The debt hawks are to economics as the creationists are to biology.
Today, September 13, 2010, a debt-hawk named Vincent (I withhold his last name to spare him embarrassment) told me his prediction: Because of “excessive” deficit spending, the U.S. will have hyperinflation next year, 2011. While there is no specific definition of hyperinflation, his definition is 3% a month (which means prices would have to be 43% higher at the end of December 2011, than they will have been next January).
Debt hawks love apocalyptic statements about how America is headed for disaster. They have been predicting massive inflation since 1980, by publishing “debt clocks” and such, and their assurance that China soon will stop buying T-bonds has them in a tizzy.
I’m posting this now as a reminder, which we can revisit at the end of 2011. Vincent, if you read this post, be sure to remind me at the end of next year.
If any readers see any other sky-is-falling, debt hawk predictions, send them to me for posting and later review.
Rodger Malcolm Mitchell
http://www.rodgermitchell.com
No nation can tax itself into prosperity
#Monetary Sovereignty - Mitchell 
Hyperinflation only occurs IF and only IF the the masses demand higher wages. Also, the Fed will need to proactively involved to avoid it. However, if these happen then I think by 2013 we’ll have hyperinflation. But more likely it will occur in 2015 due to rising oil prices – as oil starts to peak properly and scarcity forces rationing.
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The masses always demand higher wages.
Hyperinflation occurs when a government responds to inflation by printing more money, rather than by raising interest rates — the proper response.
So now we have predictions of hyperinflation for 2011, 2013 and 2015. I’ll save all these predictions, and remind the forecasters when these dates come and go without hyperinflation.
Rodger Malcolm Mitchell
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I don’t think raising interest rates are the proper response to inflation as it penalizes people with variable rate mortgages and credit cards,just as too low interest rates penalizes savers and pensioners with bonds.A variable sales tax,and taxing interest income and dividends over 10,000 a year at normal rates rather than at a reduced rate would be better.The variable rate could be as low as .25% to stimulate sales and as high as 10-25% to reduce demand.As long as politicians could be taught taxes are NOT for revenue but to reduce income spread and and control inflation.
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Or by raising taxes which has the same fiscal effect – put the excess currency out of use. In the case of taxes permanently.
There will be no hyperinflation in the US, UK or Japan. Taxes are too high for that.
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Tax increases reduce the money supply, which historically leads to recessions and depressions. Interest rate increases have not had this adverse effect.
Rodger Malcolm Mitchell
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Rodger,
Today is December 6, 2011. According to Vincent, US by now should be experiencing hyperinflation, Has it happening yet? I am still waiting for it!
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Roger, if Japan starts to get inflation and the proper response is to raise interest rates, the interest on the debt will easily be more than they get in taxes. Do you think people will buy Japanese bonds then? If the central bank is buying all the bonds with new money, do you expect inflation to slow down or speed up?
Here is a recent post I had on how I now think things work.
http://howfiatdies.blogspot.com/2014/08/positive-feedback-theory-of.html
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Vincent,
Are you the same Vincent who predicted U.S. hyperinflation for 2011? Oops.
Japan is Monetarily Sovereign, meaning it has the unlimited ability to pay its yen-denominated bills. Japanese taxes do not pay for Japanese government spending. If Japanese national taxes fell to $0, or tripled, neither event would affect Japan’s ability to pay its bills.
Therefore the prediction that “the interest on the debt will easily be more than they get in taxes” is meaningless.
Further, Japan does not need to sell bonds. It creates yen, ad hoc, by spending.
Finally, central banks of Monetarily Sovereign nations do not buy bonds with new money. The money already exists in private accounts at the central bank.
For instance, if you own a U.S. T-bond, you actually own dollars in your T-bond account at the Federal Reserve Bank. (A T-bond account is like a savings account.)
To “buy” your T-bond, the FRB merely transfers the dollars from your T-bond account to your checking account at your private bank. No new dollars created. That is why QE is a fraud.
In all its 238-year history, through wars, recessions, depressions, stagflations and the Cubs winning a World Series, the U.S. never has had hyperinflation.
So I am mystified by the repeated warnings of hyperinflation by debt-hawks. It makes more sense to warn of a tidal wave hitting Chicago than of hyperinflation hitting the U.S.
The real problems are the Gap between the rich and the rest, and recessions. Worry about those.
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