Dr. Michael Burry (The Big Short- watched it so many times) says USA may see Weimar Republic style hyperinflation. Kathie Wood of ARK Investment Management says the bigger fear is actually serious deflation as many companies will cancel orders of raw materials going into our everyday products as soon as they realize the demand will not be that crazy and that their hoarding instinct was wrong. Finally, retail hospitality and tourism sectors will have what different experts say will be an amazing year at most before things go back to normal or flat. What will really happen is a) no one knows or b) knows it for sure but is not sharing details with us. In Canada, we have already seen some inflation that was more circumstantial than a consequence of real structural problems of old coming to light. Here, based on things I have seen and heard over the last year or so, I would like to share why I think or at least hope that we will be able to avoid hyperinflation here on our home turf.
First, I have noticed what my network of friends, family and friends of friends have done. A common theme I have seen is that most of them have refused to get ripped off or have their money disrespected and I support that a lot. For example, new gamers refusing to pay up to $300 on eBay for a used Geforce GTX 960, but instead going for a decent APU while they wait for GPU prices to normalize. Or, console gamer friends who instantly lost interest in updating their PS4's to PS5's via the scalper route, waiting instead for stock to become available at Best Buy etc. while in the meantime playing eSports or finishing games they always wanted to finish. Then, there are clothes and other stuff at stores like Winners (TJ Maxx in USA). Winners used to have such awesome red tag clearance prices. However, after the last lockdown, they disappeared and now you have clothes categorized by price range. Since this happened, I know a lot of people who just went over to the Bay department store to find deep discounts on decent brands, and others actually just said screw it and hit up thrift stores, saying it's better to buy gently used quality clothes sometimes than brand new from Winners since they made that change. Overall, everyone who was lucky enough to keep their job(s) or business has no problem spending money but they are in no way ready to get hustled more than usual. By doing this, people help limit inflation simply by saying yes, we have money, but we will not pay through the roof prices of many products we were originally planning to buy simply because of an abnormal supply and demand ratio that will sort itself out eventually if we keep acting this way.
Second, many people I know are not only investing their money, but more and more of them are getting familiar with cryptocurrencies as well which is an entire separate and hefty investment category. Also, everyone who can still buy real estate is buying it even if their parents need to step in to help. Therefore, investment is sucking up a lot of money right now and is keeping it out of circulation for goods and services. Now, some people say that the masses of us commoners only want to invest short term so we can make quick gains and spend them on goods and services. However, more and more people are realizing the value of holding on to their investments. Sometimes, I wonder if that was the plan all along. Democratize investing, create new investment options over time, and get people to put their money into them. That way, governments can print more and more money but it will not cause a hyperinflation in the "real world" as long as people keep a lot of it in their investments. As for investment firms, when it comes to things like cryptos, stocks, ETF's etc., they do not care about the price we will run up with all this extra money- they care about volatility and volume. With that in mind, it would be stupid if they banned cryptos altogether but that would be a story for another time. P.S. digital products and in-game/in-app purchases have the same effect on the money in circulation in the real world.
Finally, I think more people will educate themselves on economics and fiscal policies that our different political parties are recommending every time we have to go vote, and then also once they are in power. I know more people than ever before who educated themselves on the Great Depression in USA and in Germany (Weimar Republic) and it woke them up to how dangerous blind trust really is. I found out that the money printing in the Weimar Republic got so bad that 1) the old currency was printed such that one trillion paper marks as they were called could not buy much; 2) they introduced a new currency alongside the old one; 3) 1 trillion of old currency became equal to 1 unit of new currency; 4) 4.2 of new currency (4.2 trillion of old currency) was equalized with 1 US Dollar. Now, imagine what this did to people who had lots of savings in the old currency. Wow! Just wow! So yeah, I am pretty sure that our government knows what we will do if it pulls a Weimar on us...
So, dearest readers, I think and honestly hope that we will be ok in the coming years. For now, simply having things back to normal in the very near future because even that would a reason to celebrate. Yes, there will be scars and most scars are forever. Nevertheless, those of us lucky to still be around will want to move things forward and we will make full recovery and the next round of prosperity a self-fulfilling prophecy. :)
First, I have noticed what my network of friends, family and friends of friends have done. A common theme I have seen is that most of them have refused to get ripped off or have their money disrespected and I support that a lot. For example, new gamers refusing to pay up to $300 on eBay for a used Geforce GTX 960, but instead going for a decent APU while they wait for GPU prices to normalize. Or, console gamer friends who instantly lost interest in updating their PS4's to PS5's via the scalper route, waiting instead for stock to become available at Best Buy etc. while in the meantime playing eSports or finishing games they always wanted to finish. Then, there are clothes and other stuff at stores like Winners (TJ Maxx in USA). Winners used to have such awesome red tag clearance prices. However, after the last lockdown, they disappeared and now you have clothes categorized by price range. Since this happened, I know a lot of people who just went over to the Bay department store to find deep discounts on decent brands, and others actually just said screw it and hit up thrift stores, saying it's better to buy gently used quality clothes sometimes than brand new from Winners since they made that change. Overall, everyone who was lucky enough to keep their job(s) or business has no problem spending money but they are in no way ready to get hustled more than usual. By doing this, people help limit inflation simply by saying yes, we have money, but we will not pay through the roof prices of many products we were originally planning to buy simply because of an abnormal supply and demand ratio that will sort itself out eventually if we keep acting this way.
Second, many people I know are not only investing their money, but more and more of them are getting familiar with cryptocurrencies as well which is an entire separate and hefty investment category. Also, everyone who can still buy real estate is buying it even if their parents need to step in to help. Therefore, investment is sucking up a lot of money right now and is keeping it out of circulation for goods and services. Now, some people say that the masses of us commoners only want to invest short term so we can make quick gains and spend them on goods and services. However, more and more people are realizing the value of holding on to their investments. Sometimes, I wonder if that was the plan all along. Democratize investing, create new investment options over time, and get people to put their money into them. That way, governments can print more and more money but it will not cause a hyperinflation in the "real world" as long as people keep a lot of it in their investments. As for investment firms, when it comes to things like cryptos, stocks, ETF's etc., they do not care about the price we will run up with all this extra money- they care about volatility and volume. With that in mind, it would be stupid if they banned cryptos altogether but that would be a story for another time. P.S. digital products and in-game/in-app purchases have the same effect on the money in circulation in the real world.
Finally, I think more people will educate themselves on economics and fiscal policies that our different political parties are recommending every time we have to go vote, and then also once they are in power. I know more people than ever before who educated themselves on the Great Depression in USA and in Germany (Weimar Republic) and it woke them up to how dangerous blind trust really is. I found out that the money printing in the Weimar Republic got so bad that 1) the old currency was printed such that one trillion paper marks as they were called could not buy much; 2) they introduced a new currency alongside the old one; 3) 1 trillion of old currency became equal to 1 unit of new currency; 4) 4.2 of new currency (4.2 trillion of old currency) was equalized with 1 US Dollar. Now, imagine what this did to people who had lots of savings in the old currency. Wow! Just wow! So yeah, I am pretty sure that our government knows what we will do if it pulls a Weimar on us...
So, dearest readers, I think and honestly hope that we will be ok in the coming years. For now, simply having things back to normal in the very near future because even that would a reason to celebrate. Yes, there will be scars and most scars are forever. Nevertheless, those of us lucky to still be around will want to move things forward and we will make full recovery and the next round of prosperity a self-fulfilling prophecy. :)