a promissory note for a representative amount of gold. The fiction that you could actually swap out cash for gold is one of the more bizarre historical conspiracies.
The bank runs stopped because the FDIC was created in 1934 to guarantee depositors' savings accounts. Until then, depositors risked losing their savings when a bank collapsed, which is why bank runs were a thing.
That first theory doesn’t hold because ancient empires such as the Romans did suffer a form of inflation. They just didn’t know what it was when they kept devaluing their currency.
They didn't have that word for it, but they would for instance talk about debasement for instance with putting base metals inside the coinage metals, the precious metals suitable for making coins. Although for sure some Romans used the word puffed up like a leather bag full of hot breath to hunt whales (one poet talking about whale hunting in the time of Marcus Aurelius). It's irrelevant. There's the same thing happening, the pauperization of the middle class, tipping the scales. They knew.
>they often think it is just a case of governments printing too much money.
The exorbitant banknotes we see in this collection are more like each government's response to inflation once it has gone completely out-of-control.
In some sense they are trying to arrest the free-fall at an artificially imposed numerical point, by basically normalizing the losses already incurred up until that time.
Just goes to show how much easier it can be to manipulate the value of fiat currency compared to coin of stored value.
Seems like when stocks & bonds are denominated in fiat currency, in order for the securities to maintain their relative value, whilst maintaining volatility within tolerable ranges, the only direction for the currency to ever trend is being downward in value by comparison.
When stock certificates represent overwhelmingly more stored value than their equivalent in legal tender, that's not when you're going to have the most prosperity overall. This is not the way free enterprise started out.
We recovered well from that most recent devaluation is something that no ordinary wage earner said ever.
Fiat money seems like the result rather than the cause. As nations start to draw down their gold/asset reserves, it makes sense to switch to a fiat currency.
Clearly the cause is too much money out and not enough money in to government coffers rather than fiat.
Governments prefer fiat money because they can print all they want without raising taxes. And that's what they've always done with fiat money, going back to the invention of money. It always results in inflation.
The reason nobody believes this is because of extremely effective propaganda emanating from every government that prints fiat money. The "Putin Price Hike" is the latest in a long string of lies about what causes inflation. (Inflation was at something like 7% before Putin's War started.) Of course, "the speculators, gougers, and profiteers" are always blamed, too.
I think we’re getting into conspiracy theory here. You’re arguing that $fact, and the only way $not-fact is argued is propaganda. This means any person who might have a reason to argue for $not-fact is by default a propagandist. There’s no productive conversation to be had from this.
The productive part is realizing you've been flim-flammed. There's no other explanation for the government narrative to completely avoid the truth. Every fiat money government does this - it's not a conspiracy, it's just that it's in their best interests to blame inflation on speculators rather than their own profligate printing of money.
I've presented many facts to support this. Economists know it, too. Study it and you'll see for yourself.
Another part of the flim-flam is the government is always trying to promote the idea that inflation is good for the economy. Read their explanations. It's all nonsense.
Right but it is government spending beyond that nation's means that is the root cause.
The Greek debt crisis was a great example of this, since they couldn't directly control the printing of the Euro, they were forced instead to siphon money directly out of citizen bank accounts to service the national debt.
You could imagine the same thing happening with a nation on a gold standard. In fact the US did something similar in requiring all citizens to deposit their gold holdings. Inflation of a fiat currency is just one of the many ways in which governments can 'tax' citizens to pay for government spending.
Fiat money is as old as currency itself. Greek and Rome coin values did not correspond to their intrinsic metal content (at least not within their boundaries) and they were regularly debased. The Chinese used bronze coins and paper as currency.
But in the end it's a monetary phenomenon and it is the government's choice to have inflation instead of other (painful) measures to address a distribution problem.
I would say the truly necessary component to the hyperinflation phenomenon is the existence of privileged borrowers. When inflation is high, market interest rate is also high. To benefit from inflation one must be able to borrow at below inflation rate. With credit money borrowing is what creates new money. Often it's the government that chooses this over taxation for its own funding. Other times there may be other entrenched private interests who enjoy such privileges.
Its a psychological phenomenon. Lock people up for 2 years and they will want to go crazy when they get out.
Its the same reason why alcohol consumption is up and so is smoking for the first time in some years. Drug consumption is also up.
Appetite for debt is also up, anecdotally I have been thinking a lot recently on how being debt free causes me to leave lots of potential consumption, experiences and general quality of life on the table. All those things could be financed with debt. Never had such thoughts in the 2008-2019 decade
All sorts of violence is also having an uptick on a chart which is secularly going down.
I will go to my grave thinking that Putin would have never invaded Ukraine had he been able to host his monthly “kiss my ring” cerimonies/parties with his cronies. Instead he self isolated for 2+ years and he still mostly is.
Social isolation creates all sorts of pent up energy of all kinds
I will go to my grave thinking that Putin would have never invaded Ukraine had he been able to host his monthly “kiss my ring” cerimonies/parties with his cronies. Instead he self isolated for 2+ years and he still mostly is.
That does seem to have some acceptance among people who (seem to) know what's going on. During the worst of the pandemic, nobody could meet with Putin without undergoing significant quarantine time first. Some reports say it was a matter of weeks.
As a result only the most hardcore of the hardcore yes-men were granted an audience with the Little Czar. Competence, economic and military knowledge, and sound judgement were complete non-factors.
The Ukrainians, the Americans, the Chinese by all means, everybody everywhere had to suffer through the pandemic of really isolation. Serious isolation. Pretending screens were people, the only place you saw people's whole face was on Zoom.
You're forgetting that Putin attacked Ukraine in 2014 and the war was ongoing since then. This is just latest chapter of it - The reason why a lot of early defense was purely on Territorial Defense Forces was due to mainline forces being locked on Donbas front since before 2021.
Yeah, it's usually a combination of these two factors. You live beyond your means for a decade or five, and then something else goes wrong: natural disaster, war, crop failure, sanctions, whatever. Situations that could be survivable otherwise trigger a downward spiral because you were pushing your luck before.
"Supply shock" may be just a fancy way of saying "The government wants more stuff but can't pay for it". Which tends to apply everywhere, every time. So we're back to "if they print money, you get inflation".
There is another supply to consider, which rarely suffers a shock: The supply of "economists" that want to be close to the government, and are all to happy to tell it what it wants to hear: "Print, print, don't worry, I have a spreadsheet that says that sometimes you print money and there's no inflation, so go for it. Am I getting invited to the next party?"
If my country's farms used to produce 2 billion calories per day which kept up with demand, and they drop to only producing 1 billion calories per day and now we have a food shortage - does the nation "want more stuff" because we want to import more food, or do we merely want the same amount of calories as before?
If you have less than you use to, but want to have the same as you used to, that means you want to have more than you currently do.
I think you're trying to appeal to some emotional notion of fairness, but its really irrelavent here. The world is unfair, and the consequences to actions don't care whether or not it seems "fair".
Isn't a better interpretation of that kind of supply shock "The government can no longer pay for the same stuff it used to"? That's a much different scenario to "The government wants more stuff but can't pay for it," because telling the public that you don't have the money to pay for reliable electricity or hip replacements is the kind of thing that causes regime change. People hate losing stuff more than they like gaining stuff.
Say you have an economy (ie: Turkey) where people only use the local currency as a bridge and converts their revenue to EUR/USD as soon as they receive it. The currency will get into an inflationary spiral as the stocks of savings turn into available supply of currency.
Supply shock isn't an acceptable explanation within neoliberal economic dogma.
You get hyperinflation when a country's balance of payments tilts so far to imports it falls over. Supply destruction is one common route to this. But - for example in Weimar - the burden of reparations also played a part. (Not officially exports, but a loss of capital nonetheless.)
However - through a mysterious neoliberal process the oil shocks of the 70s and 80s, during which the oil price tripled creating massive inflation in economies that relied on oil for almost everything, became a tale of greedy workers forcing up pay and prices.
We're seeing this very clearly in the UK where most workers have barely had a significant pay rise for more than a decade, but the chair of the BoE is encouraging "restraint" - while the energy companies price gouge their customers to make astonishing profits and banker bonus caps are being lifted.
Combined with the supply and export destruction wreaked by Brexit, the prospect of hyperinflation is a real concern now.
Supply shocks can lead to inflation, but hyperinflation seems to always result from bad monetary policy (specifically, money printing). To prove this point, all hyperinflation episodes have taken place on fiat currency. Usually, the bad monetary policies are a response to general chaos in the economy, but the policies themselves seem to create the hyperinflation.
I'm not an expert, but this is my conclusion from reading the article.
Not just a supply shock. Supply shock of food and/or fuel(energy). These are the absolutely need to have that you can't stop buy no matter what. Demand can't go down. Prices of food and fuel going up, you stop buying nice-to-have to keep up with food and fuel prices.
You can actually find food/fuel scarcity in every case of hyperinflation where we have some kind of statistics (which in less than 2 centuries).
Scarcity of nice-to-have goods and services will not trigger hyper inflation.
Supply destruction causing inflation seems like another monetary phenomenon.
If inflation is caused by printing more money at a faster rate than the economy grows, then when the economic growth rate is negative then money would need to be destroyed to avoid inflation.
It's not the supply destruction that caused the inflation, it's rate of monetary expansion being greater than the rate of economic growth.
Well, the most common way to get to live beyond your means is to have your means pulled up from you before you have any time to react.
That doesn't mean the productivity crisis is directly creating hyperinflation. As an idea it doesn't even make sense, because productivity crisis are bounded, but hyperinflation isn't.
Let me correct you on whole Zimbabwe point, the implication is oh the white farmers were so good and Mugabe ruined it by giving the land to the incompetent or uneducated locals and while there is some truth to that its definitely not the whole story. In truth the whites were stealing minerals and precious metals from the country on the cheap and laundering that money as farming proceeds giving the impression of this bread basket cause it was all funded by illicit funds. When they were kicked out they continued to steal these minerals through bribing the top officials but the only difference was there was no-longer an incentive to send the money back into Zimbabwe and hence the farming was no-longer supported by illicit funds and it collapsed.
tl:dr its easy to run a successful casino when you are funding it with drug money. Zimbabwe only ever had two options get robbed or get robbed, at least now the locals actually owned the land. The inflation was retaliation for standing up to the bullies!
I was there and it was nothing like what the parent posted. It's doubling down on blaming the "Whites" (again) for what precipitated the crisis and the disaster that ensued.
A bunch of those farmers moved elsewhere and started successful commercial farms. The rest just had all their wealth destroyed and will never get it back. A lucky few went to court to try legal means to address this or sold in time.
Most farms (and entire businesses) that were stolen were given out as favors to connected ruling-party officials and the scraps were given to the poor with no training or support, guaranteeing their failure.
Critical thinking? Try to look at this from a their point of view and it will make a ton of sense. They were royally fucked but all we heard was the corporate (white farmers) side. Just try to imagine if the sides were reversed
What is more likely:
1. stupid Africans just can't get things done
2. they tried to get some control of their production and their white friends abroad didn't like it one bit
1. Dictator redistributes land to his cronies and gangs of armed men (crucially not the people who worked on the farms who might actually have been able to run them efficiently). This has the same effect as when tried everywhere else regardless of the colours of people involved: production drops. When Zimbabwe goes from being a net exporter of food to a net importer, people lose confidence in a currency which was already extremely prone to inflation.
2. Actually the halving of agricultural production was a sign of how successful the "land reforms" were, and everything else that happened was all the white people's fault
That is certainly true. Though providing sources, let alone "credible" ones, would be hard. Personally, I am not that interested in the details and technicalities as this is where the deception is more likely to lurk. Who has more control over the flow of information: Zimbabwe, or the poor multi billion dollar farmers they banished?
To be honest, I think this type of thinking is everything that is wrong with public discourse today.
Gtex555 made a very specific claim: "In truth the whites were stealing minerals and precious metals from the country on the cheap and laundering that money as farming proceeds giving the impression of this bread basket cause it was all funded by illicit funds. When they were kicked out they continued to steal these minerals through bribing the top officials but the only difference was there was no-longer an incentive to send the money back into Zimbabwe and hence the farming was no-longer supported by illicit funds and it collapsed."
It should not be particularly difficult to find at least some evidence for that claim. There are voluminous reports and investigations of government corruption all over the world.
And yet, your response is basically "I'm not really concerned with the details, I'm just going to believe what I choose to believe because that fits more closely with the narrative that I identify with".
That's the very dangerous game that Biden is playing with the SPR releases to buy Democrats votes, while simultaneously being very hostile to domestic oil and gas.
If there is any sort of supply disruption in oil domestically, it's going to be the perfect storm. OPEC+ will be all too happy to have "maintenance issues" that same week and boom, $300 barrels of oil for the US, a functionally empty SPR, and we get to witness that mix of incompetence, desperation, and power that results in catastrophic ideas.
For maximum devastation, this happens close to the Presidential elections.
Lots of conspiratorial theories here but the best way to mitigate this very dangerous game is to not rely on oil for your day-to-day needs - so instead of driving to Costco for gas in a giant SUV and living in the suburbs, you change your way of life. This applies at the personal level and also nation state level. Germany shutting down nuclear reactors and relying on Russian fossil fuels is another dangerous game that was placed and lost.
Or don’t.
And then regardless who is president this happens anyway because there is no economic policy in existence that will give you forever cheap gasoline and oil unless we have some miracle breakthrough technology like fungus growing oil or something.
OPEC+ won’t have “maintenance issues” because while they have a stranglehold on oil production, there is a pain point where malfeasance would result in US military action to get oil flowing again.
> instead of driving to Costco for gas in a giant SUV and living in the suburbs, you change your way of life.
The most urban dweller who hasn't seen the inside of an automobile in 20 years will find his way of life changed dramatically with crude oil at $300 a barrel. Not to mention the billions of people around the world who would like to maybe have a chance at driving to a Costco one day who will instead suffer and die young. There is some good to come out of cheap energy.
I think this could be solved with a hard liquor backed currency. Not some boring metal or fiat hypnosis, but something of intrinsic, unwavering value. It would put things in perspective. And the sense of security from knowing you've got twenty bottles of whiskey in your pocket would assuage the anxiety of knowing you'll never retire or own a house.
It might also give us an excuse for our society, which would have some real value too.
ONE DOLLAR IN LIQUOR POURABLE TO THE BEARER ON DEMAND
Small bottles of alcohol have historically become currency during instances of war and/or hyperinflation - there are reports of this during both the Bosnian war and WW2.
The problem with it long-term is that it's a deflationary currency. Liquor gets consumed; once you pay a drunk with a bottle of alcohol, he tends to drink it and take it out of circulation. This means the value of alcohol goes up as the crisis continues, which means people have an incentive to hoard rather than circulate it, which means that it eventually loses its utility as a currency.
Well I was almost finished designing the base note featuring a florid faced, beaming Nixon for the obverse and parachuting dodo bird clutching a bundle of wilting tulips on the reverse.
Don't throw that design out, we're, uh, still on for this. I've got some good news regarding the production of alcohol -- I suspect that the government will actually find this easier than printing money.
The challenge will be in how to ensure that all that new alcohol doesn't end up in the already-well-stocked liquor cabinets of the rich.
I'm not sure about that. It’s relatively easy to make and doesn’t require any particularly scarce materials. It just takes some time to ferment. But the alcohol industry is very good at supplying as much as people will buy. Seems more equilibritory than either deflationary or inflationary.
That's another problem for it: for a functioning currency, you really don't want something that's easy for people to "counterfeit" (make themselves). The ideal currency has a stable supply; can only be minted by a monetary authority that does not have a vested interest in spending it itself; is very difficult to destroy; is not perishable or hard to store; and can easily be exchanged in variable denominations. Alcohol is relatively good at the last two points, which makes it attractive during times of crisis when the central monetary authority breaks down, but it's not really durable as a currency.
Technically that's only a problem if the value of alcohol as a currency is higher than its value as a good. If it's exactly equal then there's no way to "counterfeit" in the sense you're using the word. A ml of alcohol is worth exactly as much as itself, there's no way to convince someone that you're giving them alcohol that's worth more than it's actually worth. What's possible is that someone might produce impure liquor if it's easier.
Now, giving alcohol as a currency the value of alcohol as a good would mean having to buy, say, computer chips with hundreds or thousands of liters of alcohol. We might need some kind of token that stands for large quantities of alcohol, perhaps redeemable at certain places for the real deal.
To add some nuance: it's fine if you produce it yourself – it becomes a problem when you try to trick someone into thinking it's the same thing as what I else produce. More concretely, you are free to make your own promises of future delivery of liquor, but don't go around promising people that I will deliver liquor to them!
Barely any time, really. Most spirits can be made in a matter of days. It's only the ones that require long barrel-aging periods (like whisky) that take awhile to produce. There's a reason the first product a new distillery sells is vodka, and the second is often gin (vodka + added botanicals). You can get these up and running and out the door in no time at all.
It’s probably net inflationary. Some of the American colonies used to have tobacco-based currency and they ended up with inflation. And tobacco is a specific crop; you can make alcohol from just about any crop.
Not for brews like beer and cider, but special materials and skill are required for distilled spirits, especially steel and copper, the latter of which already having a low level of scarcity. If Boozecoin mining rigs become popular (again), the price of pipe at Home Depot would at least quadruple.
It is an old joke that in Poland you can get much more favors done with a bottle of booze than its cash equivalent. That is referring to now, not even war or hyperinflation.
So... Just saw this - Prosecutors allege an inside job. The target? Rare bourbon.
> An unusual criminal case shows how far thirsty fans are going as sought-after whiskeys become increasingly scarce
> Rob Adams allegedly promised bourbon fans something most could not get: easy access to the good stuff.
> The nation has been on a decade-long bourbon binge, making the rarest bottles increasingly unobtainable. Aficionados drive cross-country, shell out thousands and have even traded boats for brown water.
I really like your idea, but having been given to witness what disappeared the fastest from stores when Covid started, I'd back it with toilet paper instead.
Actual toilet paper I mean, not the green stuff that people use to barter these days.
I've heard from first-hand account that during Serbian hyperinflaction in the early 1990s, the value of a bottle of vodka was the common denomination of exchange.
That might have been true in some cases, but vodka wasn't super popular in Serbia. At the time they would have been been more likely to barter homebrew rakija or smuggled cigarettes. People who could also switched to using Deutschmarks or Swiss Francs.
It's not hyperinflation by any means, but it is interesting to me that when federal reserve notes were first issued, there was a $100 bill. That would be roughly $3000 today, and yet many places to this day won't accept bills larger than a $20 and the US has declined to print larger bills due to a worry of large denominations utility in crime.
The $10k limit for CTRs and reporting for international travel is a particularly annoying one, as when it was set it was worth more than $60k in today-dollars, making our current regulatory burden something much greater than the law originally intended.
Currency limits hardcoded in law as integers really need automatic inflation adjustment similarly specified.
I kind of would like the CPI to be used as a peg, but also think that if lots of things were pegged to it, the calculation would become a political football.
A lot of things already are pegged to it (eg. social security), and the calculation is already a political football. That's why there's so much distrust of official CPI numbers.
There's no real escape from this other than free trade and hard assets. Cash regularly becomes less valuable, but food remains food, housing remains housing, and the future cash flows of providers of these good continue to float regardless of cash's value.
CPI is already a huge political football that does not accurate reflect inflation measures in core things that matter for most people, like a lot of housing costs.
CPI does include housing costs, you may argue against how well it's weighted for your particular case (renting in downtown SF), but that's a problem with any national metric which will have both personal and local variations.
The data is available, for example Alaska Urban inflation is about 1pp higher than New York, presumably because of increased weighting of gas prices, if you are vegetarian and spend more on cereals than on meat then your personal food inflation will be higher
Just as crazy is that we still have the penny. Worth less than the metal it's made out of. If you see it in the street, you leave it there. When you get home you empty the change from your pockets, and the pennies just end up taking up space in a drawer somewhere. Not worth enough to even bother counting to change at the bank.
Terry Pratchett did a piece on this in his book, "making money".
A scam artist was asked to take over the capital city's rotten central bank, which contained the mint.
He made the point that these little coins cost more to make than they were worth, and what was the point? In this case they had a coin that was a tenth of a penny I think.
Turns out the point was when you didn't have a lot of money, these coins mattered. They could buy you a not so rotten apple core on the right street.
I think the point was; life is a lot different when you are poor, and that's when cents matter.
Wouldn't it be better to not create the pennies in the first place, if they're not worth the metal it's stamped on. And then use the money saved and either give that to the poor or create services for them/donating to not-for-profits
They don't even matter when you're poor. We got rid of pennies in Canada. Prices are the same, but the final bill at the till is rounded to the nearest nickel. You don't lose anything, just the weight. I'd like to see nickels go away as well.
Now that I'm using US currency again the whole penny thing just seems pointless.
If I could, I would eliminate the penny, nickel, and dime. In terms of value, the dime is a bit iffy, but having to make change with a combination of quarters and dimes would be rather unpleasant, and now that consumer price inflation is going again, the dime should be on its way out anyways.
How would you handle things like change on a 1 dollar item with 10% sales tax? I use a dollar and a dime to pay for a coffee refill regularly, and no coins smaller than $0.25 would be messy without forcing prices to go up/down to round evenly or elminating all cash. Rounding to the nearest cent now isn't an issue since sales tax should always be roughly an integer percentage, but rounding to quarters is problematic.
In Canada, with sales taxes varing from 5% to 15% by province, we round to the nearest nickel on cash transactions. Non-cash transactions are rounded to the nearest penny as usual. Works fine IMO.
Note that the rounding is to the nearest nickel, neither up nor down. So it favours neither buyer nor seller; it all nets out about the same for all in the end.
We stopped minting pennies 10 years ago. They're still legal tender but rare to see since there's no need with 5-cent cash rounding conventions now. There were brief popular grumblings and misplaced arithmetic anxiety leading up to the death of the penny. I expect the same when we bury the nickel and I bet few will miss it either when its time comes. And then the dime.
Of course one can construct amusing temporary edge cases or arbitrage opportunities when buying specific quantities of specifically priced items in the presence of any new rounding rules. The market will respond.
I can't find a proper citation, but rounding is undefined.
The recommended guideline[0] is to round to the nearest 5¢.
This article from 2013 is my closest citation to "undefined behaviour"[1]
> These guidelines are only a suggestion though and there is currently no law that specifies how retailers must round.
I don't know since ~2013 if anything has been decided to make those guidelines "law". I couldn't find anything quickly in the SEO cesspool that is modern web search.
In practice, as an American, we have a custom of paying merchants to cheat us out of a penny. As in, if a charge come out to $4.99, we hand the cashier a $5 bill and a penny, with the expectation of not receiving change. We also have leave-a-penny-take-a-penny trays by some cash registers with free pennys funded by customer donations.
The US could do what Europe doors and just include the sales tax in the advertised price and arrive at desired prices by leveling things out across the offered inventory.
This approach is too imprecise, you'd constantly be rounding everything up to the nearest dollar -- the net net equates to yet another ripoff against consumers.
A) gas prices are in fractions of a cent, and people buy that with cash
B) most items aren't an even dollar anyways
C) I've only once lived anywhere that sales tax was an integer percent
More specifically, you round to nearest quarter, just like we do now for pennies. In your case, the coffee would be a dollar, and if that was too rough on the coffee shop, they could raise prices by $0.10 and you'd pay a dollar and a quarter.
A) A tenth of a cent on a 3 dollar item is pretty far off in scale from up to 24 cents (or 12 if nearest rounding) on a 1 dollar one cent item.
B) Correct, 99 cents would be more likely, which would make the problem worse.
I don't see "prices could go up" as a selling point either (I doubt they'd want to round down unless it let them out of sales tax). How would raising prices to make change differently benefit either of us when you can already pretend to live in your ideal world by just telling places to keep the small change?
Some cashiers hate it when I tell them to keep the change. It throws their count off later if they put it in the register, and they have to count it out themselves if they want to keep it.
From the beginning of US coinage to 1891, silver "half dimes" were issued for the 5c denomination. (There were also briefly silver 3c coins) The 5-gram base-metal nickel was introduced in the 1866 due to silver coins being hoarded amid post-wartime uncertainty, but eventually was preferred to the tiny silver coin.
$100 bills are still made, though you're right that there may be reluctance to accept them.
There were bills much larger than $100 at one time, but those were mainly used for things like, e.g. settling accounts between banks in the days before electronic transfers. The largest ever made was a $100,000 gold certificate.
All major retailers - that includes Target, Walmart, CVS, Walgreens, Costco, Kroger, BestBuy - will accept $100 bills. They might occasionally get annoyed at needing to request change, to break the $100, from a floor manager. The parent comment is wrong on that point.
One of the reasons places like that can accept these bills is they aggressively pursue counterfeiters and have the budget to do so. Like having a security team. They don’t just “take the L” if they get a counterfeit bill.
When I was security at Target the most exciting thing I did was work with the Secret Service (who are also responsible for catching counterfeiters) who would come from their downtown office and pick up the counterfeit bills we’d sometimes receive. Oddly enough for awhile we were getting counterfeit $5 bills. We wouldn’t catch those until we put it into the money counting/scanning machine at night in the safe room, though.
I didn't say "most" I said "many" The only one of the places you listed that I visit regularly is CVS. Branch out from the large chains and see "No $100 bills accepted" or "No bills larger than $20 accepted" signs.
I'm curious how surprising this really is. I mean I imagine most of the documented anythings have happened in the last 100 years, because documentation of everything has gotten so much better over the last 100 years.
Not to mention, how do you have hyperinflation with gold bars and barter?
Not really. Hyperinflation is a failure mode expected to be almost unique to fiat currency, which is relevantly recent as a norm. Other types of currencies have different problems. Plus, having data that would even detect hyperinflation is a recent thing in most of the world.
Actually, what jumps out from thaf data (especially when you look into when the inflationary spiral that spiked into hyperinflation happened in individual cases) is that hyperinflation seems overwhelmingly to have one specific cause: major, especially global, conflict, and especially losing such a conflict; the main clusters are associated with (and shortly follow) the end of WWI, the end of WWII, and the end of the Cold War (the collapse of the Russian Ruble around 1992 is by itself about 1/5 of the list, becauae each country that was using it is listed as a separate incident.)
It's actually fiat money that makes it possible to escalate conflicts to such a disastrous level in the first place.
If you're on a gold standard and your war chest starts to run out, you must either find a wealthy lender (hard), press the plunder of your citizenry (limited & bad for morale) or start thinking about a peace deal.
With fiat you can just fire up the printing presses, the later consequences be damned (should you even be aware of them). The first one to have their economy collapse loses, but in the meantime the slaughter can go on.
This train of thought is logical, but what is the practical application for a given nation? Even if one were to abandon fiat money, there's no way to force their adversaries to do so as well. The game theory seemingly pushes everyone to run the printing presses, so to speak, now that the fiat toothpaste is out of the tube.
> It's actually fiat money that makes it possible to escalate conflicts to such a disastrous level in the first place.
Yes, one of the failure modes of commodity/representational currencies is that in emergencies—natural.or artificial, war or peace—your state and economy collapse before they would run the risk of hyperinflation with fiat money.
That's one of the reasons those systems have been abandoned generally. (Oddly, goldbugs see this as a selling point of commodity currency.)
The history of coinage spans thousands of years. Despite the popular tales, spot barter was almost certainly not the basis of any real economies.
There is definitely some bias in the availability of data, but it was comparatively harder to end up in a hyperinflationary spiral in the era of commodity or representative currencies, and these were commonplace until the twentieth century.
There were instances of money suddenly losing all value due to the failure of the issuing state (e.g., confederate dollar banknotes), but that's probably a different story.
We have pretty good documentation on the performance of currencies over the past 500-2000 years. It is usually of historical note when an entire nation's economy collapses as a result of hyperinflation.
> We have pretty good documentation on the performance of currencies over the past 500-2000 years.
Not “Pretty good” enough to detect hyperinflation by the definition at issue (50%+ monthly inflation.) Before regular, systematic, and frequent collection of data for price indexes, we have good enough data to make wide-range estimates of inflation over intervals of years to decades, in the best cases, but hyperinflation (whether or not it produces collapse of currency) doesn't continue long enough to show up in that, and also hyperinflation tends to correlate with conditions which reduce the availability and survivability of data. (The author of the article here notes a data problem with Yugoslavia in the late 20th century, for instance.)
In addition to what others have said, we have no shortage of economic collapses throughout history as a result of nations and banks becoming unable to pay their debts and/or basic necessities becoming unaffordable to citizens, we just record them as defaults and bank runs, complete collapses of the entire nations and mass famines (and wars and pogroms to try to make up gold shortfalls) rather than neat little time series of goods prices (which nobody collected in earnest until the late nineteenth century)
> [...] over the past 500-2000 years. It is usually of historical note when an entire nation's economy collapses as a result of hyperinflation.
From the OP:
"[In 2012,] the researchers unearthed a total of 56 episodes of hyperinflation, many of them previously unreported in English-language works."
If we don't even report on the ones in recent high-literacy times, I can't imagine what the odds of this going untranslated/unnoticed are more than two hundred years ago.
"...previously unreported..."
"...many of them..."
There is at least a bit of spin in those words that aren't quantified by your impression of them. What is meant by 'many' in this regard? 12 of them (out of 56) were unreported?
Unreported in English-language works, really? Qualify that statement, show me where you or the authors actually combed through all the works of the English language to arrive at such a statement. Show me one example among the 56 for which I cannot find a prior report on in English language works.
Some things are written in such a way as to provide editorial impact. But they're not an accurate representation of the historical record by any means.
To have hyperinflation with gold you’d either have to have a massive influx of gold (orders of magnitude), or debase the currency by the same amount. It’s hard to debase metal currency that quickly, because of all the currency in circulation, and because past a certain point it stops being recognisable as gold.
Not to mention that you have the most number of people in history in the last hundred years, so you'd expect "largest amount of" stats to generally be from that time period (as long as they're stuff related to humans)
You can debase coins. Lower the precious part and replace it with less precious.
Also, I think more key factor is the ease of printing/minting new bigger values and the amount of economic trade that happened. If you didn't buy or trade too much back in time stepping back to barter temporarily was rather easy. Mass manufacturing is rather late thing. And during industrial revolution hyperinflation is unlikely to happen.
I'm not an economics or historian but I think hyperinflation can only really happen paper currency which is relatively modern of an invention. But that doesn't mean we invented a new problem out of hubris. Hyperinflation is only a problem in that it can cause necessary goods to become unaffordable. Goods being unaffordable (or straight up unavailable) almost certainly happened more frequently prior to paper currency.
My brother recently told me that Austrian economics is well known to be a dead end and that no one takes it seriously anymore. I’m curious if that’s really a generally held view among modern economists.
It does seem to me the Austrian theories had decent predictive power when it comes to the boom / bust cycles and inflation baked into the current monetary systems.
Mark Spitznagel wrote a superb book on austrian investing [0] (risk management with an austrian perspective, so not exactly the same). Personally as a mathematician, I prefer this to the economists who think that because the use lagrangians their ideas are somehow more valid, or worse yet, sophisticated. Either case, I don't see why austrian economics get more dirt than say, MMT.
EDIT: Spitznagel works with Taleb and his fund, Universa Investments, had a 4000% return at the beginning of the covid-19 pandemic.
It's not that mathematical models make a theory more valid or sophisticated. They make it testable, which is why neoclassical economics > both Austrian and MMT.
If Austrian school economists want to gain mindshare, they should develop models, backtest them, and report the results. Same for MMT.
By the way MMT is a political phenomenon. There are very few professional economists who think it is workable.
Not everything is testable. That’s a modern reductionist approach to reality. Scientifically oriented people tend to think the opposite because scientists are strongly biased towards studying testable phenomena, providing a false impression of general testability.
>Either case, I don't see why austrian economics get more dirt than say, MMT.
Austrian economics is explicitly anti-central-banking, and most economists are funded by a central bank or a government with a central bank. "It is difficult to get a man to understand something when his salary depends upon his not understanding it".
Any opinion on Friedrich Hayek, particularly The Road to Serfdom? I had difficulty absorbing it and lent it to a book snatcher before finishing. I do remember admiring the bits I thought I understood.
Of the other Hayek I've read, none of it's any easier to read. I do think he's worth the time to get his point of view to sink in. (I don't think the same of Austrians in general.)
Perhaps most relevantly he wrote a book on the idea of competing private currencies (Denationalisation of Money -- it seemed meant for people with more knowledge of economics or finance than me).
The book of Spitznagel, even if it's about investing, is a great introduction. If you're aiming for something more broad, the Incerto series by Taleb has much more than you need but it sets the right context about risks and philosophiccal thought (remember Hayek above all was a philosopher). Then I would jump to his books. This may not be the perfect approach but it worked for me.
"No one takes it seriously anymore." Completely biased 'lefty' hogwash. Even the Fed Chair until 2014, Keynesian Ben Bernanke, had this to say about key Austrian Milton Friedman:
"Among economic scholars, Friedman has no peer. His seminal contributions to economics are legion, including his development of the permanent-income theory of consumer spending, his paradigm-shifting research in monetary economics, and his stimulating and original essays on economic history and methodology."
"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."
U of Chicago is still a top 5 Economics University.
Not an expert but my guess is: A purely deductive approach to economics shouldn't work because economics is not mathematics. Austrian economics is an attempt to justify economic policies many would consider overly individualistic using pure deduction.
Maybe I don’t understand the problem, but I don’t see how that shows deduction failing. You can deduce that the time of the event will be a surprise and thus cannot be deduced from the available facts.
In relation to monetary policy specifically, or in general? There are still many concepts from the Austrian school that are foundational to modern economics.
Per [0] Argentina's yearly inflation rate hit 300%, and per another comment [1] they only included monthly inflation rates >50%. Seems like if they did know about it, Argentina's hyperinflation wouldn't have been bad enough to be included.
That collection doesn’t include the largest denomination, the 100 quintillion pengö note that Hungary issued. That was during worst hyperinflation ever recorded and my family lived through it, so I collected some of notes, including a 5 pengö note from before and the 100 quintillion note from the end. See Wikipedia page https://en.wikipedia.org/wiki/Hungarian_peng%C5%91#Hyperinfl...
"B. Pengö" means "Billion Pengö", but with a European "Billion", which would be a trillion Pengö in American counting. So the printed, but never circulated "1.000.000.000 B.-Pengő" bill was actually "worth" 10^21 Pengö.
When Hungary introduced the Forint in 1946, the exchange rate was 1 Forint = 400.000.000.000.000.000.000.000.000.000 Pengő.
That's at least what German Wikipedia says, no matter how incredible it may sound.
Eh, we’re not at serious risk of hyperinflation here. We are at risk of regular old plain vanilla inflation, which is adequately obnoxious and harms real wages plenty.
As a net debtor, I might see see a 50% fall in the real value of my mortgage in 5-7 years at current inflation rates, if the politicians are feckless enough about it (“Milton Friedman isn’t in charge any more,” Biden tells me.) I seriously doubt I will see it in a month (the threshold cited in TFA).
Yes the US is the least bad for now. No disagreement there.
But these same dynamics, just more extreme, have plagued all less lucky people each and every time.
There are European families who have been through multiple hyperinflationary events in the last century, and couldn't convince their kids that it could happen again. Then, it did.
And it's always smoke and mirrors on the population (begging for more money printing) as to the cause of what's happening. There are some smart ones who plan ahead.
That's a bit blithe. I'm a worker and I've gotten a pay cut in real terms over the past year. Can I negotiate an offsetting raise? Looking doubtful.
Inflation slows down growth rates in some cases, becoming stagflation. The slowdown in growth is what really triggered a reaction against stagflation in the 70s.
> I'm a worker and I've gotten a pay cut in real terms over the past year. Can I negotiate an offsetting raise?
You can always negotiate a raise. But yes: on balance most workers in the US economy were getting raises as the pandemic ended. I did, just to counter your anecdata. When everyone gets a raise and economic activity doesn't change (or drops, c.f. "chip shortage", or "Shanghai shutdown"), you have more money chasing fewer things, so those things get more expensive (more anecdata: I bought a Model Y about 15 months ago, and could sell it today at a 15% profit because everyone who got raises also wants a Tesla).
Things getting more expensive is the definition of "inflation".
You can't always negotiate a raise. That's why real wages for some kinds of US workers have been flat since the late 1970s. Fewer workers are covered by collective bargaining agreements that peg wages to inflation now than in the 1970s, so wages will lag prices moreso now than then.
Right now, in the Year of our Lord 2022, the BLS says wages are down 2.8% year over year. Maybe some people can negotiate a raise to meet inflation, but society overall just isn’t there right now. It is getting poorer.
Those are "real" wages, not nominal. And as the number is quite a bit lower than the inflation rate against which it is being correct, that seems to undercut your point, no? Inflation doesn't make you poorer.
… do you have the definition of “real” and “nominal” backwards?
Real wages are down. Specifically: prices are up 8.26%, and the raise was more like 5.5% ish. People can afford less rent. People can afford less food. People can afford less fuel. People can afford fewer goods. People can afford fewer services. People can afford less of everything. This is what “poorer” looks like.
(And remember, that isn’t 2.6% less discretionary income, that’s a total-income figure.)
The only reason you want this is because tax payers subsidize your mortgage (assuming standard fixed-rate US mortgage). No other country offers this, and it’s clearly a handout to the upper middle class. In a free market your mortgage rate would rise with inflation, or to get a fixed rate (for 30 years!) you would have to agree to a rate far above current inflation.
Taxpayers do not subsidize most mortgages in the US (with the exception of Ginnie Mae programs). Having a guarantee against default and fixed interest rates are two different things.
Government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac guarantee conforming mortgages that they securitize against default. They might ultimately be backed by the US Treasury and thus US taxpayers (if not in theory, then in practice).
However, when inflation is high, the burden on the borrower of paying off their fixed-rate mortgage goes down (as their income increases faster over time). Therefore, the borrowers are less likely to default during high inflation. Thus, having the GSEs guarantee these mortgages is not a subsidy that protects middle class borrowers from inflation. High inflation essentially eliminates the need for the guarantee by itself.
The home ownership rate in the US is > 65%; it seems unlikely that this correlates well with "upper middle class", by any reasonable definition. A more interesting metric would be the percentage of people that benefit from the deduction and gov guarantees at some point in their life; I'd bet it's > 90%.
It has to do with the absolute size of the mortgage. Fixed rates go as high as $770k borrowed. You have to be well-off to carry a $770k mortgage, and the value of this subsidy to that type of borrower is unneeded.
There's no cap to the amount of cash borrowed on a fixed-rate mortgage. Bay Area jumbo loans regularly top $2.5M, and during the 2020-2021 period, they had sub-3% fixed interest rates. The big difference between jumbo & conforming loans is that jumbo loans cannot be packaged off and securitized by Fannie & Freddie, and so they are largely kept on the originating financial institution's books.
The reason fixed mortgage rates have been below inflation recently is because the financial industry (bond buyers and mortgage underwriters, at least) have largely bought the Fed's "transitory" narrative. A 3% mortgage remains profitable if inflation runs at 8% for a year and then returns to 2%; it becomes very unprofitable if inflation stays at 8%. The reason mortgage rates have climbed so much in the last couple months is because the "transitory" narrative has basically collapsed, and the bond markets are now starting to price an extended period of high inflation into the rates they charge.
It’s not that the interest is higher now! It’s that it’s fixed for 30 years no matter what the interest rate environment is! Plus it can be paid off early and refinanced when it suits the borrower!
I don’t know how more clearly I can state why this is a glaring subsidy for the rich. I’m sure in a free market these would just appear by themselves /s
My point is that fixed-rate jumbo loans are not a taxpayer subsidy, they're a banking subsidy. The bank is left holding the bag for existing jumbo loans when interest rates move against them.
There is some historical validity to the point that fixed-rate mortgages existed because of taxpayer subsidies. The creation of the FHA during the New Deal, and Fannie-Mae shortly after that, basically jumpstarted the practice. But there's a difference between jumpstarting the a market and continued subsidy of it. The existence of jumbo loans is an indication that even without taxpayer subsidies, fixed-rate mortgages still exist, presumably because the expectation of price stability means that private institutions don't think that the risk of interest rate variability is that great (jumbo mortgage borrowers usually pay about 0.5% more, so that's the implied risk premium). This can change during times of high price variability - my parents mortgage was 13.5% back in 1978, because expected inflation was about that. But that also indicates that interest rate risk is primarily absorbed by the private markets, and taxpayer subsidies play a relatively small part in it.
A mortgage with a fixed interest rate and no prepayment penalty is no subsidized since the borrower pays for the option to prepay the mortgage with a higher interest rates than they would be able to get if they were not able to prepay the loan. The market prices in the value of the call option.
The point being made here is that we actually do have the counterfactual available to us. Jumbo mortgages are not underwritten by the government, and they're exclusively private transactions between lender and borrower where the lender keeps the mortgage on the books and assumes all risk of default, interest rate changes, inflation, etc. And we know the market premium for this risk, because we can compare the difference in rates between a jumbo and conforming loan. It's about a half a percent.
I believe it's possible to get a fixed rate "jumbo" loan for even more than that, but since they're "non-conforming" they can't be sold to fanny/freddy, and so the banks take on the full risk of these loans. For conforming loans, the limit in most areas is $647k [1], which has risen substantially in recent years (along with broader housing cost inflation). Not adjusting for HCOL areas would effectively be blocking lower income people from moving into these (arguably) "higher-mobility" areas.
it is more complicated than the gp makes it seem, but 30 year mortgages are absolutely a creation of policy in the form of federally owned corporations that rebuy mortgages that were written according to a standard policy.
> It's not us doing money printing.. it's uh.. COVID, uh.. the war, uh.. Climate change, uh.. corporate greed
If you think a pandemic (and policies to combat its effects) and a war including some of the main exporters of foodstuffs and energy don't impact the world markets and increase prices worldwide (inflation), it's just willful ignorance pursuing a (stupid) agenda at this point.
A loss of production will of course result in lost wealth, but that can manifest as any combination of an increase in prices (account balances constant) or a decrease in account balances (prices constant).
For example if the government taxed enough money out of the system, prices would not increase (but stuff would be less affordable because you have less money to buy it with).
There's no getting around the increased scarcity, but the increased prices are in some sense a choice.
I'm sorry, but that's not how things work in the real global world.
Say Canada does what you say will fix everything, and adds extra taxes so that there's less money to spend, so in theory demand will go lower because there would be less money, and in theory supply will increase, and thus suppliers would have to lower prices to meet consumers. Econ 101, right? Wrong, you should have continued past that chapter.
First, we're talking about inelastic goods. Food, energy. There's very limited elasticity there - you can choose to conserve energy and eat cheaper food, but in the end, you need electricity, warmth and food or you'll die, so there's only so much you can be elastic in your demand. Less money to spend due to higher taxes means choosing between eating rice for a week or uncomfortable cold going to freezing depending on place and season. (Until magically the market fixes itself, right? Wrong.)
Second, we're talking about global markets. If Canadians have less money to spend on wheat and corn and substitutes, or vegetable oils, or oil and gas, well, someone else will buy them on the global market. Even the local producers, unless they're forced to otherwise, or they're feeling really nice. There is more demand than there is supply for those specific, rather inelastic, items that the whole world needs and consumes, and which are heavily impacted by the Russian invasion of Ukraine. Which has also had ramifications such as Indonesia, one of the biggest exporters of palm oil, stopping exports due to rising vegetable oil prices globally (due to the war), to protect the local market by having locals buy local palm oil as a replacement for the expensive imported other oils.
> Say Canada does what you say will fix everything
If you thought I was saying it would fix anything except the number on the price tag, you must have misinterpreted my comment.
> and in theory supply will increase
I don't believe an increase in taxes would cause supply to increase.
> there's only so much you can be elastic in your demand.
Demand doesn't only mean how many loaves of bread people want, or how badly they want them. It's also how many dollars they can and will pay. Picture goods being sold at an auction, as they essentially are. With fewer dollars in everyone's pockets, the winning bid will be lower, even if the bidders are just as hungry.
> I don't believe an increase in taxes would cause supply to increase.
Sorry, i meant increase proportionally to demand (because demand would go down, so there would be more supply than demand).
> With fewer dollars in everyone's pockets, the winning bid will be lower, even if the bidders are just as hungry
Not if the winning bid comes from another country, or the supplier can afford to wait (because remember, we're talking about inelastic goods - the supplier knows people need to eat and heat themselves).
The overt purpose for the money printing is to increase inflation beyond the level it would be without it. Essentially no one has the delusion you discuss.
Yes, supposed to be a couple percent -- but you have a significant number of people who think that you can simply "QE" a lot money (40% of all existing etc) and not have significant inflation, and any price increases are purely the result of corporate greed (as if they weren't always trying to charge more, they were less greedy sometimes??), supply chains, whatever. Mainstream articles telling normal people this.
They think that because that's what happened. The Fed pushed out $4T of QE and inflation barely budged for over a decade (after 2008/2009 recession). It took a global pandemic + a land war in Europe to bring on substantial inflation.
I remember when the Fed started doin QE in 2009. I thought, "my god, pushing this much money into the economy will lead to high inflation!"... except, it didn't. Then they did QE2 and again, I thought, "for sure, THIS time inflation will spike up!" Except it didn't. Then QE3 in 2012...
Call me slow, but it wasn't until that point that I started to seriously re-examine my mental model about how macroeconomics works. But at least I could admit to being wrong.
The US economy grew from $14T in 2009 to $21T up to 2019. Printing money during an economic boom is not like printing money in a static or shrinking economy.
Monetary policy isn't fiscal policy. QE is just a way of lowering interest and by itself does not significantly increase inflation. We've QE'd plenty of money since the recession without inflation. Japan QE'd even proportionally more money for much longer and has experienced even less inflation. QE makes lending cheaper, which enables businesses to produce more goods and services, so you don't have the effect of "more dollars chasing the same goods."
Even when the government spends more money than it collects from taxes, it's still not necessarily inflationary so long as if it's a productive use of money (e.g. public transportation increases employment opportunities). The main difference from Covid relief was that lot of money was simply created with no good purpose at all, so it fell into the category of "more dollars chasing the same goods."
> but you have a significant number of people who think that you can simply "QE" a lot money (40% of all existing etc) and not have significant inflation,
You can, if the underlying conditions would, with a neutral policy, produce a significant-enough deflation. We’ve pretty much demonstrated that.
OTOH, if you have something like the COVID emergency and associated controls, that results in a rapid snap-back of the underlying conditions rather than the more common gradual adjustment, when you are geared to offset massive deflation, you get inflation until you adjust the monetary policy dials again.
The problem is that there is no money printing beyond the physical printing of bank notes.
Money in your bank account isn't created through printing. It is created through accounting and the entire point of this accounting is to make sure that every liability (deposit) in your bank account is backed by an asset (the debt contract).
The entire point of this is to keep a mathematical identity. The net worth of the bank does not change when it issues deposits, deposits/savings and debt add up to zero. The only thing that changes is that the bank becomes more leveraged and less solvent which is why there are capital requirements which mandate a minimum quality of the assets that are being used to create deposits and there used to be a minimum reserve ratio to put an upper bound on the amount of leverage a bank can take on.
If you want to complain about the money supply growing or deficit spending or debt growing out of control you are free to do that but if you talk about money printing you are basically ignoring all of that and just think that there is this obvious element that everyone is overlooking. If the government bans cash it stops printing money but does it get rid of debt? Does it get rid of inflation? Not really.
When people save money, the currency goes up in value, to prevent deflation, the central bank loosens reserve requirements, lowers short term interest rates or if it can't do anymore it will do open market operations aka quantitative easing which is more or less just trying to replicate what a lower interest rate would have done.
Since there is a net increase of savings in real terms, either the interest rate must go down, perhaps even go negative to discourage people from saving too much, or more debt must be created to soak up those savings. This means if the private sector keeps accumulating more and more savings, the public sector must go more and more in debt if it wants to maintain a positive interest rate. If you don't like that, then you must somehow stop people from accumulating too much money and get them to spend it. Saved money isn't being lent on, not even in the case of a certificate of deposit, where it would kind of make some sense, it is just sitting there and waiting to be spent. Any time the bank "lends your money" it actually doesn't and instead creates new money in proportion to the debt.
“Increasing the money supply through open market operations” is a bit of a mouthful. I don’t think most people mean that that government is literally printing bills when they say “printing money”.
They should have learned from the hyperinflation in the US that resulted from the vast money printing that happened after the 2008 property bubble burst. I know that inflation for the next decade was sub-2%, but if you think that's low, you're just showing your privilege. You can't dodge gravity.
Hyperinflation is at least double digits month over month for a considerable stretch of time, arguably even more than that. Turkey comes to mind. The Western world is incredibly far from that and was nowhere close to it in 2008.
what makes hacker news appealing is the very few reddit style, low effort comments. You should explain your viewpoint instead of this cringy /s business, everyone would be richer for it
You mistook the /s for an attack on the comment above it, when it was actually a completion of my own grandparent comment. There was not inflation, even when some inflation was desired, after an almost inconceivable amount of money printing.
I know it's my own fault for thinking of Poe's Law as a target rather than a pitfall. Sadly, for me satire/sarcasm isn't good unless the target of it sometimes can't tell that it is satire. It's evidence that I've treated them fairly.
edit: note that cm2187 understood that, and formulated a direct, thoughtful reply.
edit: also note (although you can't see it) that after I explained the "/s" wasn't an attack but an affirmation of the reply that told the truth about hyperinflation, that it wasn't a goldbugging Libertarian smirk, the upvotes started disappearing. Poe achieved.
To be dead honest, and not trying to insult anyone, in real life when I assert two contradictory things within two short sentences about any subject, the people who are listening to me who agree with those sentences immediately start to make their case to me why those two statements aren't contradictory.
It's only on the internet where I can assume that people will show up who really think that I believe that stubbornly low <2% inflation is hyperinflation, and attempt to excoriate or support me.
no its just lame reddit style low effort comments, like writing "This!! SO much THIS!!!", brings nothing to any discussion. I don't care if you attack or write something bizzare or rude, as long as you write something thought out and coherent(or insane as long as it is interesting).
It was technically before the US was officially founded (counting from the adoption of the Constitution), but the Continental currency printed by the Continental Congress during the Revolutionary War was inflated to such a degree that a banknote in 1781 had only 1/40 of its original value in 1776, and was finally redeemable at only 1% of its face value in the 1790s, thus leading to the expression "Not worth a Continental".
Because of the way it was introduced (in the financial system), there was inflation, it created an asset bubble. Asset managers, hedge fund managers, VC investors got rich, and the cost base of this population (prime real estate, restaurants in city centres, tuition fees) inflated too. That's not captured in CPI indices. Part of it was also neutralised through massive liquidity requirements imposed on banks, and the multiplier effect of banks was also killed with capital ratios / forcing banks to deleverage. But that's done now and the said requirements aren't increasing anymore.
What changed with the covid money printing is that it was distributed directly in people's pockets. Also its scale and pace dwarfed the previous 10 years of QE.
I have no good explanation for Powell to have kept printing money like there was no tomorrow after Feb 2021, after the first >7% inflation prints. I suspect he must have made a deal with Biden to let the inflation go (helped Biden's policies) in exchange for renewing his mandate. The ECB is run by a lawyer who probably had to look up on wikipedia the definition of inflation.
I don't know that the inflation of luxury goods is a bad thing, because that's going to trickle down. It's the damage to (inflation of) housing, for me, that begs for intervention.
The beauty of all money being electronic is that it will make it practical to have an hyper-inflation. Which given how irresponsible the central banks and governements are is only a matter of time.
Very quickly off the top of my head, we've had the savings and loan crisis of the 80-90s, Black Wednesday in '92, the Great Financial Crisis, and the European sovereign debt crisis. I don't think the world can handle any more competency in central banking.
Interesting, I wonder how many of those 100,000 $(currency) bills are associated with hyperinflation vs. regular run-of-the-mill inflation over a very long time.
South Korea has 50,000 KRW bills (= about $36 these days), but its currency has been pretty stable in the past 40+ years.
> In the end, the researchers unearthed a total of 56 episodes of hyperinflation, many of them previously unreported in English-language works. It needs to be noted that the criterion used in their paper is very strict: a consumer price increase of at least 50% in a month. This excludes countries such as Israel, Vietnam, or Italy, even though they experienced many years of very steep inflation - and in the latter two cases, ended up with banknote denominations all the way up to 500,000.
It's no surprise that many former colonies are on this list. Many were subjected to economic retribution from attempting to establish their sovereignty in a hostile global trade environment. Many colonizers imposed enormous debts on colonies in exchange for their freedom[1]. Runaway inflation is one of the many indiscriminate tolls sanctions impose on the people of a country.
Why sell the products you produce on your farm to locals when you can ship them overseas and get dollars to exchange for medicine? Medicine that is illegal to produce in your country if your country hopes to operate in the good graces of the WTO[2].
All of this history is condensed by the author into mere "haphazard fiscal policies and civil struggles." This gallery of currencies is a stunning visceral departure point for understanding macroeconomic policy, my only wish is that it went deeper.
The US incurred massive debts fighting the war of independence. They didn’t have to pay for their freedom in reparations, but the cost of the war did lead to massive inflation.
Typically, hyperinflation is caused by a country trying to print money to pay a debt denominated in an external currency. (Because, the more money you print, the worse the exchange rate gets, so you have to keep printing more and more.). And very often, the crisis is related to imf loans taken under duress. (Venezuela, Zimbabwe, etc etc). Read “confessions of an economic hit man” if you want to know more about how that happens.
This could be generalized as structural inability to collect taxes commensurate with politically mandatory disbursements, less net new foreign borrowing. Consider for example the post-Soviet Eastern European hyperinflation mentioned:
I get where you’re coming from- but I still think it’s more specific than that. Take Yugoslavia. They took out imf loans right before their hyperinflation.
What you describe definitely causes inflation, but the “hyper” part, in every case I am aware of, involved foreign debts.
Does anyone know what happens after these hyperinflationary periods with the notes?
Are they made illegal tender?
For example I was curious about if you held onto a 10 million Ruble note when it was "worthless" until the point the Ruble recovered, is that note still legal tender and has your "investment" appreciated?
Basically, yes, old notes become nonlegal tender. Hyperinflation is resolved by the government issuing a new currency (sometimes with the same name as the old one), and allowing conversion to the new one, at whatever extreme ratio like 10e6 to 1 or whatever. The conversion lasts for a limited time and then any notes existing after that are no longer accepted as fiat currency.
In the case of Germany, they invented a new currency worth a lot more and allowed exchange at a gov't-determined rate (they actually did this a few times).
I was looking at the bill from Weimar Germany that says "Zwei Billionen Mark" with the caption of "Two trillion mark" and I was like, did they get that wrong? I looked it up and sure enough the German word for trillion is billion! Languages are wild, I wonder how that happened.
I would be very surprised if there's a currently spoken variety of English that doesn't use the short scale. British English switched many decades ago.
How are these bills now worthless? I can't go to Zimbabwe today and get 100 trillion dollars (2.6 billion USD) from the currency that they printed that is supposed to be worth that amount?
Many countries that suffer hyperinflation keep the historical name of their currency, but establish some exchange rate between the "old" and "new" money. Zimbabwe went through four cycles - currency codes ZWD, ZWN, ZWR, and ZWL.
Per Wikipedia: "The final redenomination produced the "fourth dollar" (ZWL), which was worth 10^25 ZWD (first dollars)."
The ZWL itself was subsequently largely abandoned, too. I believe you'd have more luck transacting in foreign currencies.
For whatever reason when I saw this I thought it was going to be an archive of people's predictions of imminent hyperinflation in the West (still hasn't happened guys).
It's been maybe a day since I have had a comment on here buried so I will go ahead and mention cryptocurrency.
Hyperinflation is evidence that money needs to be a high technology. Public ledgers in and of themselves don't prevent hyperinflation or other problems with money, but they do give us potentially much more and better tools to make money work.
Especially if high tech digital money can be holistically integrated with information about real world resources.
While they certainly were dominated and dictated by USSR, neither belonged culturally. Neither was as stiff with sexuality for instance; they didn't have collectivization in the earnest and understandably there was no cult of war in DDR other than in token solidarity with occupying Soviet troops.
> While they certainly were dominated and dictated by USSR, neither belonged culturally.
Hmm... that seems more like a distinction without a difference.
Though dominated by Russians (mostly... Stalin was a Georgian), the USSR was made up of over 100 different nationalities with widely varying languages and cultures.
Yes and you couldn't use all those fine languages for anything else than attending a folk festival. It was Russian-language monoculture in every aspect of your living (source: lived there). Certainly not so in satellite states. Besides you waved off my examples and these already were enormous cultural distance.
No, not even close. Those were sovereign countries under communist single party rule and allied with the USSR. Ukraine, for exampke, was a sovereign Soviet Republic as part of the USSR, just as Russia was.
I know its not trendy, but its probably easier to think of the eastern bloc countries as colonies of the USSR, just as india, egypt, and the african nations were to the UK.
Sure, on paper they were sovereign, and they certianly had a government made up of people from that country. But they were a colony.
Might be splitting hairs, but I’d characterise them more as client states or even puppet states, rather than colonies. A colony would imply more direct governance.
It's not clear that the term colony implies direct governance. For example, the Brits applied almost no direct governance to their colonies in the Americas from 1650-1750.
One could also just say that the Russians occupied Eastern Europe for the half-century following World War 2.
I think that the American colonies were more like the Latin colinia, deriving from the Latin for cultivate. It implies a large population movement, and exploitation, not just a conquest.
It was more like the Saxon colonisation of the UK, which replaced the native Celtic population, rather than the Norman conquest, (or the colonisation of India) which just replaced the oligarchy.
What came quite a lot later in America , was the attempt to assert more direct Imperial rule over the colonies.
> Those were sovereign countries under communist single party rule and allied with the USSR.
They were countries conquered and occupied by USSR troops, with USSR military bases in them to guarantee obedience. There were local rulers, sure, but major decisions were consulted with Moscow. Many decisions just were out of question, because it was obvious that Moscow would not approve and it may end in a military intervention (as in happened in Hungary and Czech Republic). So no, I would not describe them as "sovereign countries". The proper term is something like "puppet state".
"Allied" in the sense of having a USSR-installed puppet government propped up by the massive presence of Soviet troops. This was a part of the concessions made by the West to Stalin, not an expression of the will of Polish or German people.
"Our belief in the power of personalities and ideas may blind us to fundamental truths: after all, every year, another penniless revolutionary pens a new version of Das Kapital or a new version of Mein Kampf."
I won't bother with the bullshit of anybody who compares Das Kapital and Mein Kampf like this, grow a fucking brain. And conscience.
1. In the Weimar Republic, Germany's productive capacity was devastated by WWI.
2. In Zimbabwe, which was "the bread basket of Africa", farm productivity famously plummeted due to the land redistribution policies of Robert Mugabe.
3. Looking at the current crisis in Sri Lanka, the forced switch to organic farming similarly destroyed farm productivity.
4. Though I wouldn't call it "hyperinflation", the COVID pandemic clearly caused shortages throughout the economy.
My point is that hyperinflation is rarely just caused by governments living beyond their means - the trigger is nearly always a supply shock, and then it's what governments do in the face of that supply shock that gives you hyperinflation.