…but possibly not in your lifetime…I have never been in the camp that exclaims “buy gold because the U.S. is headed for hyperinflation!”… There is no point trying to look ahead more than 2 years…[and within that time frame] I think that the U.S. has a roughly 0% probability of experiencing hyperinflation…I also think, however, that the U.S. has a 100% probability of eventually experiencing hyperinflation. [Below I explain why I think that is the case.]
The comments above and below are edited ([ ]) & abridged (…) excerpts from an article by Steve Saville (tsi-blog.com) to provide a faster and easier read.
…My belief that the U.S. has a 100% probability of eventually experiencing hyperinflation, however, has no practical consequences. There is no good reason to start preparing for something that:
- is an absolute minimum of two years away,
- could be generations away, and
- is never going to happen with no warning…
We will never go to bed one day with prices rising on average by a few percent per year, 10-year government bond yields below 2% and the money supply rising at around 8% per year and wake up the next day with hyperinflation. It takes a considerable amount of time (years, not days or weeks) to go from the point when the vast majority is comfortable with and has confidence in the most commonly used medium of exchange (money) to the point when there is a widespread collapse in the desire to hold money. Furthermore, many policy errors will have to be made and there will be many signs of declining confidence along the way.
The current batch of policy-makers in central banking and government as well as their likely replacements appear to be sufficiently ignorant or power-hungry to make the required errors, but even if the pace of destructive policy-making were to accelerate it would still take at least a few years to reach the point where hyperinflation was a realistic short-term threat in the U.S..
In broad terms, the two prerequisites for hyperinflation are:
- a rapid and unrelenting expansion of the money supply and
- a large decline in the desire to hold money…
To further explain, at a time when high debt levels and taxation underpin the demand for money, a collapse in the desire to hold money could not occur in the absence of a massive increase in the money supply. By the same token, a massive increase in the money supply would not bring about hyperinflation unless it led to a collapse in the desire to hold money.
Over the past three years the annual rate of growth in the U.S. money supply has been close to 8%. While this is above the long-term average it is well shy of the rate that would be needed to make hyperinflation a realistic threat within the ensuing two years. Furthermore, high debt levels in the U.S. and counter-productive policy-making in Europe will ensure that there is no substantial decline in the desire to hold/obtain US dollars for the foreseeable future.
The upshot is that there are many things to worry about, but at this time U.S. hyperinflation is not one of them.