Elbonian Inflation Reaches A Billion Percent, Daily
The Dilbert comic strip has a series running right now (two strips so far, maybe more?) you shouldn't miss on hyperinflation. Both focus on the difficulty of making purchases when the money is becoming more worthless almost by the moment: Potato and Fetid Water.
As often with good comedy, inflation at "a billion percent, daily" is just an exaggeration of many real hyperinflations that have occurred throughout history... But especially since the 20th century and the wide adoption of central banking. See, for example, Hans Sennholz on the Hyperinflation in Germany, 1914-1923. Also, see Mises's discussion of the same topic. He uses the charming term "the crack-up boom". Let us hope hyperinflation remains something to joke about because the reality of living through one is not funny at all.
Comments (7)
el rei
what's the current "real" rate in Zimbabwe?
Published: September 16, 2008 9:34 AM
Karl Lembke
I suspect this qualifies as a nitpick, but today's Dilbert shows the price of a small fetid water inflating 100-fold in a minute. An inflation rate of one billion percent per day works out to 1.1256% per minute. At that rate, a 100-fold increase would take a little over six and three-quarters hours. (6 hours, 51 minutes, 25.7 seconds).
An inflation rate of one hundred times (ten thousand percent) per minute would be very hard to deal with.
Published: September 16, 2008 11:23 AM
Bank Rupt
The United States of America will enter into a phase of Hyper-Inflation through reduced interest rates and bailout of several failing financial companies.
The USA is going bankrupt. Last time a powerful country went bankrupt, it declared world war II.
Published: September 16, 2008 12:07 PM
Nitpick
A doubling every minute is 100%, a tripple 200%, etc. Hence, a one hundred times inflation rate is actually nine thousand nine hundred percent.
Published: September 16, 2008 12:59 PM
curio
The USA is not “going” bankrupt. It IS bankrupt. At this point it would be impossible for the gov to pay off all existing debt obligations, were it not creating money out of thin air.
As of 2007, according to the Government Accountability Office, the current Federal Deficit = over at least $9 Trillion. Total Debt (which includes social insurance obligations) = over at least $60 Trillion.
I say “at least” because even the GAO points out that there are significant discrepancies and financial mismanagement occurring in several departments, particularly the largest – the Dept of Defense. So who knows what the numbers really are, but you can bet they aren’t less than what they are stating.
Total revenues in 2007 were less than $3 Trillion, so they would have to triple taxes and other revenue sources just to pay off current debts. I’d say that qualifies as bankrupt.
Indeed, severe inflation is the only realistic outcome in the long term. Drastically slashing federal programs, especially defense, would at least help. Closing up some of those hundreds of multi-million dollar bases around the globe would save hundreds of billions, perhaps over a trillion, alone.
Published: September 16, 2008 1:23 PM
Ball
curio, actually, the USA is technically insolvent. It will be bankrupt when its loans default. An inevitability to be sure, but we aren't there yet.
The Spanish Empire had a long run and spanned the globe, yet at its end it defaulted four times in a row and became the poor man of Europe.
Published: September 16, 2008 4:31 PM
Ball
curio, actually, the USA is technically insolvent. It will be bankrupt when its loans default. An inevitability to be sure, but we aren't there yet.
The Spanish Empire had a long run and spanned the globe, yet at its end it defaulted four times in a row and became the poor man of Europe.
Published: September 16, 2008 4:33 PM