The above images show what happens when the money printer goes brrrrrrrr in a couple of sobering real life scenarios. In chronological order, we have Weimar Republic (Germany), Zimbabwe, Yugoslavia and Venezuela. If you ever wanted to see what a starving billionaire looks like, it is someone taking 14 million bolivars in Venezuela to buy a chicken- if there is one. Scary stuff, dearest readers. Imagine contributing to your RRSP or 401K your entire life, only to spend it on groceries and perishables in a matter of months or just a year or two! So, here in North America as well as EU and some other places, we took the first step due to our current global predicament; while we have not yet added zeroes to our standard banknotes, we have plenty more of them in digital and physical formats. Nevertheless, I see "fears of hyperinflation" being thrown around in the media and I wanted to throw a PSA out there about what is and is not a hyperinflation, as well as ask you readers for an opinion if the stock market and digital goods may help save us from it.
So, according to multiple sources, a hyperinflation by its very definition is when prices of typically perishable everyday goods rise by 50 percent in one month. Now that, dearest readers, and anything leading up to it, is crazy. Imagine $500 worth of groceries in February would cost $750 in March! Oh, and then it continues going up. We never, ever want this no matter what. Basically, here is what happens. A crisis like pandemic or war happens. A country works with banks to get more money into circulation to offer financial help to people affected by the disaster. Nice as that is, a country is putting more money into circulation but there is less work and economic output going on, not more. So, more money for less or no work. At the same time, people panic and start buying up perishables like crazy with the extra money floating around; they want to hoard until the crisis is over. The goods producers see demand skyrocketing and they either cannot keep up with demand, or they refuse to because they know either way that the cost of goods they make will then go up and they can profit more. Do not blame them, every one of us looks for ways to make more money or get more stuff in life, not just goods producers... Eventually, people can end up selling their homes just to get cans of food and toilet paper. Oh, and as we get tired of printing so much of our standard banknotes, we start printing less money and adding more zeroes to it. Then, things get really crazy and people become starving billionaires. Also, on a side note, remember that increasing cost of goods impacts everything. You drive less because gas goes up and so do car repairs because parts costs skyrocket; same goes for public transit. The healthcare system can collapse due to increased cost of medication and medical supplies. Less homes are constructed as the cost of building materials goes up. The list goes on.
Now, for this to happen to us, we would need to go through this entire process yet somehow, that is not happening yet. I wonder if this is thanks in part to the stock market and digital goods. The stock market is a source of so many different companies, ETF's and other funds you can invest in, hoping for a return. Digital goods like digital currencies (Doge coin, bitcoin), items you can buy in video games and so on are plentiful sources of products that people can buy. It sort of seems like spending money on these, while not always helpful to individuals who do so, are so much in demand that a lot of this extra the government and the banks create is actually being kept out of all traditional perishable goods categories. So, it seems to me that we increased the safe money printing levels by doing the following: 1) we kept creating new categories and subcategories of products that vast groups of people want to buy; 2) we increased the number of things most people consider essential e.g. smartphones tablets laptops cars etc.; 3) investing is catching on more than ever before, becoming essential in the Western World and sometimes more enticing than saving money.
Where does it all stall? When does it all fall apart? I have no good answer for those questions. We are in uncharted territory, dearest readers. What do you think?
So, according to multiple sources, a hyperinflation by its very definition is when prices of typically perishable everyday goods rise by 50 percent in one month. Now that, dearest readers, and anything leading up to it, is crazy. Imagine $500 worth of groceries in February would cost $750 in March! Oh, and then it continues going up. We never, ever want this no matter what. Basically, here is what happens. A crisis like pandemic or war happens. A country works with banks to get more money into circulation to offer financial help to people affected by the disaster. Nice as that is, a country is putting more money into circulation but there is less work and economic output going on, not more. So, more money for less or no work. At the same time, people panic and start buying up perishables like crazy with the extra money floating around; they want to hoard until the crisis is over. The goods producers see demand skyrocketing and they either cannot keep up with demand, or they refuse to because they know either way that the cost of goods they make will then go up and they can profit more. Do not blame them, every one of us looks for ways to make more money or get more stuff in life, not just goods producers... Eventually, people can end up selling their homes just to get cans of food and toilet paper. Oh, and as we get tired of printing so much of our standard banknotes, we start printing less money and adding more zeroes to it. Then, things get really crazy and people become starving billionaires. Also, on a side note, remember that increasing cost of goods impacts everything. You drive less because gas goes up and so do car repairs because parts costs skyrocket; same goes for public transit. The healthcare system can collapse due to increased cost of medication and medical supplies. Less homes are constructed as the cost of building materials goes up. The list goes on.
Now, for this to happen to us, we would need to go through this entire process yet somehow, that is not happening yet. I wonder if this is thanks in part to the stock market and digital goods. The stock market is a source of so many different companies, ETF's and other funds you can invest in, hoping for a return. Digital goods like digital currencies (Doge coin, bitcoin), items you can buy in video games and so on are plentiful sources of products that people can buy. It sort of seems like spending money on these, while not always helpful to individuals who do so, are so much in demand that a lot of this extra the government and the banks create is actually being kept out of all traditional perishable goods categories. So, it seems to me that we increased the safe money printing levels by doing the following: 1) we kept creating new categories and subcategories of products that vast groups of people want to buy; 2) we increased the number of things most people consider essential e.g. smartphones tablets laptops cars etc.; 3) investing is catching on more than ever before, becoming essential in the Western World and sometimes more enticing than saving money.
Where does it all stall? When does it all fall apart? I have no good answer for those questions. We are in uncharted territory, dearest readers. What do you think?