By John Soltez: Hyperinflation, or just a bunch of hype? That is the hot debate among economist types these days. On one side are the alarmists, sounding their warning sirens, flashing us pictures of Weimar-era Germans using wheelbarrows for wallets. On the other side are the skeptics and the pooh-poohers, such as Fortune magazine, which recently ran an article headed with the comment "irrational fears of hyperinflation won't die." Right now, it's hard to argue with the doubters, particularly at a time when the Fed is doing all it can to fight deflation - whether it's buying up credit-card debt, or swelling up the money supply like a pregnant elephant. Unlike the Weimar folks, the thinking goes, we hold the world's reserve currency; theoretically we could inflate to kingdom come, and someone will still have to buy our debt. Hyperinflation threat? Stick it in the panic shelter along with the tuna fish and the shotgun shells.
The skeptics may be missing the point, though. Inflation, as Friedman famously remarked, is a monetary phenomenon. Hyperinflation, however, is a different animal altogether; despite common belief, it's not simply inflation on steroids. No, it stems from a different seed, one that involves politics rather than economics........read on
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