Timing the coming hyperinflation

We have a bubble in government paper. Assessing the end of the bubble is, like assessing the end of any bubble, hard.

Bubbles climb a wall of worry. At the beginning, everyone worries that the asset is overpriced. As more and more people hold more and more value in the bubble asset, that signifies that fewer and fewer people are worried. Supposedly, government paper is the only safe asset left, so most people prefer to hold it, even though interest rates are far below inflation.

Eventually almost everyone is convinced that the bursting of the bubble will not happen for a long, long time, and just about everyone has as much of their assets in the bubble as they are ever going to have. At which point, at the point of maximum confidence in the bubble asset, it starts to fall in value. The bubble bursts when confidence in the bubble asset stops rising.

So when the hardcore gold bugs have given in, when the prophets of hyperinflation having repeatedly been proven wrong, stop issuing new redated prophecies, that is when we shall suddenly discover that the world cannot indefinitely have a far larger amount of assets in the form of taxpayer futures than it has ever had before.

Of course, if you have read this far, you want me to stick my neck out, and give a date.

Bubbles are unstable, and can suddenly collapse for no reason at all, or because the child calls out that the emperor has no clothes. Often confidence just stops growing for no particular reason, and the asset starts to fall, and confidence collapses.

The sooner the collapse, the less damage is caused. But the trouble is that this bubble is being centrally managed by powerful people, who will do anything to keep confidence up, short of actually balancing their budgets, so though the collapse could start at any moment, I think there is a good chance this bubble will go all the way to its absolute limit, which looks to me to be around 2026.

I used to say 2025, so I am adjusting my prophecies, which is itself an indicator of the collapse being imminent. Food prices and fuel prices are soaring, and though the government is telling the truth about fuel prices, it continues to deny, or at least substantially delay the truth, about food prices.

If the collapse comes sooner than 2026, then in trying to predict the time of the collapse, we are trying to predict crowd psychology, meaning we are trying to predict madness, which is notoriously unpredictable. The best tool for predicting crowd psychology is charting.

I therefore attempted to fit the commodities index on to the run up towards German hyperinflation. Unfortunately, it does not fit well. Commodity prices are growing linearly or exponentially with time, rather than hyperexponentially. Looking at the chart to 2008, the fit predicts hyperinflation in 2012; looking at the chart to 2009, the fit predicts hyperinflation early in 2011, which obviously did not happen; looking at the chart to the middle of 2010, the fit predicts hyperinflation in 2013 June; looking at the chart to today, the fit predicts hyperinflation in 2014 June. A method that yields ever later prophecies is probably predicting crisis too soon.

So, I will say that hyperinflation is unlikely before late 2014, but will happen 2026 or earlier.

6 Responses to “Timing the coming hyperinflation”

  1. Vincent Cate says:

    I have a bunch of ideas for ways that we might be able to predict hyperinflation. Sort of a list of possible research ideas.


  2. Matthew says:

    Just keep stacking. . .

  3. RS says:

    I’m a weakling at this game, but to me the US is really pushing it in an amazing way as of right now. How can they even inflate fast enough? I think Europe could cook for a whole lot longer. Naturally a lot’s riding on what happens with the price of petroleum.

  4. Dave says:

    Hugh Hendry says that if you are a hyperinflationist, then you should be long US Treasuries now because there is likely to be significant deflation before it all turns bad.

    • Red says:

      The US government seems intent in printing it’s way though the deflation process.

    • jim says:

      I don’t think so. Deflation is a Keynsian myth. I am seeing stagflation, not deflation, and expect to see a lot more of it.

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