Last December, John Williams of Shadowstats.com wrote an article that predicted the onset of “hyper-inflation” in A.D. 2014.
Yesterday, I wrote another article about Mr. Williams’ prediction at John Williams Predicts Hyper-Inflation in A.D. 2014. One of my readers wrote back to ask me to define “hyper-inflation”.
It was a very good question. I replied and in doing so, I discovered a plausible definition for hyper-inflation that I’ve never before heard.
Here’s my reply:
I can’t define “hyper-inflation”. So far as I know there is no absolute definition that’s universally accepted–other than “a lot”. I know that some economists say “hyper-inflation” means any rate of inflation over 50% per year. Others pick lower rates of inflation as marking the onset of hyper-inflation. I’d be inclined to view any rate of inflation that exceeds 25% as “hyper”.
I suspect that “hyper-inflation” really means is:
1) any rising rate of inflation that the government and/or Federal Reserve is unable to control; or,
2) A significant loss of confidence in the fiat currency by the general public.
But, on reflection, I realized that the two meanings I’d proposed were actually synonymous—much like two sides of the same coin
Therefore, I proposed that, in combination, a single definition of “hyper-inflation” might be:
“A rising rate of inflation caused by a loss of public confidence in the fiat currency that the government and/or Federal Reserve is unable to control.”
Thus, my proposed definition of hyper-inflation isn’t based on a particular number or “rate of inflation” so much as any rising rate of inflation (caused by the public rather than the government) that the government and/or central bank is unable to resist or control.
We’ve had persistent inflation for most of my lifetime that probably averages out to around 2% per year. This “inflation” has been caused and controlled by government rather than the people and/or the free markets. Thus, we might define “inflation” (but not “hyper-inflation”) as a reduction in the purchasing power of the fiat dollar that’s been intentionally caused by but also controlled and limited by the federal government.
Therefore, it might be overly simplistic to define “hyper-inflation” as anything over a specific rate of inflation (like 25% or 50%). Instead, we might more accurately define “hyper-inflation” as any rate of inflation that was 1) caused by the people’s loss of confidence in the fiat dollar; and 2) beyond the control of the federal government and/or federal reserve.
Thus, my proposed definition for hyper-inflation is not about a particular rate of inflation, but is instead based on a public cause and, more particularly, government’s inability to control.
Whatcha think? Does that make any sense?
P.S. It occurs to me that deflation might similarly be defined as an increase in the fiat dollar’s purchasing power that is caused by the people rather than government) and is beyond the government’s capacity to control.