HyperInflation Is A Political Choice

Monty Pelerin * Economic Noise

The situation with the Federal Reserve (and other central banks around the world) is not very different than what prevailed in the early 1920s and ended in Germany’s horrendous hyperinflation.

The notions that “this time is different” or “it can’t happen here” are naive. It is happening here. It just hasn’t metastasized yet. It can and likely will, as it is the politically expedient route, until it occurs, of course. No politician will stop the music that ends the party. Thus,monetary creation will continue, likely in increasing dosages, until the system collapses via hyperinflation.

Markets will stop what politicians will not.

Thorstein Pollet discusses the issue (my emboldening):

Paper money, produced “ex nihilo” and injected into the economy through bank credit, is not only chronically inflationary, it also causes malinvestment, “boom-and-bust” cycles, and brings about a situation of over-indebtedness. Once governments and banks in particular start faltering under their debt load and, as a result, the economy is in danger of contracting, the printing up of additional money appears all too easily to be a policy of choosing the lesser evil to escape the problems that have been caused by credit-produced paper money in the first place. Looking at the world today — in which many economies have been using credit-produced paper monies for decades and where debt loads are overwhelmingly high, the current challenges are in a sense quite similar to those prevailing in the Weimar Republic more than 90 years ago. Now as then, a reform of the monetary order is badly needed; and the sooner the challenge of monetary reform is taken on, the smaller will be the costs of adjustment.

http://www.economicnoise.com/2013/11/19/hyperinflation-political-ending/