The comments below are an edited and abridged synopsis of an article by John Ing
Between Covid and the Russia/Ukraine war, markets are vulnerable. Amid the uncertainty, huge deficits will be the norm. Inflation is climbing, and hyperinflation is a possibility. Hyperinflation has often been a consequence of wars (Germany, China, Afghanistan). The US is following the same path, with hyperinflation-type supply shortages and a sinking currency. In each of the previous instances, governments ran massive deficits, racking up huge national debts, and each had a central bank creating money to pay their bills. There was a complacency in policymaking and economics.
One of the worst examples was Weimar Germany’s hyperinflation. In 1923, $1.00 was worth 4.2 trillion marks versus 42 marks in January 1920, paving the way for Hitler’s rise to power. The German inflation was due to huge deficits run by the government during World War I and the Treaty of Versailles’s heavy reparation payments, financed by the unlimited issuance of marks. A liter of milk, 7 marks in April 1922, cost 26 marks five months later.
Up for discussion: The danger of runaway inflation; the Russians are coming, the Russians are coming; American exceptionalism; a commodity supercycle is upon us; a Chinese gold standard; when the swamp drains…; the US spends more than it earns; the golden rule still rules; and recommendations.