He begins, "Bottom line: "When money dies, so do people." Hyperinflation in a modern urban nation would kill people. I think it would kill a lot of people." A bit scary, no?
He compares the classic case of hyperinlfation in Weimar Germany to our day:
"Whenever a contemporary economic analyst predicts hyperinflation in the United States, he is likely to offer the German inflation as his example of how bad things can get. The problem with this approach is that it ignores the last nine decades of American urbanization. We do not live in post-World War I Germany. We do not live in the relatively low division of labor society of post-War Germany.
In 1921, Germany was a militarily defeated nation. It had gone through years of price controls and rationing. The war had destroyed urban capital. The population was still mainly rural or small town: around 70%. There were about 60 million people. The largest city was Berlin, with about two million people. No other city was over a million, and most of the dozen large ones were in the 600,000 range.
The degree of specialization in Germany in 1921 compared to the United States today was minimal. Food was available without long supply routes from farm areas into cities. Money was mainly currency. It was not fractionally reserved digital money in banks. Most people did not have bank accounts. People could barter.
Today, hyperinflation would threaten supply lines into cities: food, gasoline, coal (electrical power). It would threaten the production of crops, which is a highly mechanized business. It would make food costs central in household budgets. Instead of spending about 10% of our income on food, as Americans do today, we would likely spend half or more. Unemployment would be widespread – the people not producing vital services."
But North does not think hyperinflation will occur, he concludes:
The breakdown of modern urban society is unthinkable. Central bank economists know this. They are urban. They are tenured or close to it.
I do not think central bankers will move to a hyperinflation scenario. To do so would be opposed to their personal self-interest. At some point, they will tell their respective treasury departments, "you're on your own."
Then will come the great default.I commend the entire article to you.
Hyperinflation, Hyperinflation II, Hyperinflation III, Hyperinflation IV
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