What about the risk of inflation or, worse, hyperinflation in the United States this year?
→ This question will be tackled within our collective intelligence during the next GEAB Café, scheduled for 24 February, 2021. This question is taken from the article Europeans on alert! Major uncertainties across the Atlantic (recovery plan, inflation, defence) in the GEAB No 152.
Nobody believes in hyperinflation any more. That said, less than a year ago, nobody believed in inflation either. If the American debt mechanism of the last 20 years produced no apparent inflation, this does not mean that there was no inflation at all – either hidden (within the financial markets) or exported (to developing countries closest to the American sphere of influence, namely Latin America).
The next question is whether the global geopolitical reconfiguration, which has been underway for 20 years, is not likely to reduce the capacity of the United States to divert inflation away from its domestic market. At least that’s what we assume. Three characteristics seem to have presided over German hyperinflation in the early 1920s: the debt ratio, the existence of private currencies, and a high speed of money circulation. If the first point has been ticked for a long time, the emergence of digital currencies and cryptos now fulfils the second condition.
For the time being the monetary velocity is low. However, the American rescue plans are targeting the real economy: supporting purchasing power, financing infrastructure, enabling people to get medical care, etc. All this in a context of a rapid economic recovery «thanks to» the American super-vaccination campaigns, here’s what’s needed to increase the famous traffic speed.
If none of these causes taken individually can bring along fears of an episode of hyperinflation, their simultaneous combination is a real reason for concern. Would the tools for controlling healthy inflation that Janet Yellen has in mind have anything to do with the issue of a Rentendollar, possibly digital, at random, diem-libra?
For the time being, the Fed and the US Treasury are planning to assume a return of inflation which apparently does not frighten them. In fact, in order to refinance itself, the government not being able to count on taxes, inflation will be welcome. But it will still have to be controlled, that way it does not turn into an episode of hyperinflation, and the possible consequences on an impoverished population are cause for concern. The day when the US financial markets stop absorbing the inflation induced by their huge debt levels, it will have to end up somewhere. And given the height of the debt mountain, an inflationary blip could quickly get out of control.
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