No Fever Like Gold Fever: Response

Hyperinflation appears when the loss in confidence in country's financial institutions and more broadly its currency suddenly becomes fatal. Before that, things coast on as usual. Then there is a sudden "nonlinear" transformation to a whole new ball game. It is precisely the nature of hyperinflation that you cannot project it based on prices until it hits.

I put the US in the ball park of that risk. We've got massive quantities of dollars and dollar-denominated credit floating around the world, printed over the past 30 years if not recently. We've got the world's reserve currency, which is now faltering, which means it can really only become LESS of a reserve currency. We've got a wholesale failure of our financial institutions, and government in regulating them. We have a demographic and managerial nightmare -- a country that cannot produce enough to put itself in balance. And we're piling on government obligations faster than ever.

Some would point out that a country must be "politically isolated" to experience hyperinflation, and that the US is not that. Well, I wouldn't be so sure. But even if it isn't isolated, who will be able to lend to the US in volumes great enough to keep it afloat? That is already happening, and can only happen to a lesser extent, not more.

So these almost perfectly match the conditions of hyperinflation, as it has been repeated time and time again in history. The only question is how we get from relative stability to there. And my only answer to that is "suddenly".

The US is not special, in that it cannot defy economic law forever.