"Volatile," i.e., variable inflation might be the optimistic view. I fear that inflation tends to feed on itself, and that as people scramble to escape its ravages, it accelerates as it did in Weimar Germany or Zimbabwe. Economic disorder ensues, and real output falls even though it is expressed in ever larger numbers. This leads to soci…
"Volatile," i.e., variable inflation might be the optimistic view. I fear that inflation tends to feed on itself, and that as people scramble to escape its ravages, it accelerates as it did in Weimar Germany or Zimbabwe. Economic disorder ensues, and real output falls even though it is expressed in ever larger numbers. This leads to social disorder and political turmoil. Envy, resentment, and scapegoating get out of hand. In a modern democracy, demagogues and their grifter supporters enact broad entitlements beyond what can be paid for by any politically feasible system of taxation, leading to central bank monetization of government debt. Financial repression (artificially depressed interest rates resulting from central bank purchases) holds off the reckoning for a while. This channels the inflation into asset prices, while consumer prices remain relatively stable, so it is painless for those with capital. But the recent spending binges have now brought inflation to the consumer. Eventually, rates can no longer be repressed, resulting in even larger deficits to be monetized. No one wants to face the pain of stopping the game, but eventually there is a revolutionary crisis. Many assume it is just a matter of some tax increases and a bit of cutting back on spending, but the numbers needed are far greater than recognized. Our clueless ruling and managerial class continues on its merry way, thinking "I'm alright, Jack," oblivious to impending disaster from which they won't escape.
There is a good book out there that details the decline and despair caused by hyperinflation and flawed policies to address it in Weimar Germany. Check out When Money Dies by Adam Fergusson
"Volatile," i.e., variable inflation might be the optimistic view. I fear that inflation tends to feed on itself, and that as people scramble to escape its ravages, it accelerates as it did in Weimar Germany or Zimbabwe. Economic disorder ensues, and real output falls even though it is expressed in ever larger numbers. This leads to social disorder and political turmoil. Envy, resentment, and scapegoating get out of hand. In a modern democracy, demagogues and their grifter supporters enact broad entitlements beyond what can be paid for by any politically feasible system of taxation, leading to central bank monetization of government debt. Financial repression (artificially depressed interest rates resulting from central bank purchases) holds off the reckoning for a while. This channels the inflation into asset prices, while consumer prices remain relatively stable, so it is painless for those with capital. But the recent spending binges have now brought inflation to the consumer. Eventually, rates can no longer be repressed, resulting in even larger deficits to be monetized. No one wants to face the pain of stopping the game, but eventually there is a revolutionary crisis. Many assume it is just a matter of some tax increases and a bit of cutting back on spending, but the numbers needed are far greater than recognized. Our clueless ruling and managerial class continues on its merry way, thinking "I'm alright, Jack," oblivious to impending disaster from which they won't escape.
There is a good book out there that details the decline and despair caused by hyperinflation and flawed policies to address it in Weimar Germany. Check out When Money Dies by Adam Fergusson