Guest Post: Explaining Hyperinflation

Tyler Durden's picture

Submitted by John Aziz of Azizonomics

Explaining Hyperinflation


This is a post in three sections. First I want to outline my conception of the price level phenomena inflation and deflation. Second, I want to outline my conception of the specific inflationary case of hyperinflation. And third, I want to consider the predictive implications of this.

Inflation & Deflation

What is inflation? There is a vast debate on the matter. Neoclassicists and Keynesians tend to define inflation as a rise in the general level of prices of goods and services in an economy over a period of time.

Prices are reached by voluntary agreement between individuals engaged in exchange. Every transaction is unique, because the circumstance of each transaction is unique. Humans choose to engage in exchange based on the desire to fulfil their own subjective needs and wants. Each individual’s supply of, and demand for goods is different, and continuously changing based on their continuously varying circumstances. This means that the measured phenomena of price level changes are ripples on the pond of human needs and wants. Nonetheless price levels convey extremely significant information — the level at which individuals are prepared to exchange the goods in question. When price levels change, it conveys that the underlying economic fundamentals encoded in human action have changed.

Economists today generally measure inflation in terms of price indices, consisting of the measured price of levels of various goods throughout the economy. Price indices are useful, but as I have demonstrated before they can often leave out important avenues like housing or equities. Any price index that does not take into account prices across the entire economy is not representing the fuller price structure.

Austrians tend to define inflation as any growth in the money supply. This is a useful measure too, but money supply growth tells us about money supply growth; it does not relate that growth in money supply to underlying productivity (or indeed to price level, which is what price indices purport and often fail to do). Each transaction is two-way, meaning that two goods are exchanged. Money is merely one of two goods involved in a transaction. If the money supply increases, but the level of productivity (and thus, supply) increases faster than the money supply, this would place a downward pressure on prices. This effect is visible in many sectors today — for instance in housing where a glut in supply has kept prices lower than their pre-2008 peak, even in spite of huge money supply growth.

So my definition of inflation is a little different to current schools. I define inflation (and deflation) as growth (or shrinkage) in the money supply disproportionate to the economy’s productivity. If money grows faster than productivity, there is inflation. If productivity grows faster than money there is deflation. If money shrinks faster than productivity, there is deflation. If productivity shrinks faster than money, there is inflation.

This is given by the following equation where R is relative inflation, ?Q is change in productivity, and ?M is change in the money supply:

R= ?M-?Q

This chart shows relative inflation over the past fifty years. I am using M2 to denote the money supply, and GDP to denote productivity (GDP and M2 are imperfect estimations of both the true money supply, and the true level of productivity. It is possible to use MZM
for the money supply and industrial output for productivity to produce different estimates of the true level of relative inflation):

Inflation and deflation are in my view a multivariate phenomenon with four variables: supply and demand for money, and supply and demand for other goods. This is an important distinction, because it means that I am rejecting Milton Friedman’s definition that inflation is always and only a monetary phenomenon.

Friedman’s definition is based on Irving Fisher’s equation MV=PQ where M is the money supply, P is the price level, Q is the level of production and V is the velocity of money. To me, this is a tenuous relationship, because V is not directly observed but instead inferred from the other three variables. Yet to Friedman, this equation stipulates that changes in the money supply will necessarily lead to changes in the price level, because Friedman assumes the relative stability of velocity and of productivity. Yet the instability of the money velocity in recent years demonstrates empirically that velocity is not a stable figure:

And additionally, changes in the money supply can lead to changes in productivity — and that is true even under a gold or silver standard where a new discovery of gold can lead to a mining-driven boom. MV=PQ is a four-variable equation, and using a four-variable equation to establish causal linear relationships between two variables is tenuous at best.

Through the multivariate lens of relative inflation, we can grasp the underlying dynamics of hyperinflation more fully.

Hyperinflation

I define hyperinflation as an increase in relative inflation of above 50% month-on-month. This can theoretically arise from either a dramatic fall in ?Q or a dramatic rise in ?M.

There are zero cases of gold-denominated hyperinflation in history; gold is naturally scarce. Yet there have been plenty of cases of fiat-denominated hyperinflation:

This disparity between naturally-scarce gold which has never been hyperinflated and artificially-scarce fiat currencies which have been hyperinflated multiple times suggests very strongly that the hyperinflation is a function of governments running printing presses. Of course, no government is in the business of intentionally destroying its own credibility. So why would a government end up running the printing presses (?M) to oblivion?

Well, the majority of these hyperinflationary episodes were associated with the end of World War II or the breakup of the Soviet Union. Every single case in the list was a time of severe physical shocks, where countries were not producing enough food, or where manufacturing and energy generation were shut down out of political and social turmoil, or where countries were denied access to import markets as in the present Iranian hyperinflation. Increases in money supply occurred without a corresponding increase in productivity — leading to astronomical relative inflation as productivity fell off a cliff, and the money supply simultaneously soared.

Steve Hanke and Nicholas Krus of the Cato Institute note:

Hyperinflation is an economic malady that arises under extreme conditions: war, political mismanagement, and the transition from a command to market-based economy—to name a few.

So in many cases, the reason may be political expediency. It may seem easier to pay workers, and lenders, and clients of the welfare state in heavily devalued currency than it would be to default on such liabilities — as was the case in the Weimar Republic. Declining to engage in money printing does not make the underlying problems — like a collapse of agriculture, or the loss of a war, or a natural disaster — disappear, so avoiding hyperinflation may be no panacea. Money printing may be a last roll of the dice, the last failed attempt at stabilising a fundamentally rotten situation.

The fact that naturally scarce currencies like gold do not hyperinflate — even in times of extreme economic stress — suggests that the underlying mechanism here is of an extreme exogenous event causing a severe drop in productivity. Governments then run the printing presses attempting to smooth over such problems — for instance in the Weimar Republic when workers in the occupied Ruhr region went on a general strike and the Weimar government continued to print money in order to pay them. While hyperinflation can in theory arise either out of either ?Q or ?M, government has no reason to inject a hyper-inflationary volume of money into an economy that still has access to global exports, that still produces sufficient levels of energy and agriculture to support its population, and that still has a functional infrastructure.

This means that the indicators for imminent hyperinflation are not economic so much as they are geopolitical — wars, trade breakdowns, energy crises, socio-political collapse, collapse in production, collapse in agriculture. While all such catastrophes have preexisting economic causes, a bad economic situation will not deteriorate into full-collapse and hyperinflation without a severe intervening physical breakdown.

Predicting Hyperinflation

Hyperinflation is notoriously difficult to predict, because physical breakdowns like an invasion, or the breakup of a currency union, or a trade breakdown are political in nature, and human action is anything but timely or predictable.

However, it is possible to provide a list of factors which can make a nation or community fragile to unexpected collapses in productivity:

  1. Rising Public and-or Private Debt — risks currency crisis, especially if denominated in foreign currency.
  2. Import Dependency — supplies can be cut off, leading to bottlenecks and shortages.
  3. Energy Dependency — supplies can be cut off, leading to transport and power issues.
  4. Fragile Transport Infrastructure — transport can be disrupted by war, terrorism, shortages or natural disasters.
  5. Overstretched Military — high cost, harder to respond to unexpected disasters.
  6. Natural Disaster-Prone — e.g. volcanoes, hurricanes, tornadoes, drought, floods.
  7. Civil Disorder— may cause severe civil and economic disruption.

Readers are free to speculate as to which nation is currently most fragile to hyperinflation.

However none of these factors alone or together — however severe — are guaranteed to precipitate a shock that leads to the collapse of production or imports.

But if an incident or series of incidents leads to a severe and prolonged drop in productivity, and so long as government accelerates the printing of money to paper over the cracks, hyperinflation is a mathematical inevitability.

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economics9698's picture

I will write one about this maybe this weekend.  

economics9698's picture

FYI 44 basis points and the Fed is bankrupt.  That’s not very much.  Then the printing shall commence in earnest!

THX 1178's picture

I think Hyperinflation was always the plan. I mean, once we went off the gold standard (officially) in 1971, there was immediate outcry to return... but it was realized that we have a system of credit-- a national credit card-- that we could max out and then hyperinflate to pay off... why would we waste it? That's why I'm always amused when people bitch about the national debt, "16 Trillion! Oh God how are we going to pay that off. We'll be in debt forever." NO WE WON'T. WE ARE GOING TO FUCK OUR CREDITORS AND HYPERINFLATE. THAT WAS ALWAYS THE PLAN. After all, when you transition from a fiat money system to a gold standard, deflation doesn't cut it because it causes people to hoard cash-- they can't get enough of it. Hyperinflation is just the opposite, there is so much cash that people throw it in the gutter, paper their walls with it, wipe their asses, etc. So if you know hyperinflation is a debt jubilee, and you know you are going to hyperinflate... why not get your money's worth? Its a conspiracy, but not your typical internet/alex jones/rense conspiracy. People find it so hard to believe that there are benevolent conspiracies, or at least SOMEWHAT benevolent conspiracies. And this I think is one of them. So, yes, prepare for hyperinflation and our return to a gold standard is my advice.

EvlTheCat's picture

I am confused as to why you believe, in earnest, this is a somewhat benevolent return to a gold backed currency?  Why would they not just use the current debasement of the dollar to try and introduce another "more stable" global currency?  My wife comes from Brazil, and she can remember a time where they were trying to convert between three different currencies, trying to stabilize the economy.  They never went back to a gold standard.  And in my opinion, I do not see a benevolent ending to this.  Even if they do back a new fiat system by gold, who is to say they will allow you to cash out your investments into gold, if every thing is paperless.

I am more inclined to believe they want to go to a paperless system in order to have more control over the monetary system.  It certainly would make it easier to add and remove money from the supply, and not let paranoid people, like myself, "stuff their mattresses" with their savings or convert to hard assets without petitioning some benevolent  banking benefactor in times of fear. Try to remove 10,000 dollars or try and cash out an investment from your bank today, and see what kind of monkey shine they pull.  They would have total control over people choices and an even easier time disappearing your investments.

I hope I am wrong, but with the evidence I see around me today I am afraid I am right.

THX 1178's picture

I don't know what you mean by "they" when you say introduce a global currency. Who are they? I think there are people who want that, but I don't think they have as much influence as conspiracists give them. Same with paperless system. But yes, I believe in earnest this is what is happening. "back a new fiat system with gold" I don't know what this means. "who is to say they will allow you to cash out your gold if everything is paperless" well, I never said anything about paperless... so again, I don't know what this means.

Also, there is news all over the place of countries hoarding gold bullion china, russia, turkey, and others... they are themselves going to issue gold backed currencies! This is why the global currency stuff doesn't stick for me! In order to have a global currency, you need everyone on board. And China and Russia and many others are not on board with that. It only takes one gold standard currency to totally GUT a fiat currency that can be debased. So if china returns to a gold standard, the global fiat won't happen.

kito's picture

as long as 161 million people are depending on the government for some entitlement or employment, it matters NONE................they will vote for their cheese.....................

Landotfree's picture

The global credit system is not hyperinflating and is barely even inflating during this dead cat bounce.   The system inflated exponentially for 63+ years, now it is unable to inflate normally.   The Fed's job is delay the collapse as long as possible, the Fed's job is not to stop the collapse has that is impossible unless one possesses unlimited power.

Inflation died in the US in 2007, the US is central engine of the global system just as the UK was the center of the system in 1929.  Nothing has changed.  The only thing that will be inflating is the number unfunded liabilibities that will have to be liquidated.

 http://2.bp.blogspot.com/--RkLZLRlRi8/UGAGOUg7fNI/AAAAAAAAABs/HHgMlfUYP2...

I know, I know... the helicopters are coming to save you, I assure you there are no helicopters coming to save anything.  This blog is the Fed's wet dream.  

All you nuts can go run down to the bank and collect your wheelbarrows full cash, you show up at the bank at 9am, the bank will be out of cash by 9:05am... 

 

kito's picture

yes sir............hold those precious physical dollars..............arent alot floating out there...................

economics9698's picture

Land of the free dude you look at the M2 velocity lately?  Maybe that would be a indicator that all is not well.  Or excess reserves.  When that freight train comes you will be on the tracks looking the wrong way.

 

http://research.stlouisfed.org/fred2/series/M2V?cid=32242

The Alarmist's picture

Blah, Blah, Blah ... there is no inflation ... I know, because CNBS, the BoE, the Fed, and numerous other reliable sources tell me so.

So what if SPAM costs nearly twice as much as it did 10 years ago. The fact that I can still buy a hamburger with what used to get me a steak is ample evidence that inflation is not a problem. Hyper inflation is simply a problem of other, more distant regimes.

akak's picture

 

Inflation died in the US in 2007

So overall prices, and the cost of living (at least in the USA) are up at least 30% since 2007, um, exactly why?

You know, you can make all the deflationary flat-earth, egghead academic arguments you want, but in the end there is only ONE thing that matters to almost everyone, and that is precisely this: How does the value of the dollars I am earning (or have saved) today compare to their value in the past, and what will the value of my income (or my savings) be in the future?  Everything else is smoke and mirrors.

All Risk No Reward's picture

If Obama has any sense, he will try and lose this year and rake in his $10 million a year pay day post presidency.

If he waits another 4 years, he'll likely get far less and be hated all the more.

EvlTheCat's picture

I am not saying you don't have valid points and that I don't want to believe you.  And when I refer to "they" I am talking about the Western banking cartel. 

I am not a fringe conspiracy theorists, but some of the ideas presented are interesting, to the point where they would make sense, if you are talking about global finance control.  Even if adopted in a particular country/ies, a paperless system gives the government more control over the system as a whole.  Aren't most people on this website against that kind of control, to the point where the legality comes into question?  As an example it would certainly eliminate people who are unskilled labour from jobs where they get paid under the table.  With the new system are we going to overhaul the bureaucracy to allow it to be easier to start small business and to fund then so these people do not have to work under the table to provide for themselves?

Yes, everyone is shoring up their gold reserves in a protectionist move.  But is that a precursor to war, or is every country anticipating the dollar collapse and a new United States currency where we are not the reserve currency?  If that is the case won't everyone be pissed if/when it happens in the U.S.?

Thanks for the reply.

Tegrat's picture

I recently withdrew a small 401k fund (was in bonds and nat resources) from a short contract years ago. I deposited it in my checking. And used 1/2 to extend my PM holdings. I am using the other half to buy a small solar system to offset the hit in penalties and tax liabilities.

There was a two week hold on the funds as they transferred but no problems otherwise. I have possession of my procured goods. No need to install anything just yet.

 

 

 

EvlTheCat's picture

Everyone's experience is different I suppose.  Wells Fargo SUCKS from my past experience. The "straw" that ended it for me was, I had two CD due to roll over, I told them I was cashing both of them out via phone and notary letter.  One got processed the second got rolled over. They wanted to penalize me for cashing out the newly rolled over CD.  It took me a two months to get them to admit their mistake, because the branch manager "had no power" to deal with the issue.

I am going through another issue now trying to move assets from one investment to another because the loosing investment bank says, "I need the financial advisor who prepared the investment to submit the paperwork to move the assets".  Horse shit.  And of course when you fulfil one requirement, then they have two more "oh, bye the ways" you need to do this also..  Pacific Life SUCKS too.

I do not think of benevolence when banks deal with financial matters. I think of purposely inefficient bureaucratic pig men and women.

jlindesay's picture

This small solar system you're buying - has it got any habitable planets?

Yen Cross's picture

 I wan't to know where I can "buy" a FICO of 650 with 16 Trillion in the hole? Lest we forget all the un-hypothecated (earned) entitlement programs!

i_fly_me's picture

You think intentional hyperinflation is a benevolence?  Stealing from those who produce more than they consume is not benevolence, it is corruption in the very truest sense.  It encourages vice and discourages charity in a way that rots society from the bottom up.  It sets people against each other when they would naturally be inclined to work together for mutual benefit.  Also, when hyper-inflations occur, they don't happen overnight, they happen over the course of years and they do not result in a debt-jubilee, they result in massive wealth transfers to those doing the printing who then sell the people a new system and continue the scam.  The only way any true gold standard will come into being is by individuals *choosing* to opt out of government controlling their savings and not storing it in government instruments (including illusory gold-hardened currencies in which the government controls the currency/gold ratio).

THX 1178's picture

Thats a very interesting tirade, but you have to look at it like a this: the short term hit is less that the long term gain. FAR LESS. And hyperinflation historically has not happened overnight. But we live in a  different world than we used to. A world flooded with US dollars and TONS of treasuries. A soon as there is a flight from treasuries, expect a crash and subsequent printing. Things move much faster these days.

123dobryden's picture

the problem at the moment is that US military and the Empire itself  controls those about to flight quite tight, but as you say things move much faster these days

i_fly_me's picture

That wasn't a tirade and I still don't see who it is you are saying gains from hyperinflation in your analysis (long term or whenever).  The only winners will be the banks.  You seem to think we are going to go through a currency collapse and then in orderly fashion transition into a hard money paradigm.  It just doesn't work that way.  The banks only have to win *nominally* while everyone else has to make it in real terms, including the government.  The banks rigged this game ... they will continue winning as long as we are playing their game.

robertocarlos's picture

He probably thinks his debts will be wiped out by hyperinflation AND he'll keep his job.

THX 1178's picture

I have no debts. nice try.

All Risk No Reward's picture

Here's the game board as I see it set up.

1. The Money Power controls government (finances and promtes its operatives into government positions).
2. The Money Power is sovereign, everyone else is subjugated.

Debt Money Tyranny would not exist if it weren't so, as exposed here:

http://www.keepandshare.com/doc/4715145/debtmoneytyranny-5-pdf-57k?tr=77

Or, as Napolean put it, "The hand that gives is above the hand that takes."

The Bible puts it thusly, "the borrower is servant to the lender."

You get the idea.

3. The Money Power uses its amassed fraudulent wealth to buy up multi-nationals and mega corporations.
4. The Money Power has control over trillions in debt assets directly and through their front corporations.
5. The Money Power has control over trillions in cash directly and through their front corporations.
6. The Money Power controls the Federal Reserve Policy.
7. The Money Power isn't just self interested, they are psychopathically self interested.
8. The Money Power controls the mega-banks and they are lending 30 year money at 3.5%.

My research has made these truths self evident.  If your research isn't there yet, don't fret - just assume these 8 truths for now.

My question to all of you straight to hyperinflationistas is, "why would the Money Power go straight into hyperinflation when they own/control the bulk of the cash and debt assets?"

Some claim the banks "win," but don't explain how lending out real value to buy a home and receiving a loaf of bread's worth of cash to pay off the loan benefits the banksters because it doesn't.

Not to mention, the minute real hyperinflation is smoked out, people withdraw all their money from the banks and spend it on hard goods.  That's another loser.

I think a debt saturated society is merely wishing their book.

The banksters are going to steal as much cash possible (that's what QE is, theft - they aren't trying to fix what they blew up), they are going to offload as much debt on the public as possible and when the cost/benefit of looting turns bad for them, they pull the plug on credit, they bust the debtors, roll up almost all society's assets into their TBTF front corporations and use their puppet politicians to proclaim the failure of the Repbulic and freedom and demand that a world government, run by more puppets they Money Power finances and controls, run the show or else the people will starve.

Even if you can't grasp the wicked striving for world domination (duh!?!?!?), they are going to bust you and steal your real world chit before they hyperinflate.

They will likely hyperinflate in the end - but only after they've cashed out of their Debt Money Tyranny into ownership of most of the tangible wealth on the planet... and it won't matter to them at that point.  Debt Money Tyranny will have done what it was engineered to do - transfer the hard assets of a post bubble nation (nations, actually) to the Money Power.  Covertly.

Some will ask why they are QEing to save the economy.

They aren't.  That's a false narrative.  This...

http://market-ticker.org/akcs-www?post=207083
(first chart)

...can't be fixed.  Nor do they want to fix it.  Your debt is their neo-shackles around you.

The Money Power isn't stupid - Faber and Rogers have made the error of believing the false narrative.  They are allowed on TV to spout their views because the Money Power allows them... it serves the Money Power interests to let them on TV.

The Money Power ruiles the world precisely because they aren't stupid, even if they go Art of War on the ignorant and feign stupidity!

“Pretend inferiority and encourage his arrogance.“
~Sun Tzu, Art of War

QE is all about transferring toxic assets to the ignorant populace and to transfer trillions in cash (debt receipts) to the banksters.

Who hear wouldn't accept a 10% devaluation of the currency if you could have $1 million cash today.  Try trillions.  Millions of millions.  Yes, the math works.

But I'll tell you what doesn't work.  Making the currency worthless, causing bank runs, paying off 3.5% 30 year loans with bread money...  makes no sense.

NOBODY in the "straight to hyperinflation" camp has ever addressed this reality in a detailed manner.  Rather, it is typically, "Bernanke is dumb, I'm gonna get my debts bailed out."

Uh, no.  Bernanke isn't dumb, he's enriching his employers to the tunes of trillions while saturating our *sses with trillions of debt.  His employers run our government, they run the drugs, arm their drug cartels with tax payer money and launder the drug money and, when they get caught, nothing happens to them.  Their operatives steal over a billion, lie to Congress under oath and nothing happens.  They bribe county governments and the government employees go to jail while JP Morgan, the briber, is never charged.  They toxify your food and water.

Debts aren't going to be bailed out.  Not gonna happen.

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. The one aim of these financiers is world control by the creation of inextinguishable debt.”
~Henry Ford

But I am always open to having missed something here.  if you think so, please explain, in a detailed manner, where I've gone off the track here and why you think so.

Ghostbusters's picture

ah yes the benevolence of printing fiat currency that is used as "the gold standard" the world over to price funny things like oil, gold, and real estate or those pesky little things like rice, corn, milk, and pork bellies.  Funny how that works, Ben takes the helicopter for a spin and people starve.  ah yes the benevolence...

THX 1178's picture

Yes, it destroys the Federal reserve and the banking cartel, and makes us wealthier in the long run. It is benevolent compared to alex jones and rense and the NWO/depopulation agendas.

i_fly_me's picture

It certainly will not destroy the banking cartel though they might sacrifice the FED as part of the reset process.  Who exactly is the "us" getting wealthier above?  Surely not those of us who have tried to live within our means and save the excess our whole lives.

THX 1178's picture

All of the infrastructure that we bought and built with the petrodollar and strong dollar policies... we get to keep. This is us maxing out the credit card. On the whole, our nation will be much richer because of it. And also, yes it will destroy the banking cartel because it destroys their monopoly on money.

i_fly_me's picture

"We bought?"  *I* didn't get *anything*.  Are you insinuating that I am richer because "we" steal my savings and build solar factories and such with it?  Collectivists annoy me when they use this logic.  Government adds no value, it only takes and crowds out legitimate production.

THX 1178's picture

Yes! Absolutely! the Petrodollar standard and the Cheap Chinese/foreign shit we got from that system made you ORDERS OF MAGNITUDE richer than you otherwise would have been had it not been done this way!!!

i_fly_me's picture

Your understanding of wealth is disturbed.  By your logic the guy who lives under the bridge is as well off as the guy driving over it.

SeattleBruce's picture

And the bankstas/PTB will control the reset (as they've hoarded the wealth on the way down (deflation) and the way up - hyperinflation).  They will control the reset, unless 'we the people' can somehow muster the will to prevent it.  In any case all it takes for evil to triumph is for good men to do nothing [Edmund Burke] - and that has always been true.

smlbizman's picture

how does silver drop in a 1 minute chart .30 in that span without a bid? and that was at 5 21

bobola's picture

How does Blythe Masters sleep at night...???

smlbizman's picture

than recovered all at 5 59 to 6 01....it looks like a flash crash...charts at netdania 1 min chart and the tick chart shows it broken down in seconds...i would really like to see the nanex view of this...it bounced between 34.60 to 34.605 to 34.61 for forty minutes

SafelyGraze's picture

how does the mint go from 0 to 0 to 0 to 1,233,000 ozt in the first four days of october

the zeros are accounted for

but a million ounces in a day? that's 85 thousand pounds that could've been used as antimicrobial cellphone parts inside missiles.

cut it out, mint. you're gonna burn through the annual domestic production before the election.

LMAOLORI's picture

 

 

Economics 9698

Did you say you are an Economics teacher?  I might be confusing you with another but can the Fed really go bankrupt? I don't believe it can. Being the World's Resever Currency we can't really default either unless they do it intentionally and none of the politicians would really want to do that because Money is Power and Debt is Slavery. 

 

Fed New Accounting Change Means its Impossible for the Fed to go Bankrupt!

Hot! Fed hides major Accounting Change

 

 

Newsboy's picture

This month's homework assignment: Iran.

Dr. Richard Head's picture

Their nuclear program http://www.youtube.com/watch?v=3Dmz8JO9zIw&feature=g-all-u ?

Or the effects of US sanctions being causation of hyperinflation in Iran?  I would assume the latter, but wanted to share the former.

Newsboy's picture

Love the name...

There was a shutdown in the Bazaar in Tehran, day before yesterday. The currency exchange rate was changing so fast that they turned off all the big boards and shut the doors. They blamed it on that anti-Muslim B-movie, but the Bazaar was shut for 4 hrs. My Iranian contact told me that, and there are reports about it.

I don't know what currency attacks the US, Israel and global banking are doing, but it's more than just sanctions and freeze-out from global banking. In the American Revolution England had a printing press for Continental dollars that did massive damage. Forgery was made a capital offense. There have to be local attacks like that going on inside Iran, as well as cyber attacks hammering away at all levels.

This has got to be an all out attempt to destroy the Rial/Touman in as short a time as possible. Iranian banking is a threat to global central banking, as was Libyan banking (RIP).

Harbanger's picture

I'm not disagreeing with you, I don't understand how the CBI or CBL can be a threat to other Nations Central banks.  You also say, lybia banking (RIP), as far as I know the CBL is still functioning.  Am I wrong?

Tango in the Blight's picture

There wasn't a central bank in Lybia until last year. Founding it was the first thing the rebels did when they got in power.

Harbanger's picture

Wrong.  The Central Bank of Libya was started in 1956.

Urban Redneck's picture

Follow the "money"

1) out the back door of the exchange and across the bathtub to Dubai or

2) out the front door and into the Iranian economy

 

Either a counterfeit fiat printing press or a counterfeit tungsten machine press can wreak havoc if someone can get the "money" into the money supply

Harbanger's picture

I asked this b4 and didn't get an answer maybe you can help.  If you believe counterfeit fiat created the hyperinflation in such a short period of time in Iran, how did they distribute the truck loads of counterfeit fiat necessary to create all this excess cash? 

Urban Redneck's picture

I think counterfeit currency would be only one aspect within a larger effort to destroy confidence in currency, which will erode public support  for the existing government and possibly lead to regime change (the US being only slightly less succeptible to the exact same tactics because of the Coke/Pepsi challenge)

 

If you need to smuggle truckloads of "anything" into any country it is actually safest and easiest to use the known & established smuggling routes.

 If you need to quickly distribute a "product" throughout a country where you don't have a distribution network, you leverage an existing network (build it vs. buy it)