Author Topic: What is hyperinflation?  (Read 6472 times)

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Online Pandora

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Re: What is hyperinflation?
« Reply #20 on: March 23, 2011, 06:18:45 PM »
Well, if I told you that there was a room full of cash, but you didn't spend it, what impact would it have on the economy? Nothing. Just because there is more of something doesn't mean it is worth less. It has to be put to use in the economy.

What if I told you your painting by Rembrandt now has multiplied by 1500, all painted exactly the same by the Master.

Would your Rembrandt not be worth less?
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Online IronDioPriest

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Re: What is hyperinflation?
« Reply #21 on: March 23, 2011, 06:27:04 PM »
Well, if I told you that there was a room full of cash, but you didn't spend it, what impact would it have on the economy? Nothing. Just because there is more of something doesn't mean it is worth less. It has to be put to use in the economy.

What if I told you your painting by Rembrandt now has multiplied by 1500, all painted exactly the same by the Master.

Would your Rembrandt not be worth less?

As murmurs of the duplicates made their way around the art-buying community, the value of the original would erode somewhat. Once the existence of duplicates was confirmed and widely known, the value of the original would begin to steadily decline. Once those duplicates were released into the market, the original would instantly devalue to a fraction of its original worth, and the price for all 1500 pieces would settle on an actual market value relevant to each other, rendering the previous value of the original irrelevant to its current value.
"A strict observance of the written laws is doubtless one of the high duties of a good citizen, but it is not the highest. The laws of necessity, of self-preservation, of saving our country when in danger, are of higher obligation. To lose our country by a scrupulous adherence to written law, would be to lose the law itself, with life, liberty, property and all those who are enjoying them with us; thus absurdly sacrificing the end to the means."

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Online Pandora

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Re: What is hyperinflation?
« Reply #22 on: March 23, 2011, 07:10:14 PM »
Well, if I told you that there was a room full of cash, but you didn't spend it, what impact would it have on the economy? Nothing. Just because there is more of something doesn't mean it is worth less. It has to be put to use in the economy.

What if I told you your painting by Rembrandt now has multiplied by 1500, all painted exactly the same by the Master.

Would your Rembrandt not be worth less?

As murmurs of the duplicates made their way around the art-buying community, the value of the original would erode somewhat. Once the existence of duplicates was confirmed and widely known, the value of the original would begin to steadily decline. Once those duplicates were released into the market, the original would instantly devalue to a fraction of its original worth, and the price for all 1500 pieces would settle on an actual market value relevant to each other, rendering the previous value of the original irrelevant to its current value.

Yes.

From your response, I can't tell  ::thinking:: whether you see the currency inflation as analogous or not.
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Online IronDioPriest

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Re: What is hyperinflation?
« Reply #23 on: March 23, 2011, 07:34:14 PM »
Well, if I told you that there was a room full of cash, but you didn't spend it, what impact would it have on the economy? Nothing. Just because there is more of something doesn't mean it is worth less. It has to be put to use in the economy.

What if I told you your painting by Rembrandt now has multiplied by 1500, all painted exactly the same by the Master.

Would your Rembrandt not be worth less?

As murmurs of the duplicates made their way around the art-buying community, the value of the original would erode somewhat. Once the existence of duplicates was confirmed and widely known, the value of the original would begin to steadily decline. Once those duplicates were released into the market, the original would instantly devalue to a fraction of its original worth, and the price for all 1500 pieces would settle on an actual market value relevant to each other, rendering the previous value of the original irrelevant to its current value.

Yes.

From your response, I can't tell  ::thinking:: whether you see the currency inflation as analogous or not.

I do. I think an economist might tell us we're oversimplifying but are in the right sphere of thinking. There are certain economic principles that are self-evident, and devaluing currency by arbitrarily increasing the supply is one I've heard explained often enough to have had it sink in. Currency on a world market has a value just like anything else. Unless someone can explain to me why flooding the market with fiat currency thus increasing the available money supply does not devalue the worth of each dollar, I think the analogy stands - at least as an illustration of the point, if not in the details of the economic mechanics.
"A strict observance of the written laws is doubtless one of the high duties of a good citizen, but it is not the highest. The laws of necessity, of self-preservation, of saving our country when in danger, are of higher obligation. To lose our country by a scrupulous adherence to written law, would be to lose the law itself, with life, liberty, property and all those who are enjoying them with us; thus absurdly sacrificing the end to the means."

- Thomas Jefferson

Offline Glock32

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Re: What is hyperinflation?
« Reply #24 on: March 23, 2011, 07:40:43 PM »
Well I am no financial guru by a long shot, but I see a problem with printing money even if it's not theoretically spent. Just the mere fact of its existence promotes lax fiscal discipline if there's always the understanding that it's sitting there as a "backup".

Isn't this sort of how Social Security ended up? To borrow the analogy, SS was supposed to be that cash in a room. But statist politicians can't keep their hands off of something like that. They started off saying "well, we'll just borrow some money out of the SS reserve and then when tax revenues come in later this year we'll put it back". Of course, they soon started "borrowing" more from SS than they were replacing with current revenues.

Libertas can speak far more authoritatively on monetary theory and how the laws of supply and demand work with respect to currencies; my main point is that if money is there government will spend it.
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charlesoakwood

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Re: What is hyperinflation?
« Reply #25 on: March 23, 2011, 08:36:19 PM »

I'll give you a dollar each, for every Rembrandt in the frame.
No frame no deal.


Online Libertas

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Re: What is hyperinflation?
« Reply #26 on: March 24, 2011, 07:18:12 AM »
Yes, G, printing currency and locking it in a room forever is just not going to happen, not at the levels we are talking about.  Perhaps there is confusion over reserves Fed banks have and feed through armoured cars to the banks in their region so that they have adequate cash reserves...but we are not going be print billions and billions in currency, lock it away, and keep accumulating.  It will be put out into circulation one way or another.  Many big brokerage houses peddling government paper may have clients who will have proceeds wired and then the client will want to pull it out if his institution in cash, that currency demand has to be fullfilled somehow, so even in the normal course of business there will always be demands for physical currency.  When or how much of that gets put back into circulation...there's a test for ya.  I argue the reason the Fed gave up on tracking money supply is because how can someone in today's world track a freshly printed note from inception to final destination?
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Offline radioman

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Re: What is hyperinflation?
« Reply #27 on: March 26, 2011, 10:35:55 AM »
If you have a golden pie worth a million dollars,
and you cut the pie into four slices, then,
each slice would be equal (==) to a quarter million dollars.

IOW, the value of a 'slice' would be $250k.

Now, the population can not own a 'slice', but can only purchase a certificate for a 'slice' to use for exchanging. It would cost them $250k for each certificate of a 'slice'.

Now, obama comes along, or his fed, or whatever, the head bottle washer and pie cook, decides to cut the pie into 10 'slices'. Now, the exchange rate for a certificate (pie) is $10k.

I'm sitting down here in Texas, fat, dumb, and stupid, minding my own business, and I read in the paper where the exchange rate for my pie certificate is now only worth $10k as opposed to the $250k that I spent on my pie certificate.

Now, I'm fat, dumb, stupid, and a whole more 'broker'. :(



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Offline Joanna

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Re: What is hyperinflation?
« Reply #28 on: March 26, 2011, 06:08:54 PM »
Just happened by this today. Very interesting to see below some of the history of the Federal Reserve.


http://www.wtv-zone.com/Mary/BIGGESTSCAMINHISTORY.HTML

charlesoakwood

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Re: What is hyperinflation?
« Reply #29 on: March 26, 2011, 06:44:07 PM »

Henry Ford once said " It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning ".

Bless him, he fought the Fed & Unions all his life.

 

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Re: What is hyperinflation?
« Reply #30 on: March 27, 2011, 12:58:35 PM »
Just happened by this today. Very interesting to see below some of the history of the Federal Reserve.


http://www.wtv-zone.com/Mary/BIGGESTSCAMINHISTORY.HTML

That is some interesting information. I'm not sure about all the conclusions drawn, but the facts stand on their own as interesting and certainly supportive of the conclusions in a speculative way, if not entirely indicative of them.
"A strict observance of the written laws is doubtless one of the high duties of a good citizen, but it is not the highest. The laws of necessity, of self-preservation, of saving our country when in danger, are of higher obligation. To lose our country by a scrupulous adherence to written law, would be to lose the law itself, with life, liberty, property and all those who are enjoying them with us; thus absurdly sacrificing the end to the means."

- Thomas Jefferson