Inflation, Asset and Consumer Prices
The comments below are an edited and abridged synopsis of an article by Goldmoney Insights
“The Fed finds itself between a rock and a hard place: Either it keeps inflating or the whole confidence-based valuation of financial assets collapses. Either it raises interest rates or the dollar collapses.”
There has been speculation about what happens to asset values in a hyperinflationary collapse. This question has become relevant because consumption in the US and Britain has been stimulated with monetary inflation aimed at consumers, and been met with limited supply, leading to strongly rising prices across the board.
Unless urgent action is taken, there is the possibility of a hyperinflationary outcome. The only alternative is to stop monetary inflation and thereby deliberately crash the global economy.
Along with other central banks, the Fed is trapped. We will assume that rather than face this reality, governments and central banks will continue money printing until both their fiat currencies and financial systems face collapse. All precedent points to this choice.
That being the case, an examination of how a collapse in the purchasing powers of fiat currencies is likely to affect asset and consumer prices is timely. This article draws on theories of money as well as empirical evidence in search of some answers. The answers will surprise and discomfort many of its readers.
Up for discussion: Introduction; monetary and market policies from here; the outlook for fiat currencies; asset values in a currency collapse; consumer prices; summary and conclusion.