Great bunch of replies to my question about hyperinflation. I'll take them one at a time.
Pete: here's an article written by that same Peter Bernholz where he claims that he does NOT think there will be a hyperinflation in the US. Its dated - about three years old - but read it and tell me what you think. One signpost he gave for incipient hyperinflation is where 40% of government expenditures are being funded by money creation (direct monetization). Looking at graphs on FRED, there's one year where that almost happened - 2009 - and then money creation backed off. However, the metric IS interesting - measuring money creation divided by government expenditures, and more important than "winning" or "losing" such an argument, I'm looking exactly for such metrics so thanks!
Mr Bernholz also suggested another requirement is when people "turn positive" on the economy and all that money sitting around is suddenly mobilized. That makes sense to me, and so that's something else we can follow. I'll poke around and look for consumer sentiment metrics and see what I can dig up.
Here's the Bernholz article:
http://www.american.com/archive/2009/december-2009/how-likely-is-hyperinflation
Here's the graph from Fred - USFED budget change y/o/y divided by annualized Fed Gov expenditures. Once the FGEXPND series updates, we'll probably see that chart pop up again. Perhaps there's a series on govt expenditures that updates more frequently. I'll poke around.
![](http://research.stlouisfed.org/fredgraph.png?g=eX5)
@Jim
Loss of reserve currency status. Yes I've heard that one too. What can we use to measure this loss? Presumably long term treasury rates are the metric - the ability to borrow money cheaply. Martin Armstrong is a bit of a crank, but when a bunch of people predicted hyperinflation he has counterclaimed that a core economy never hyperinflates - that only happens in the periphery. When trouble strikes, money runs towards the core, not away from it. As measured by Treasury rates and the observation of money flows during the many phases of the eurozone crises, that thesis would seem to bear out. The US remains a core economy.
Would you rather have your money in China, or in the US? Me, I pick the US. Heaven only knows what the Chinese government will do any day of the week. And more anecdotal evidence suggests the chinese leadership have bought houses in the other core economies - the US, Canada, England. But that's anecdotal - for metrics, we monitor money flows which means long treasurys and the USD. Judging from how the yield on TIPS (top chart, trending down) and the trade-weighted US dollar (bottom chart, tracking sideways) are doing, we're not losing that reserve status as of today. If TIPS start tracking up - say above 2% - and the dollar down below (say) 90, then we will have a problem.
![](http://research.stlouisfed.org/fredgraph.png?g=eX8)
![](http://research.stlouisfed.org/fredgraph.png?g=eX9)
@AKGranny
$3 per pound for cauliflower? BLS response would be: try substituting a different vegetable!
The deeper truth here is, the impact of food price inflation on a person depends entirely on how much of their budget is used to buy food. That's why food riots happen in very poor countries and not in rich ones. People in Pakistan spend 45% of their budgets on food, so when food doubles in price, they get extremely upset.
Most people in the US do not spend anywhere near that (our average is about 7%), so we don't have food riots. And we have a great deal of cheap (but perhaps not so nutritious) food. FAO has a food price index http://www.fao.org/worldfoodsituation/wfs-home/foodpricesindex/en/ which illustrates how dramatically international food prices have risen since 2007. (I pick the orange line - nominal prices - since I'm not really seeing wage gains in nominal terms these days). But if your food budget takes up 40% of your income, you REALLY notice this. That's not hyperinflation, but for sure, its pain. I'd claim that's linked to oil prices, and I have a chart for that too if you are interested.
![](http://www.fao.org/fileadmin/templates/worldfood/images/home_graph_3.jpg)
Thanks for the replies, I think I'll go and make another page! I have one on credit inflation and CPI inflation, but not one for signs of hyperinflation.