Hyperinflation, when can we expect it?

Economics Economics Questions
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Examples abound of fiat currencies becoming worthless in a matter of months, weeks or days, prices spriraling out of control from one hour to the next near the end as everyone rushes to get rid of what they can while they can. It’s easy to see how any government dedicated to recklessly monetizing it’s deficit would eventually cross the tipping point and set off an unstopable, self-fulfilling decline (to zero) in demand for it’s already depreciating currency. In fact, has any fiat currency not seen it’s value eventually go to zero?

But, I’m wondering how plausible such a scenario is in today’s world? Only reserves are created out of the government debt. The vast majority of US dollars are created out of consumer debt and their value is leveraged ontop of the government debt. Unlike government debt, much consumer debt is backed by real assets: cars, houses. Further, much of this debt is simply the result of accrued interest which does not result in the creation of new dollars. One would expect that debt far exceeds dollars. Millions of Americans are chasing after dollars in hopes of paying off (or simply not losing) their assets.

Conceivably, this huge bubble of consumer debt could offer the government a buffer for it’s own inflation. What I mean is: even if the government decided to suddenly double, or quadruple it’s total debt (eg. maybe the next admin would want to engage in some huge offensive war, or whatever…) just from one year to the next, wouldn’t much of this new ‘cheap’ money be absorbed by debtors eager to pay off what assets they can (eg. before they have to renegociate to a higher nominal interest rate)?

The USD has been losing value to basic commodities at a frightningly rapid rate: 5% per month or so for 6 months now. If continued, this corresponds to a 100%+ annual “inflation” (although not yet seen in consumer prices…), something comparable to the early Weimar Republic days. Might just be a short term readjustment, but It’s enough so far to get me thinking about it.

So, is there any fundamental difference between the current situation and past currency crack’ups as I speculate above? Maybe some Austrian econs have written on the circumstances of hyperinflation but I’m not familliar with any. Thanks in advance for any ideas. [8-|]

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I saw an interview with Ron Paul on youtube that was on CNBC where he claimed that the US is in unchartered territory. So far I agree with that, but I am not sure I would be able to explain it very well. I am still trying to digest all of this, but you make some good points.

I think it was Paul Craig Roberts who wrote an article recently about the Brown Shirts Having an Ace Up Their Sleeve (or something similiar to that title) where he posed the possibility of another ‘event’ to rally the sheep. Here it is http://www.informationclearinghouse.info/article19308.htm

I see the mind set of the average American consumer teatering somehwere between what you describe “paying off debt to keep their assets” and spending their money on things that will help them survive the crunch - anything from gardening to gold. Many are simply cutting the fat and not looking too far ahead or asking too many questions.

My neighbor recently mentioned an often used saying - “Better to deal with the devil you know than the one you don’t.” And that seemed to fit the current climate, since many seem to willing to accept the Establishment’s solution to whatever we may be facing as opposed to stepping out into a process of thinking for themselves.

I think Brazil went through a period of hyperinflation within the last 30 years or so, but I haven’t studied it.