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Author Topic: Why did hyperinflations happen?  (Read 3914 times)
caveden
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May 30, 2011, 04:29:55 PM
 #21

@Chodpaba, most of the time these multipliers are constant, and even when they change, the amount of inflation they can cause is limited, if they go too high, the system collapses, and those who pushed those multipliers too far go bankrupt. What doesn't have hard limits is the amount of new money the central bank can create.

It doesn't matter if each new dollar created by the Fed will become $10 or $100 or $1000 new dollars when passed through all multipliers. What matters is the relative growth of the monetary offer, if it is 1%, 10% or 100%. And this relative change to the monetary offer is the same relative change the Fed does to the monetary base when all multipliers remain constant.

It's like analyzing the complexity of functions in computer science. Constant multipliers don't really matter, what you have to look is the format of the curve, if it's N, N^2, 2^N etc. And in the realm of money, it is the central bank who shapes the curve.

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speeder
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May 30, 2011, 04:58:53 PM
 #22

Oh, good times in Brazil when hyperinflaction existed so my family used only USD...

:/

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May 30, 2011, 08:21:48 PM
 #23


I don't know about "no reason", but they can certainly come up with one.  Look at the US.  Ever since 2001, we've funded the majority of our wars with printed money and/or debt.

I don't know about majority (simple fact lookup I guess), but point taken.

So governments can print for a long time without hyperinflation, it's the loss of faith that causes hyperinflation. No government ever needs to print 1000x the old monetary base unless hyperinflation has already taken hold, the truly MASSIVE printing is caused by hyperinflation. But sure, normal, reckless printing could trigger the loss of faith that triggers hyperinflation that then triggers trillion dollar bills.


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caveden
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May 30, 2011, 08:59:33 PM
 #24

I really don't think it's much a problem of loss of faith. In Brazil, from 1980 to 1994, the monetary base expanded 2.303.797.693.883%. Yes, more than two trillion percent. There is no faith that could have kept the value of such money...
@chodpaba, the M1, in the same period, expanded a lot less - 1.656.853.722.660% (1,6 billion)-, meaning that the multipliers we were talking about decreased considerably. They actually prevented the damage from being worse, in a certain way.

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May 30, 2011, 09:03:19 PM
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I don't know about "no reason", but they can certainly come up with one.  Look at the US.  Ever since 2001, we've funded the majority of our wars with printed money and/or debt.

I don't know about majority (simple fact lookup I guess), but point taken.

So governments can print for a long time without hyperinflation, it's the loss of faith that causes hyperinflation. No government ever needs to print 1000x the old monetary base unless hyperinflation has already taken hold, the truly MASSIVE printing is caused by hyperinflation. But sure, normal, reckless printing could trigger the loss of faith that triggers hyperinflation that then triggers trillion dollar bills.



http://news.bbc.co.uk/2/hi/business/3603923.stm

As this explains, at least during the Bush administration, Iraq was funded by "supplemental appropriations".  AKA, not from the budget.  When the budget is already a deficit, these funds were necessarily debt.

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May 30, 2011, 09:05:20 PM
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I really don't think it's much a problem of loss of faith. In Brazil, from 1980 to 1994, the monetary base expanded 2.303.797.693.883%. Yes, more than two trillion percent. There is no faith that could have kept the value of such money...
@chodpaba, the M1, in the same period, expanded a lot less - 1.656.853.722.660% (1,6 billion)-, meaning that the multipliers we were talking about decreased considerably. They actually prevented the damage from being worse, in a certain way.

Do you know they were reduced? It seems to me it could just be less people willing to take a risk on derivatives when they know the base will soon be worthless.

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May 30, 2011, 09:11:26 PM
 #27

I really don't think it's much a problem of loss of faith. In Brazil, from 1980 to 1994, the monetary base expanded 2.303.797.693.883%. Yes, more than two trillion percent. There is no faith that could have kept the value of such money...
@chodpaba, the M1, in the same period, expanded a lot less - 1.656.853.722.660% (1,6 billion)-, meaning that the multipliers we were talking about decreased considerably. They actually prevented the damage from being worse, in a certain way.

I'm not saying that faith can hold things together no matter what. I'm just saying that to a large extent the loss of faith requires the printing.

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BitPorium
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May 31, 2011, 08:27:03 AM
 #28

I really don't think it's much a problem of loss of faith. In Brazil, from 1980 to 1994, the monetary base expanded 2.303.797.693.883%. Yes, more than two trillion percent. There is no faith that could have kept the value of such money...
@chodpaba, the M1, in the same period, expanded a lot less - 1.656.853.722.660% (1,6 billion)-, meaning that the multipliers we were talking about decreased considerably. They actually prevented the damage from being worse, in a certain way.

I'm not saying that faith can hold things together no matter what. I'm just saying that to a large extent the loss of faith requires the printing.
I am not very versed in economic theory but. If no one has faith in a currency how does printing more of it help? If I don't trust usd when I can get bread for $3 why on earth would I tryst it when $30 or $300 gets be the same bread. It like you not trusting me but me expecting you to trust me because I keep throughing myself in your face.
How does that work? It almost makes 0 sense... from a logical standpoint.
all economics sounds like some kind of religion. It sucks when our economy is faith based.
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May 31, 2011, 08:51:27 AM
 #29

If no one has faith in a currency how does printing more of it help? If I don't trust usd when I can get bread for $3 why on earth would I tryst it when $30 or $300 gets be the same bread. It like you not trusting me but me expecting you to trust me because I keep throughing myself in your face.
How does that work? It almost makes 0 sense... from a logical standpoint.

Stockholm syndrome.  I wish I were joking.

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May 31, 2011, 09:54:44 AM
 #30

From my understanding, people in government steal everyone else's money (they call this taxing, borrowing, and inflation), and when they have stolen too much, they go to war to steal some more, to distract others from their theft, and to use the war as an excuse to print. When this doesn't work, they just keep going until people realize what's going on.

Well if people have lost faith in the currency, then they all rush out at once to dump the dollar and buy products while they still can. The sharp rise in demand causes a sharp rise in prices. If the dollar is no longer money, then for all intents and purposes and perfect or not, all the products become money, until a new money is established.

Usually the government prints dollars chasing these prices, and it's never enough, so they print more. This also conveniently as mentioned keeps credibility while paying off government debt. But if people in government wanted to handle their debt right, they would have done it already. So there would be no expectation that they would stop printing until they thought they had blamed enough, stolen enough, made others suffer enough, fooled enough, or more likely got bored enough to try another fiat scam.
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May 31, 2011, 10:20:24 AM
 #31

If no one has faith in a currency how does printing more of it help? If I don't trust usd when I can get bread for $3 why on earth would I tryst it when $30 or $300 gets be the same bread. It like you not trusting me but me expecting you to trust me because I keep throughing myself in your face.
How does that work? It almost makes 0 sense... from a logical standpoint.

Stockholm syndrome.  I wish I were joking.

It isn't literally zero faith until it's all over. As long as there are some people still taking some amount for actual stuff it continues.

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June 03, 2011, 10:39:38 PM
 #32

In my country of origin, there are laws -- and I should know, as I plan to break them -- which require domestic businesses to use the local government-managed fiat currency as their operational capital, and to offer any products and services to customers in the same currency (presumably certain financial-services products are exempted).

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