Inflation/Hyperinflation13 Feb 2021 13:14
An interesting article on the diamond exchange Davethehorse and some of the driving sentiment – inflation fears.
When I went to school we were taught that money needed to have certain properties including – it should be a long term store of wealth, it should be not be possible to conterfiet / randomly create it.
Which is why historically money has been something physical– gold, silver, copper, nickel, gems etc. For example whatever ‘stuff’ an ‘amount’ of gold would have bought in a market 2000 years ago – the same ‘amount’ of gold would buy the same amount of ‘stuff’ in a supermarket today. It has been an almost perfect store of value over the long term.
At various times ‘paper’ has been used as an alternative. Always/invariably/eventually the temptation to print away problems becomes irresitable eg the hyperinflation of the French revolution when the ink required to print notes was worth more than the notes themselves, the German post WWI hyperinflation when all the currency that existed in 1922 wasn’t enough to buy a newspaper in 1923.
Currently around the globe governments are printing money like it is going out of fashion. The UK was bankrupt before it started. The last time I looked about (5 years ago ) a new born child came into the world with about £200k of inter generational debt/unfunded liabilities handed on by the people who went before who didn’t leave the books square. This is insidious and immoral - but it seems to suit all parties in the present to shaft those who are coming behind. Meanwhile most people are (by design) hopelessly uneducated. They think a phrase such as ‘the government has reduced the deficit’ is another way of saying ‘the government has reduced its debt’. IT ISN’T! It means the exact opposite ie it means the debt has continued to expand (but by less than usual)
So the current money printing bubble is accelerating and like all bubbles it seems like a good idea at the time and like all bubbles it is very hard to predict when it will burst – but it will. Again like all bubbles there is a narrative that ‘this time things are different / there has been a paradigm shift’. Currently it is not a problem because we have discovered ‘Modern monetary theory’ - in exceptional cirumstances government can over spend, nail interest rates/debt costs to the floor, secretly under report inflation and over time secretly inflate away the overspend and things come out in the wash. Needless to say this WILL be tested to destruction.
It never ceases to amaze me how a country such as Somali doesn't print its way to exceptional wealth.
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