Pragmatic Capitalism has gone some distance towards assuaging my concerns about hyperinflation. In the post PC, unlike so many influential economists, correctly notes the distinction between hyperinflation and ordinary inflation:
Hyperinflation is a disorderly economic progression that leads to complete psychological rejection of the sovereign currency.
Contrary to popular opinion deficit spending and high government debt levels are not the actual cause of a hyperinflation. In most cases they have been the result of other exogenous events such as ceding of monetary sovereignty, war, rampant corruption or regime change. It is these exogenous events that result in the public’s rejection of the currency, a collapse in the tax system and the government response of printing more money to fill in the confidence void. Ultimately the confidence void cannot be filled and the currency is fully rejected by the public in the form of hyperinflation.
and reviews the major cases of hyperinflation over the period of the last century. Based on his review foreign denominated debt is clearly a sufficient cause but not a necessary one since two of the five cases of hyperinflation in the post war period did not involve foreign denominated debt.
I also think that what he characterizes as regime change would be better thought of us mismanagement as a consequence of regime change or, in other words, regime change did not cause a failure of confidence in the sovereign currency but mismanagement by the incoming regime did.
Right now we have mismanagement to burn which explains my continuing concern about hyperinflation. In analyzing risk you’ve got to take a number of things into consideration. Among them you’ve got to consider the severity of the consequences in combination with the likelihood of occurence. In my view a number of the factors that have lead to hyperinflation including mismanagement, severe problems with the tax system, loss of faith in government, serious problems with the domestic economy, and a combustible political environment are all in place or have been fulminating for quite some time.