While I’m airing pet peeves here’s another one. Hyperinflation is not simply high inflation. It’s caused by a collapse in confidence in the currency.
The chart above is of Argentinian inflation prior to, during, and after their bout with hyperinflation. As you can see prices were perking along at an acceptable level of increase when suddenly, as if from nowhere, bam!. That’s not the exception for hyperinflation but the rule. It was true in Weimar Germany in the 1920s and it’s true in Zimbabwe right now.
What sparked this particular reaction from me was this post at Econbrowser. After a lengthy exposition and some graphs illustrating very low CPI and PPI Menzie Chinn notes:
This suggests to me that those who fear a quick turnaround in actual and expected inflation must be anticipating — either implicitly or explicitly — a supply shock as well.
Dr. Chinn’s graphs don’t assuage my concerns at all. Indeed, they look to me very much like those of Argentina just prior to hyperinflation.
I don’t know what concerns other people but I’m concerned that all of the aggressive experimentation with spending and quantitative easing will rock confidence in the dollar sufficiently to produce hyperinflation. Contrary to the misconception that seems to be popular among economists it’s not simply a difference in degree with ordinary inflation, i.e. inflation gets a little higher and a little higher and a little higher over time and eventually you have hyperinflation, but a difference in kind, sui generis.
I feel obligated to point out the hyperinflation in Weimar was a deliberate act of economic warfare perpetuated by the German government in order to force the French and Belgians out of the Ruhr. It worked, and the Papermark was replaced with the stable Rentenmark. The total period of hyperinflation in Weimar was less than a year, and it was a carefully controlled act.
I find Chinn very…disappointing in his postings. This is a good example. If we are worried about a sudden jump in inflation, possibly even hyperinflation then we should look at those periods in those countries as you have done. Both before, during and prior to the period of high/hyper-inflation. Looking just at what is going on right now in the U.S. isn’t going to tell us much. Also we should look at other aspects of the U.S. economy and other economies that went through periods of hyperinflation and see if there is a match and/or if that match implies hyperinflation.
Heh, Steve doesn’t like Chinn because he is the mirror-world Verdon (bearded Spock). Actually though … Chinn might make his argument less emotionally in general.
FWIW, hyperinflation is the always possible but seldom actual outcome. It’s easy to end up spending your life with “the end is near” on your sandwich board.
I say we still teeter toward austerity and deflation. We don’t have the political will to run the presses half-enough for inflation, let alone hyper.