Hyperinflation, The End Result of 40 Years of Money Games

Anyone else concerned that 40+ years of borrowing, printing, overpromising & spending is finally coming home to roost? And like in the 1970’s, retirees without rising paychecks, will get hurt the most? I get it that there’s always someone predicting doom and gloom, but these guys seem to have a pretty good track record: (I’m not quite sure how to format this, but the quote and article is from Elliott Management, a hedge fund that was widely quoted in recent financial news. If you can’t read this, Googling that will yield what I’m talking about. THIS NEW FORMAT IS MADDENING. )

“An “extraordinary” set of financial extremes that come as the era of cheap money draws to a close “[has] made possible a set of outcomes that would be at or beyond the boundaries of the entire post-WWII period”, it wrote in the letter, which was seen by the Financial Times. “Investors should not assume they have ‘seen everything’” just because they have experienced financial crises such as the 1970s bear market and oil price shock, the 1987 market crash, the dotcom bust or the 2008 financial crisis, it added.”


No. The Financial Times is even more on the fringe than the Editorial board at the WSJ, and that’s saying something.

Inflation happens, and contrary to Friedman it is not always a monetary phenomenon. Indeed, this time it began as a supply problem during the pandemic, when scarce goods still in demand caused a run up in prices. Add the energy shortage thanks to Putin, and yes, the stimulus checks (I put that in third position, purposely), and you have the prescription for what is happening now.

We have had worse inflation - much worse - and overcome it before. In 1941 and 1942 we had it, and without any stimulus to the populace at all. Inflation hit almost 20% in 1946, a result of soldiers coming home and wanting to buy stuff which was in exceedingly short supply because none of it was produced the previous 4 years. Then the supply gates opened and inflation crashed to 9% the next year and 3% the year after that. Supply constraint, see?

I won’t belabor the 70’s because everyone here lived through it, but I will mention that (again) it was a supply input (oil) which quadrupled in price, not helicopter money which induced the increases. It was rough getting out, but we did, didn’t we?

I tire of Friedman’s explanation because while “technically” correct, it is usually wrong: there is another proximate reason for the sudden jump, and it appears that money is the issue simply because there is “money.” If there weren’t money, of course, prices couldn’t increase, but then society would stop, people would starve, and it’s hard to me to see how that explanation is useful in analyzing the issue.


First of all, this is not specifically a Financial Times thing. I just posted that link because I found it first. CNBC and Marketwatch, probably others, reported the same thing. So the delivery boy for messenger isn’t the issue here, it’s the actual messenger (credible) and the message.

What’s different NOW is the record debt-to-GDP. Yeah, it’s similar to what it was at the end of WW2, but then we were the king of the world and the only economic game in town. And with millions of new babies causing demand for goods and services. It was easy to grow our way out of debt (relative to GDP) Now it’s a world economy, and we have a record number of Boomers (like me! The same babies that caused growth as youth) retiring every day, putting pressure on government to borrow and print yet even more. I think the peak of the baby boom was 1957…those are retiring right now.


In 3-6 years there will be more baby boomers dying than retiring. That will cause govt boomer expenses to start going down.


That’s true. It’s the crying towel for all of the conservative financial media. They complain about it during good times and then… they complain about it during bad times. They will not be happy until we return to the gold standard, one which nearly strangled the world economy multiple times, but for some reason that doesn’t count.

Government spending is fraught: too much and you get bad effects. Too little and you also get bad effects, as we have seen throughout history. And it’s hard to know how much is right, at least until after.

For the record, borrowing as a percentage of GDP is a bit higher than it was during WWII; that said it seems to me that our ability to pay is also better than it was at the time. (Remember the economy of the 1930’s? Right.) That doesn’t mean I’m in favor of unbridled spending; I’d like to see military spending come down, corn, sugar and other ag supports come down, and a bunch of other stuff. I’d also like to see us rationalize health care spending in ways that 100 other countries have and we haven’t, and the day may come when social security needs to be looked at (eliminate the cap, possibly means test). But it seems to me those days should be far away. Usually you get to those kinds of drastic “solutions” when your economy is a basket case, and we’re anything but.


Now look Mark always finds a bright spot in every gloomy picture. :joy: :joy:






Nobody here is under 40? :sunglasses:


Retirees are also the ones who benefited the most from the “borrowing, printing, overpromising & spending”. What would stock portfolios, home equity, and savings look like in an alternative history with 40 years of reduced spending, higher interest rates, and slower growth? I suspect today’s retirees are far ahead of where they would be otherwise.


That maybe true, but it doesn’t negate that retirees’ reality will be worse than current expectations (under big inflation).


Goofyhoofy, I totally disagree that our ability to pay down or grow out of debt is better now than starting in 1945. And certainly our will to do so is much less. One group wants massive new spending and another wants massive tax cuts.


I’m just not seeing the need for panic just yet. The cost of serving the national debt as a percentage of GDP has been much higher in the past–like in the 1990s, which most people recall as a time of prosperity.

Prices of many commodities like lumber are down a lot. Energy prices are still high thanks to Putin’s misadventure, but are down a lot off the peak. Mortgage rates are up a lot, but by way of perspective my first mortgage was 7 ¼% (we didn’t use decimals back then) which I thought was a screaming low rate.

I think the simplest explanation is probably the best: Globally, lots of people were paid not to work. At the same time demand went up, but without the corresponding economic output. Hence inflation. But we’re past those conditions that originally caused the inflation.


Don’t forget the other good news. Life expectancy dropping by 3 years since COVID.


I remain confident that I cannot predict the future. On a positive note, my savings produced $585 in interest this month after generating about $115 per month at the start of the year.

My stocks are still down a bunch but they are positioned to participate in a recovery if and when it happens.

I have been depositing my SS checks into the savings account since August. If we take another dive below the lows of last June at least I will have accumulated additional cash during the continued downturn.

If we have another V shaped recovery in the face of the Fed’s tightening (unlikely in my opinion but I am often wrong), my stocks will participate in the recovery and my lagging cash will participate when I start averaging back in (whenever the Fed announces their intention to stop raising rates). Maybe February?

If we have hyperinflation I have my health, about 3 year’s worth of kippers, eggs and produce from my daughter’s orchard, and a backpack and bike for grocery shopping nearby.

That about covers it, I guess.


Stocks have been painful this year. Since retiring we have been living on our cash cushion. Sold a few stocks that were not promising, holding most since we have a pretty solid stable of companies. I sold a tiny bit of my RSUs this week. I’m going to start selling quarterly at about 1/4 of my anticipated expenses, regardless of stock price. Sort of a dollar-cost-averaging, except in reverse. I’ll start with my ESPP and RSUs. I’ll be 59.5, so also can start pulling money out of the rollover IRA without fear. We still have a sizable cash cushion, but I don’t want to deplete it too much.

Honestly, I don’t really know what to make of the debt and “money games”. I don’t think there is any reality where we balance the budget and start paying down the debt. I understand carrying some debt, but we just increase it every year (except for the few years Clinton managed a surplus). We’ll certainly never increase taxes enough to make a difference, and even if we did I suspect most of the money we would need access to is not easily taxable (e.g. inherited wealth in offshore accounts). Taxing wages is easy, but that makes up only a small portion of the monies that should be taxed.


Hyperinflation is something to keep an eye on, but we seem to be far from that.

In Germany in the '20s they tell us German currency was worth more as scrap paper than as currency. In Brazil, hyperinflation was so bad that people were reluctant to hold cash. They would immediately convert it to dollars or other hard currencies or buy something of value (TV set, jewelry, gold coins) that could be sold for revised values in the future.

Our current inflation rate may be above the 2% target, but 5% or so seems reasonably achievable. And 2% possible given time. We are a long way from 20 or 30% per day.


Pauleckler, just above: The fact that we don’t have true hyperinflation and didn’t have that from 1966 to 1981 doesn’t mean those retirees didn’t get financially decimated with “just” a long period of lower-than-hyper inflation. But bigger than 2%.

Offtopic: How do I quote someone’s post into my reply?

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Copy the portion you wish to quote, just you would normally copy something off the screen. A little blue “quote” box will appear. Click on it. The quoted portion is transferred to the posting box, along with the necessary html coding.

Type your response below it, then click “reply”


Ah ha! Thank you very much! Did I mention that this new format is maddening?


To quote the entire text of a message (like I am doing in this reply) you can just click on the little speech balloon icon (very first one in the upper left corner before the B for Bold)) of the reply box