This was an interesting video from the National Inflation Association (NIA) about the impending hyperinflation, or at least, the hyperinflation that they predict. I don’t know much about the organization as far as its funding, leadership, membership, etc. However, the video does hit upon many hyperinflation arguments I have seen elsewhere.
If you have read my blog posts, you will probably see I lean towards a deflationary environment for a few years similar to Japan. However, we are headed on a path, along with other Westernized nations, of default. Our unfunded liabilities are just too great to cover through taxation, GDP growth, or additional debt. The question is when will it happen. Kyle Bass, a hedge fund manager at Hayman Capital, believes a country is done when the social insurance obligations (Medicare, Social Security, etc.) plus interest payments is greater than incoming tax receipts. He points out how Japan should hit this magical point in a couple years even with Japanese government bonds at record low yields. The US has more time, but not a lot. I tend to agree with this thinking. This is also the subject of Reinhart and Rogoff’s book, “This Time is Different”, which I have discussed on the blog previously. They point to a couple metrics being the death cross for nations. One is 40% of expenditures comes from debt, which we are already there, and secondly, national debt equal to GDP. Again, we are basically there if we include Fannie and Freddie.
Anyway, I still see deflation as the biggest threat now, but there will be a day in the not too distant future that inflation and bond yields will rise precipitously. For now, take a gander at this movie and give me your comments.