Inflation – The Case for Dollar Decline
Inflation happens when the Dollar loses value because more of them have been printed. We’ve been discussing the factors which show our economy is headed for a more serious recession. There is no real broadly accepted definition of hyperinflation. Inflation is technically when the money supply is increased. However, most people look for the effects of inflation and therefore look to measure the increasing costs of goods in a currency and thus measure inflation this way. We have all grown very accustomed to living in a world of inflation. If you’re old enough, you probably remember the 1970’s as a time of significant inflation. However, this was not hyperinflation.
Hyperinflation generally means that the value of a currency (the Dollar) declines in an extremely rapid manner. Decimal points move. In other words, if a cup of coffee costs $2 and you turn around a year or two later, and it costs $20. This is hyperinflation. Of course, this would not happen in a way that you could turn around and miss it unless you were in a coma! We don’t feel that the effects need to be that big for the hyperinflation tag to be applied, but again, there is no strict definition, and at the same time, we don’t have a definitive opinion on how much we feel the value of the US Dollar will fall. But we do believe the value will fall.
There are economists who we respect who disagree that this will happen. You must decide for yourself. The biggest reason that they believe this won’t happen in the US is because they don’t see the currency which will replace the US Dollar as the world reserve currency and so they feel that the people of the world will continually flock towards the US Dollar in times of trouble as a safe haven. We believe that that is not enough of an argument for the sanctity of the Dollar to ignore the many faults. We’ll present those to you so that you can make your own opinion.
First, let’s introduce a little historical background so that you can understand what is likely to happen to your Dollars soon. We’ll start with the history of money tomorrow…
This is Part 1 of the series Hyperinflation and the Dollar. To continue with this series, click on Pt 2.
Photo credit: j7m