It’s 2016. Where’s My ‘Hyperinflationary Great Depression’?

[The following post first appeared on the LSTB on January 1, 2012. What it said then still applies today, mutatis mutandis. Thanks for reading the blog and have a prosperous 2016!]

Behold, the curse of a long memory. Last January [2011], Google Alerts sent me an e-mail informing me that the National Inflation Association (“Preparing Americans for Hyperinflation”) issued a press release predicting that the higher ed bubble was “set to burst beginning in mid-2011. This bursting bubble will have effects that are even more far-reaching than the bursting of the Real Estate bubble in 2006.” The NIA press release then digressed into legal education (I’m guessing they’d just read David Segal’s first NYT piece a few days earlier), how evil lawyers are, how they produce nothing for society, and how 60 percent of the Senate and 37 percent of the House are lawyers who rig the economy to make jobs for lawyers. It editorializes:

“While everybody went to school to become a lawyer [really?], nobody went to school to become a farmer because Americans didn’t see any money in farming. With prices of nearly all agricultural commodities soaring through the roof in 2010 and with NIA expecting this trend to continue throughout 2011, the few new farmers out there are going to become rich while lawyers are standing at street corners with cups begging for money.”

The NIA would’ve been more helpful if it explained how lawyers could be a drain on society yet remain vulnerable to market forces. Also, one would think unemployed lawyers would try to find non-lawyer jobs instead of begging, but I think it’s important to note that agricultural prices weren’t “soaring through the roof” in 2010. They were growing, yes, but although the NIA was right that they continued to do so in 2011, (a) it’s stalled recently, and (b) they’re no worse than they were in the 1980s and early 1990s.

Oh well. The NIA sternly concluded:

“We must work hard to educate America to the truth if our country is going to have the wherewithal to survive the upcoming bursting college bubble and Hyperinflationary Great Depression.”

Whoa.

I can’t say I’m quite as disappointed as the NIA undoubtedly is that we’re not seeing much inflation these days, and in mid-2011 I didn’t see many colleges cutting their tuition, laying off faculty, closing programs, or trying to retrench themselves. I also remain unconvinced that $1 trillion in student debt can be worse than $8 trillion in mortgage debt. True, student debt is not dischargeable (unlike mortgage deficiencies) absent a showing of an undue hardship, and it’s hampering the recovery and ruining lives, but it’s not worse in quantity than the housing bubble. As for the NIA’s paranoid ranting about lawyers, all economic evidence I’ve seen indicates that legal services have all but stagnated for much of the last two decades. Apparently, those 60 percent of lawyer-senators aren’t very good at creating work for themselves. I suppose the NIA should express appreciation.

Anyway, if anything, inflation would be a boon to underwater homeowners and student debtors because it erodes the real value of their debts, which grew significantly in the 2000s. Here’s household debt to GDP:

Importantly, I’m no macroeconomist but I’ve never heard of a “hyperinflationary depression.” The terms contradict each other. Depressions occur when people take on excessive debt and begin paying it down simultaneously instead of spending money on other things. This is deflationary because new credit isn’t being created, even by the government. By contrast, hyperinflation has only occurred in unusual circumstances, like when a government owes debts to foreigners in a different currency. Weimar Germany, for example, owed gold-dominated war reparations to the Allied powers, and to purchase the gold, it printed money, causing hyperinflation. Zimbabwe isn’t a good comparison either because it’s a small, HIV-ridden landlocked state with an undiversified, oligopolistic agrarian economy while the U.S. is a wealthy, continent-spanning super-state.

As for inflation fears generally, maybe it’s the fact that I have no memory of high inflation, but why isn’t there a “National Personal Income Association” (NPIA) that regularly celebrates increases in Americans’ per capita personal income?

“Per capita personal income has quadrupled since 1980! Prices didn’t even triple! Hooray! We’re rich! Fiat currency forever and ever! ‘You shall not crucify mankind upon a cross of gold!'”

I’m sure the NPIA wouldn’t’ve been too thrilled with 2008-09, but personal income is increasing again. The problem has just been that over the decades those gains haven’t been distributed equally. This isn’t a problem of inflation but one of wages and taxation.

Intuition tells me the NIA won’t spend early 2012 carefully discussing why the higher ed bubble didn’t burst in mid-2011 as it predicted, nor will it take the time to explain why Americans—many of whom are net debtors—should be concerned about inflation. Instead it will prophecy even more hyperinflation later. But here’s hoping the National Inflation Association won’t provide me entertainment come January 1, 2013. Such is the curse of a long memory.

29 comments

  1. Where do you live? And how do you live? How are the costs of housing, education, healthcare, food, and energy (until the Saudis got all ideological)? There’s no inflation if you just measure non-essential things that drop in price because the essential things are SKYROCKETING IN PRICE.

    Where are wages in comparison to the things we must buy to stay alive. I’m sick to death of the f-job courtesy of the Fed’s debt bonanza. And P.S. you still can’t eat a stock.

    When necessities are going up 30%+ per year in your corner of the world as a direct result of federal tampering to make us all wealthy, that’s hyperinflation. That’s my life.

    Btw, is Venezuela hyperinflating? How do you know?

      1. It’s not about MY credibility. It’s about yours. You claim that there will be no inflation – but you refuse to place a huge bet on that prediction and profit handsomely from it.

        It sounds like you are the one with the credibility problem. That is to say, you don’t assign enough credibility to your confident statements to take them to the bank.

        But hey, by all means, feel free to (once again) try to drag me into it. Make sure you don’t ever explain why you refuse to profit from your wisdom by making a huge bet against the inflation predictions, though – you’ve only dodged that question like six times in a row. But let me try to answer the question for you: you won’t follow YOUR OWN ADVICE because I lack credibility.

        LOL.

      2. Short version: You can’t explain why or when high inflation is coming, so you try to shift the burden of proof onto me to show that it’s not.

      3. Even shorter version:

        Matt clearly realizes that his own predictions are absolutely fucking WORTHLESS.

    1. Oh, you’re a smart guy, Matt. But talk is cheap.

      If you really believe all is well, then you should DEFINITELY put your money where your mouth is. Here’s how:

      Sell everything you own. Mortgage the outhouse you are living in, even. Then go “all in” selling uncovered futures contracts for commodities. To maximize your gain, be sure that you are playing with as much leverage as humanly possible. You should try to trade with AT LEAST ten times the amount of money that you put up.

      Show all of the mouth-breathers how it’s done.

      Be sure to get back to us in a year and let us know about your results. As it stands now, you look mighty stupid declaring the end of inflation – but not doing anything at all to profit from that wisdom.

      Chop, chop!

      1. Happy New Year, Skeptic.

        Your wager is entertaining, but I do not see how it addresses any of my post’s points. The post says that the National Inflation Association (ha!) predicted a “hyperinflationary great depression” would begin in mid-2011 due to the bursting of the college bubble. However, even in 2016 there’s still no evidence of hyperinflation. Perhaps you could ask the NIA to explain why its prediction hasn’t come about five years after making it.

      2. I may not agree with the people who try to forecast specific years when the shoe will drop – but drop it will. They might be able to keep things running on smoke and fumes for a while – but indefinitely? Not a chance.

        The real check on inflation has been the complete, categorical lack of any economic improvement whatsoever since 2008. The fraudsters who report the economic numbers have spun some rosy fairy-tales indeed (using ancient methodologies from the 1930s), but somehow the legions of unemployed (or part-time, or underemployed) millennials aren’t hearing the enchanted fable of the historically low unemployment.

        That $18.5 trillion of debt? Not a big deal in your view, right? Well, if the economy ever does somehow start to grow or expand again, said growth /expansion will be held back by that very same $18.5T (it is currently sitting on the sidelines). It’ll drag down any potential recovery like a millstone – just as surely as night follows day.

      3. In other words, unlike the National Inflation Association, which offered a falsifiable prediction, you’re asking us to sit and wait for some day in the vague future for the U.S. to default on a national debt that’s existed since the Jackson administration.

      4. NO, I’m “asking” you to put your money where your mouth is by selling everything that you own and going “all in” with a big bet against the inflation predictions.

        All those trillions of dollars that they printed IS causing inflation – it’s just that the economy has been contracting more or less concomitantly with that inflation in a way that makes its effects less noticeable. Not that you would ever understand such a concept.

        I don’t really care what you believe. (And who is this “us” you are referring to? You got a turd in your pocket?)

        I just want you to make a big bet against the inflation predictions. You know – as a gesture of good faith to show that you actually believe the stuff that you are writing here? Since you are so sure and all.

      5. “All those trillions of dollars that they printed IS causing inflation – it’s just that the economy has been contracting more or less concomitantly with that inflation in a way that makes its effects less noticeable.”

        So I should change my financial position based on a phenomenon you claim is real but either can’t be measured or never seems to happen. The Federal Reserve quadrupled the monetary base since 2008. Where are the $30 Big Macs? When will we get them? Under what circumstances will you admit that your theory is busted?

      6. NO – you should “change your financial position” by placing a huge bet against the predictions of runaway inflation.

        What part of that are you not understanding? Is English your second language?

        Hiring and wages are worse today than they were in 2008.

        The dollar isn’t getting stronger – the economy is simply declining at a slightly faster rate than the dollar is. But from your superficial viewpoint, the dollar appears to be “gaining” value against the commodities/goods.

      7. “NO – you should “change your financial position” by placing a huge bet against the predictions of runaway inflation.”

        Why should I take you seriously? You have no credibility. If there’s inflation, you say it’s here; if there isn’t inflation, you say it’s coming. That’s not falsifiable and therefore not science.

        “What part of that are you not understanding? Is English your second language?”

        Your continued insults will not persuade me your claims are correct.

        “Hiring and wages are worse today than they were in 2008.”

        “The dollar isn’t getting stronger – the economy is simply declining at a slightly faster rate than the dollar is. But from your superficial viewpoint, the dollar appears to be “gaining” value against the commodities/goods.”

        On top of your pseudoscientific inflation predictions, you claim that the economy continues to deteriorate, even though, for example, the employment-population ratio has been rising for the last few years. It’s not good, but it falsifies your statements.

        Then again, you’ve hinted that you don’t believe in government data anyway. If your theory doesn’t work, you double-down on theory, and if the facts don’t work, you reject the facts as biased. This isn’t science; it’s solipsism.

      8. Very amusing, Matt.

        You know who you’re like? A guy who drives to work each morning at 200 mph and maintains – implausibly – that doing so is perfectly “safe.”

        “Well, I haven’t been killed, right? All your statements about driving at 200 mph are invalid, because I’m still alive! Why haven’t I been killed yet? Your prediction isn’t falsifiable. How much time has to go by before you admit that it’s actually safe to drive to work each morning at 200 mph? Let’s set a date – if I don’t crash and burn in one year, we should agree that it’s safe to drive at 200 mph each morning. With a blindfold on, btw. Why should I take your argument seriously if it can’t be falsified?”

        ^ LOL, the awesome might of a Leichter argument. And very little of the “logic” I just employed is even hyperbole. You actually seem to believe such nonsense.

      9. Skeptic, I’m disappointed by your response. You had an opportunity to prove to me that when faced with facts that contradict your position you don’t simply claim without evidence that the facts are biased. Instead, you’ve again resorted to juvenile insults. That just tells me that deep down you’re insecure about your beliefs.

        You’d rather live in an idiosyncratic universe where you get to make up facts about inflation, job growth, and economic expansion than admit you might be wrong.

      10. ^ LOL, “an idiosyncratic universe where you get to make up facts”? PROJECT, MUCH?

        That’s rich, coming as it does from someone who starts out with an assumption, and then claims that any and all statements to the contrary are either (a) “falsified” or (b) “not falsifiable.”

        You keep attempting to flip the discussion around to make it about personalities. After five responses, you STILL haven’t explained why you refuse to place a big bet against the inflation predictions. I assume it’s because you don’t take your OWN statements seriously – not mine.

        And LOL, I didn’t realize that a completely valid reductio ad absurdum takedown of your silly argument was just a “juvenile insult.” Care to respond on substance?

        What a great “scientist” you must be!

      11. Skeptic, you are becoming increasingly agitated. The principal reason I to not indulge you is your abusiveness. Credibility comes first, and you’ve shown no interest in establishing that, especially when the post you’re commenting on mocks people who made the same claims as you are but five years ago. Why should I take you anymore seriously than the NIA when they’ve been discredited?

        Moreover, you have yet to cite a source for a single fact backing your claims or theories. For example, you wrote, “The fraudsters who report the economic numbers have spun some rosy fairy-tales indeed (using ancient methodologies from the 1930s).” If the methodologies are obsolete, shouldn’t the numbers have been completely off decades ago? The 1930s were a long time ago. Even MIT’s independent Billion Prices Index appears to give the same inflation figures as the government does. Why should I distrust the government’s other figures: They seem to point to slow job and wage growth, not rosy times at all as you charge them with.

        Finally, you have yet to explain how all the money the Fed has created will suddenly surge into inflation, even though it hasn’t already. What’s the mechanism? When will it be tripped? What warning signs should folks like me be vigilant for? What should the U.S. do to avoid the impending doom visible only to you? If you’re right, you would’ve established these points by now.

      12. Dude.

        You’re starting to sound a little, ehm, THICK, Matt.

        Perhaps it would help your powerful mind if I broke it down by numbers, hm?

        1. I’m not asking you to make a bet that inflation will happen.

        2. I’m asking you to make a huge bet that inflation WILL NOT happen. That’s what you are confidently saying, right?

        3. Why won’t you put your money where your mouth is and back up your own words? Because *I* don’t have any “credibility”?

      13. Short version: You still can’t explain why or when the NIA’s “hyperinflationary Great Depression” is coming, so you try to shift the burden of proof onto me to show that it’s not.

      14. Matt, that skull of yours is apparently about 20 inches thick – but once again:

        1. I’m not trying to convince you that a “hyperinflationary great depression” is coming.

        2. I’m asking you to take a financial stake in it NOT happening, consistent with your confident predictions.

        3. Why won’t you?

        4. Please begin your response with the phrase “I don’t think hyperinflation will happen – but I won’t bet actual money on my prediction because …”

        5. So simple that anyone can understand it. OR IS IT?

      15. Well, I can’t convince an idiot, but fortunately I’m not trying to.

        I’m with YOU, Matt! I truly hope you are right – I eagerly welcome your confident prediction of calm waters and low inflation as far as the eye can see. But sir! Sir! I want to see you PROFIT HANDSOMELY from your wise counsel. You deserve it! WHY WON’T YOU?

        So say it with me, Matt: “I don’t think hyperinflation will happen – but I won’t bet actual money on my prediction because …”

      16. SHORTER version:

        Even Matt realizes that his own predictions are absolutely fucking WORTHLESS.

      17. Um, can you explain why it ISN’T coming?

        That’s what I thought.

        You CLEARLY are unwilling to bet any money on your claims.

  2. During the Great Recession I was driving home from court and I heard an economist on a News Program predict that the US economy will be fully recovered in 2016. So, it’s 2016. Guess what, my phone is ringing off the hook with new clients seeking the Assistance of Counsel for their Defense. I am forecasting revenues of 500K enabling me to pay off 200K in law school loans and finally get my family off Medicaid. . It’s going to be a magical year, I along with 92,000 of my best Illinois attorney colleagues are going to be “in the money game.”. My head is spinning!

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