Some Notes on Hyperinflation

Good afternoon. Mike here from Forward Observer and Gray Zone Activity.

Bottom Line Up Front: Hyperinflation is a growing concern of mine. I don’t believe the threat is imminent, however, the Fed’s monetary policy and the U.S. Government’s fiscal policies are foolish. They can avoid significant consequences because the U.S. Dollar’s world reserve status has no serious competition right now. Monetary history says that this period of “exorbitant privilege” is likely coming to an end. Each Thursday, Troy and I write an economic intelligence report called Economic Early Warning. If you don’t already receive it, you can subscribe here: https://forwardobserver.com/susbcribe

Over the summer, I read three books on hyperinflation to learn more about what happened in the past and how it could happen here. (Spoiler Alert: It could.)

More recently, I picked up a book called Studies in Hyperinflation & Stabilization. I haven’t finished it yet, but I want to share with you some initial takeaways on our own potential future.

1. Once inflation gets going, it keeps going, even if the expansion of the money supply slows or stops, due to the EXPECTATION of inflation & sensitivity to money holding (i.e., spending it quickly). Inflation is psychological, too.

When people believe, rightly or wrongly, that their money will be worth less tomorrow, they have an incentive to spend what they would ordinarily save. This can keep inflation going regardless of the Fed’s monetary policy.


2. Hyperinflation is MUCH more common that I previously thought. We all know about Weimar Germany (1921-23), Zimbabwe (2007-), Venezuela (2016-), maybe Argentina (1975-1990).

But go ahead and add Soviet Russia (1917-24), Greece (1943), Hungary (1945-46), China and Taiwan (1945-49), Korea (1950-53), Vietnam (1966-69), Yugoslavia (1992-94), and many other examples.


3. Do you know what most of these cases of hyperinflation had in common?

War. Either a civil war, foreign bombardment, or foreign occupation. The domestic outbreak of war erodes the tax base and subsequently government tax revenue, while the money supply (especially fiat/cash) remains the same or increases, giving you inflation and then hyperinflation.

If you believe that a large scale civil war will erupt in the United States, then history says you should be preparing for economic, financial, and monetary ruin.


I’ll have a few more takeaways from this book in tomorrow’s Economic Early Warning report, including how the Federal Reserve and U.S. Government are violating basic principles to avoid hyperinflation. You can subscribe and get access to our Thursday EEW and the rest of our intelligence reports here: https://forwardobserver.com/subscribe


Until next time, be well and stay out front.

Always Out Front,
Mike Shelby

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