According to the Austrian economics-inspired crank Marc Faber, hyperinflation in the US was “100% certain,” no less!
Well, we are still waiting for that alleged hyperinflation.
Philip Pilkington has an old but wonderful post here that really is one of the best refutations of this nonsense I have ever seen:
Philip Pilkington, 2013. “Hyperinflation! The Libertarian Fantasy That Never Occurs,” Nakedcapitalism.com, March 6.The answer is, quite simply, that Austrians and hyperinflation cranks do not – and have never – understand real world capitalism.
Their economic models and assumptions are virtually worthless, and they have never understood the role of administered prices/mark-up prices, excess capacity, and stocks/inventories in modern economies.
I advise them to read Nicholas Kaldor’s classic Economics Without Equilibrium (Armonk, N.Y., 1985), simply one of the best short introductions to real world capitalism you will find.
Ideologues who have an agenda to inflict on society that they know ordinary people would reject out of hand by thinking about it calmly often try to whip up fear first. They know that people make bad decisions under the influence of strong emotions, especially fear, so they come up with, and propagate, the scariest scenarios that sound plausible, at least to them, to try to impair the judgment of the people they want to trick into accepting their schemes. In the world view of Austrian economists, predictions of hyperinflation serve as the fear-inducing strategy to try to get people to accept the Austrians' harmful "reforms" that don't stand up to rational scrutiny.
ReplyDeleteAustrians consider themselves highly rational, indeed they consider themselves the only rational folk in the world of economics. Their system is both an moral system of economic ethics and a description of how very nice the world would be and how smoothly it would all run if people would just behave according to its dictates and let equilibrium rule all. I"m not so sure that they're cynically predicting doom in order to scare the world into accepting their reforms. I suspect that they feel economic doom to be the only right and proper fate of a humankind that obstinately refuses to understand how lovely everything would be if we all let the market work its magic.
DeleteThe fact that base money and national debt are very similar in nature, and thus that swapping one for the other does not have a huge effect is a point that is way to difficult for Austrians to grasp.
ReplyDeletePeople who own U.S. Treasury securities do their own "quantitative easing" every time they cash even a humble U.S. Savings Bond - and those debt instruments have traded for generations. Why hasn't that practice already resulted in hyperinflation?
DeleteDoesn't it seem rather odd to claim that hyperinflation is a "libertarian fantasy that never occurs" when there are more than 50 documented incidents of hyperinflation in the 20th century alone, up to as late as 1998?
ReplyDeletehttp://object.cato.org/sites/cato.org/files/pubs/pdf/workingpaper-8.pdf
Except Philip's title is saying that hyperinflation is a "libertarian fantasy that never occurs" in the way that **libertarian cranks predicted it for the US on the basis of QE.**
DeletePhilip does not deny there were other real world hyperinflations, if you had bothered to read his article:
For some reason it is ingrained in the common/libertarian mind that all inflations are a case of too much money chasing too few goods. In fact, these inflations are very rare in modern economies and inflations are far more likely to be due to rising commodity prices. Weimar and Zimbabwe will be brought up too. These hyperinflations were due to entirely different reasons and the interested readers can read up on these here.