Summary: What makes an experiment is uncertainty about the outcome, no matter how great people’s confidence. That applies to the great monetary experiments now in progress by China, Europe, America, and Japan. Europe since 2008, the USA since 1998, and Japan since 1988 all have common histories: confident leadership, unexpected crises, and repeatedly wrong forecasts.
After all that it will astonish historians how we worship the power of central bankers. But that power neither makes them omnipotent, nor their theories accurate. Today’s post by Nathan Lewis discusses one of the possible outcomes.
“Unless you expect the unexpected you will never find truth, for it is difficult to discover.”
— Heraclitus, the pre-Socratic “Weeping Philosopher” of Ionia
Today’s guest post:
What is “Hyperinflation”?
By Nathan Lewis at New World Economics, 13 October 2013
Reposted with his generous permission
- A history of hyperinflation
- Hyperinflation: not what you might think
- What hyperinflation looks like
- USA in the 1970s; Mexico in the 1980s
- Other lesser-known episodes
- Why not us? Or rather, why not us yet?
- About the author
- For More Information
- A Last Resort, if all else fails …
(1) A history of hyperinflation
The word is tossed around, and many have an opinion about it, without having any real clear idea of what it means.
We all probably have some mental picture of the “billion dollar banknote” or “price of coffee rises as you drink it” kind of hyperinflation, as happened in Germany especially in 1923.
But, this is somewhat rare. Not as rare as you might think, but it constitutes only a small portion of those events which I think are legitimately labeled “hyperinflation.” This table lists fifty-three of the most intense hyperinflations in recent history: The Hanke-Krus Hyperinflation Table.
The least intense hyperinflation listed on this table is a 55.5% increase in “prices” in a month in Kazakhstan in 1993, which works out to a doubling of prices every 47.8 days. However, this table leaves out many hundreds of events which are legitimately called “hyperinflation” in my opinion, and in the opinion of those who lived through them, and historians.
You see what I mean when I say that it is “not as rare as you might think.” Here’s Wikipedia on various hyperinflations.
(2) Hyperinflation: not what you might think
Extreme hyperinflations like these tend to grab people’s attention. However, I would suggest that they are actually less relevant than some milder cases.