Sabri Oncu wrote: > Hyperinflation happens for one reason only: foreign debts denominated > in foreign currency. Foreign debts denominated in domestic currency > and American exceptionalism are the same thing, because the USA has > been the only country in history with foreign debts denominated in > domestic currency.
I have a related theory of hyperinflation, which applies to more moderate cases (90% per year, etc.) That is, (to ape MF) hyperinflation is always and everywhere a political phenomenon, due to political stalemate, civil war, and/or the collapse of the state. Clearly, a state with a lot of debts denominated in foreign currency and owed to foreigners would be having severe political problems. The idea is that if the state is collapsing, it has a hard time raising tax rates (as in the US, where special interests block such policies) or collecting the taxes that are legally in place or cutting transfer programs or reducing government payrolls. This gets worse when there's a civil war, where tax payers can go over to the "other side" and the loyalists have to be bought off with spending programs and tax breaks. There's a serious government deficit, which must be paid for by selling bonds or printing money. If the state's in serious trouble, it has a hard time selling bonds (and the risk premium takes off), so it ends up having its central bank print money. With a civil war or similar problems hurting the ability of the economy to produce services and tangible goods, this encourages higher inflation and thus higher nominal interest rates. The latter make the state's debt burden worse, encouraging more printing of money. -- Jim Devine / "In science one tries to tell people, in such a way as to be understood by everyone, something that no one ever knew before. But in poetry, it's the exact opposite." -- Paul Dirac. Social science is in the middle.... and usually in a muddle. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
