tag:blogger.com,1999:blog-8282587.post1727005709207123510..comments2024-03-19T01:48:39.709+00:00Comments on Power and Control: Surviving In A War ZoneM. Simonhttp://www.blogger.com/profile/09508934110558197375noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-8282587.post-77346519316564255432010-08-29T05:58:58.213+00:002010-08-29T05:58:58.213+00:00The post at the top of the comment you quote has a...The post at the top of the comment you quote has a lot of the dynamics correct, but there's one big thing he missed.<br /><br />The post describes a one-way hyperinflation, where the end-state is a New Dollar with the decimal point shifted to the left by several places, and everyone's savings are utterly destroyed. One of the key ingredients for that kind of hyperinflation is missing in the U.S.--an alternative currency. He actually alludes to this several time, saying that eventually things get back to normal because people want a medium of exchange. The reason hyperinflation happened so easily in other situation is because there was a ready alternative medium of exchange. Gold marks in Weimar Germany, the U.S. dollar in the South American hyper-inflations, the gold <i>solidus</i> in the Roman Empire (vice the inflated denarius). I'm not up on the details of Zimbabwe, but I believe it's common to do business in the South African Rand there. In all of these situations, as soon as people lost confidence in the national currency they just stopped accepting it as payment because they already had a ready alternate currency.<br /><br />The U.S. tax and banking systems make it very difficult to do any kind of business in a currency other than the dollar. The IRS takes a bite out of you at every turn if you try. It would get far worse during a real hyperinflation. For that reason, I don't think things will work out the way he describes. Maybe there will be a run on Treasuries, almost certainly there will be a spike in commodities at some point. Imports will get expensive, gas will get outrageous, lots of day-to-day items will either be expensive or unavailable. But this will crash the economy (similar to 2008) and crash commodity prices with it. Quite a roller-coaster ride, but in the end you wind up roughly where you started, not with a New Dollar.<br /><br />Hyper-inflation could happen here, but it will take more than a couple of years to change people's habits, business systems, and the tax code enough to start doing business in a parallel currency. I think this doesn't allow for a hyperinflation induced by a flash-crash like that post describes.Neilhttps://www.blogger.com/profile/01039999711990701720noreply@blogger.com