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Hyperinflation worries in the UK & USA warranted?

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JamesQB8

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I have a feeling with the FED and BoE printing a ton of money and providing support to the people without a productive economy could lead to hyperinflation. What do you think is the percentage chance of this happening and is it worth putting more money into commodities or physical assets?
 

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GIlman

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I have a feeling with the FED and BoE printing a ton of money and providing support to the people without a productive economy could lead to hyperinflation. What do you think is the percentage chance of this happening and is it worth putting more money into commodities or physical assets?
Yeah, this is definitely a significant concern of mine. Ironically I was looking at the gold chart in the past couple days and price was down since the meltdown started, I would have thought it would have spiked Given the devaluation of stocks and the fed printing money.
 

Minuz

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As a person from a printing money country (Argentina). First you need high inflation (like 50% a year) before you get to hyperinflation (wich Argentina is expected to have this year, sadly, after almost two decades of high inflation).
Jajajajajja me causan hasta un poco de ternura. Si vieran la hiperinlfacion que se viene en Argentina, proximamente va a ser mas barato limpiarse el culo con billetes que con papel higienico
 

ChickenHawk

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I was looking at the gold chart in the past couple days and price was down since the meltdown started, I would have thought it would have spiked Given the devaluation of stocks and the fed printing money.
One theory is that investors are liquidating their "paper" gold positions to cover their steep losses in the stock market. I just checked an online store that I've ordered from in the past, and premiums to get physical gold seem high right now. For example, even though the spot price for gold is $1,500, it costs nearly $1,700 to buy a single 1 oz. gold coin, and the Web site indicates that due to high demand, buyers should expect shipping delays.

This suggests that the demand for physical gold is quite high, even if other market forces are driving the price down. It will be interesting to see how this settles out in the coming weeks.
 

lowtek

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It's not a guarantee by any means, but we are trending in that direction. Government is promising to bail out everybody, which means even more money printing. The more money we print, the less desirable our bonds become for foreign investors, particularly when coupled to the fact that they (foreign governments) are dealing with economic crises of their own.

All of this and it's only the first few months of something that is expected to last 18 months, or more. What will the governments do 6 months from now? A year?

I expect massive printing and all the associated problems that come with it. If not outright hyperinflation, certainly the inflation that has propelled stocks to heights not supported by the fundamentals will creep down into every day goods.

Also, @GIlman check out the situation with silver and gold coins at just about any online dealer. While the spot price is down, demand for precious metals went through the roof. Good luck finding any silver eagles at even $7 over spot. That means the big boys are probably unloading to cover their short positions, while the rest of us hoover it up because we can read the tea leaves.


The next important question to ask:

Who has been buying gold like it's been going out of style, for years? Who has been buying up infrastructure, land, and resources in Africa for the last several years? Who is forcing their people back to work despite the virus (if you believe they don't have any new cases, I got some ocean side property in Idaho for you)? China, of course.

While we're wallowing in the next great depression, they'll be sitting on real money, real industrial production capacity, and real physical resources.

This is precisely the situation at the end of WW2 that lead to the USA being the global reserve currency. Specifically, having the only functional industrial production capacity and a hoard of gold meant that there was no better option.

Could we see China make a play for a gold backed Yuan as the next reserve currency? Quite possibly. They've not hid the fact that they want to be the big dog superpower on the world stage, and this sure would be a golden opportunity.

The final and most important question:

How will Uncle Sam respond? You think we have a stockpile of nukes, aircraft carriers and jets to just sit back and let the empire collapse?

I'm not saying any of this with certainty, but my intuition about the virus was spot on. As soon as I heard about it, and China's response in particular, I knew what was coming. Seeing the way the western governments are responding sure leads me to believe the above scenario is a very real possibility (again, not certain) and I'm starting to take what little steps I can to prepare - at the least mentally.
 

Florian

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It's not a guarantee by any means, but we are trending in that direction. Government is promising to bail out everybody, which means even more money printing. The more money we print, the less desirable our bonds become for foreign investors, particularly when coupled to the fact that they (foreign governments) are dealing with economic crises of their own.

All of this and it's only the first few months of something that is expected to last 18 months, or more. What will the governments do 6 months from now? A year?

I expect massive printing and all the associated problems that come with it. If not outright hyperinflation, certainly the inflation that has propelled stocks to heights not supported by the fundamentals will creep down into every day goods.

Also, @GIlman check out the situation with silver and gold coins at just about any online dealer. While the spot price is down, demand for precious metals went through the roof. Good luck finding any silver eagles at even $7 over spot. That means the big boys are probably unloading to cover their short positions, while the rest of us hoover it up because we can read the tea leaves.


The next important question to ask:

Who has been buying gold like it's been going out of style, for years? Who has been buying up infrastructure, land, and resources in Africa for the last several years? Who is forcing their people back to work despite the virus (if you believe they don't have any new cases, I got some ocean side property in Idaho for you)? China, of course.

While we're wallowing in the next great depression, they'll be sitting on real money, real industrial production capacity, and real physical resources.

This is precisely the situation at the end of WW2 that lead to the USA being the global reserve currency. Specifically, having the only functional industrial production capacity and a hoard of gold meant that there was no better option.

Could we see China make a play for a gold backed Yuan as the next reserve currency? Quite possibly. They've not hid the fact that they want to be the big dog superpower on the world stage, and this sure would be a golden opportunity.

The final and most important question:

How will Uncle Sam respond? You think we have a stockpile of nukes, aircraft carriers and jets to just sit back and let the empire collapse?

I'm not saying any of this with certainty, but my intuition about the virus was spot on. As soon as I heard about it, and China's response in particular, I knew what was coming. Seeing the way the western governments are responding sure leads me to believe the above scenario is a very real possibility (again, not certain) and I'm starting to take what little steps I can to prepare - at the least mentally.
Great argumentation @lowtek !

What would be your recommendations?
 
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Martin.G

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It's funny to find other Argentinian here. And it's true what they said. In the USA, you have 2-3% of inflation a year, that what we have here in a month. The worse part is that is very probably that we have and hyperinflation in the next year, but now our government has the perfect excuse with the pandemic.
I consider myself a very optimistic person, but when it comes to Argentina, I cannot avoid thinking that it's condemned.
 

Kak

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Gold isn’t the only safe haven... Any asset with inelastic demand is good too.

Remember, with inflation, money gets easier to earn because its spending power is decreased.

Imagine, for example an apartment complex with a big loan. If you had significant inflation. Like 20-70 percent in one year, you would be renewing your leases at 20-70 percent higher. Your loan on the other hand is still the same. You profitability skyrockets because over time the loan becomes negligible.

Banks will hurt the most. Interest rates will skyrocket. I would NOT be looking at ARM mortgages right now. Fixed rate all day. Eventually lending will totally dry up.

I hesitate on gold honestly. It is too much money for an ounce to be a currency and buying a gram at a time is super expensive over spot. How often do you go to a grocery store and spend even a couple grand? That would only be worse amid inflation that drives the price up further.

I wonder if this time, when/if hyperinflation does rear its ugly head, if a non state controlled currency, and more easily divisible value hold like a crypto, might actually become preferable to the barter system that would have emerged in the past.

Don’t be a bank. Don’t be a bond holder. Equities are better than cash. Assets with inelastic demand are the best. Gold is good to store value, but not a very good currency. Crypto might make a showing.
 

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JamesQB8

JamesQB8

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The music. Hahahaha
Hahaha the music got me as well

It's not a guarantee by any means, but we are trending in that direction. Government is promising to bail out everybody, which means even more money printing. The more money we print, the less desirable our bonds become for foreign investors, particularly when coupled to the fact that they (foreign governments) are dealing with economic crises of their own.

All of this and it's only the first few months of something that is expected to last 18 months, or more. What will the governments do 6 months from now? A year?

I expect massive printing and all the associated problems that come with it. If not outright hyperinflation, certainly the inflation that has propelled stocks to heights not supported by the fundamentals will creep down into every day goods.

Also, @GIlman check out the situation with silver and gold coins at just about any online dealer. While the spot price is down, demand for precious metals went through the roof. Good luck finding any silver eagles at even $7 over spot. That means the big boys are probably unloading to cover their short positions, while the rest of us hoover it up because we can read the tea leaves.


The next important question to ask:

Who has been buying gold like it's been going out of style, for years? Who has been buying up infrastructure, land, and resources in Africa for the last several years? Who is forcing their people back to work despite the virus (if you believe they don't have any new cases, I got some ocean side property in Idaho for you)? China, of course.

While we're wallowing in the next great depression, they'll be sitting on real money, real industrial production capacity, and real physical resources.

This is precisely the situation at the end of WW2 that lead to the USA being the global reserve currency. Specifically, having the only functional industrial production capacity and a hoard of gold meant that there was no better option.

Could we see China make a play for a gold backed Yuan as the next reserve currency? Quite possibly. They've not hid the fact that they want to be the big dog superpower on the world stage, and this sure would be a golden opportunity.

The final and most important question:

How will Uncle Sam respond? You think we have a stockpile of nukes, aircraft carriers and jets to just sit back and let the empire collapse?

I'm not saying any of this with certainty, but my intuition about the virus was spot on. As soon as I heard about it, and China's response in particular, I knew what was coming. Seeing the way the western governments are responding sure leads me to believe the above scenario is a very real possibility (again, not certain) and I'm starting to take what little steps I can to prepare - at the least mentally.
Man this seems more true than not right now. Interesting times ahead for sure.
 

JScott

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They want higher inflation.
Not really. They've been pushing for 2% for much of the past decade, and have recently surpassed that target by a good bit.

CPI hit 2.5% in January, and 2.3% in February:


In terms of the original question, hyperinflation (or likely much of any inflation) isn't much of a short-term risk, even with all the QE being undertaken.

The reason for this is that inflation is driven not just by an increased money supply, but by demand pressure. We see inflation when consumers are spending a lot of money, requiring businesses to build more factories, buy inventory, hire more employees, etc. -- all these extra costs to businesses are passed on to their customers in terms of higher prices (inflation).

But, even with an increased money supply, there is no demand pressure, and likely won't be anytime soon. Consumers don't have much they can spend their money on right now, and assuming we see a recessionary environment when this is all over, consumers won't be spending a whole lot then either.

The risk of inflation returns once the economy is back on track, we hit full employment again, and demand starts prompting businesses to expand. When that happens, the fact that we have an increased money supply will snowball that demand pressure, and that's the point we need to worry about inflation.

The key to reducing this risk is for the Fed to have a plan in place NOW to reverse that QE quickly when the crisis is over. They didn't have much of an appetite for that back in 2014-2018, as they were concerned that the recovery was too fragile (even though they were pulling out about $40B/month for about a year and a half).

This time around, they need to make the decision that they'll reverse QE even if it means that it impacts growth for a year or two or three. That's the price we're going to need to pay for all this. It will be interesting to see whether whomever is in the White House starting next year has the balls to do what's right, regardless of the short-term impact to the recovery.

Kicking this one down the road could be the biggest risk to our economy in the history of our country...
 
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JScott

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Yeah, this is definitely a significant concern of mine. Ironically I was looking at the gold chart in the past couple days and price was down since the meltdown started, I would have thought it would have spiked Given the devaluation of stocks and the fed printing money.
Part of the reason for this is that PPI has been extremely low the past few months, and was down .6% in February:


With reduced producer demand, it's not uncommon to see reduced demand for gold in large quantities, and this correlation has been pretty strong since the recovery started (this chart is old, but you can see the correlation):

31384
 

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