The Mathematics of Hyperinflation

[traelin0]

We have already passed the point of no return on our journey into hyper-inflation for many paper currencies, and investors seeking to protect themselves from currency debasement should understand why. This opening statement is valid even if we ignore today’s abounding systemic risks.

There is a simple reason why monetary inflation becomes an exponential phenomenon. As currency is debased, an increasing quantity of money is required to achieve the same real-money effect. For example, if the quantity of money is increased 25%, the initial benefit to the issuer is a tax of that amount on the holders of previously-existing money stock. To achieve the same tax in real terms for a second time requires a further expansion of 31.25% of the original monetary units, and continuing with subsequent 25% expansions on increasing totals we obtain our exponential series of monetary inflation.

In practice, the realisation of the loss of purchasing power a currency suffers depends on how quickly it is transmitted into the general price level, and this can vary considerably; but eventually it is reflected in prices. So we need to consider the likelihood of an improvement in government finances sufficient to eliminate reliance on funding through the printing of money, which is the root of this evil. It is here that governments have great difficulties, which lie generally in the nature of government bureaucracy.

www.zerohedge.com/article/guest-post-mathematics-hyper-inflation

[BeenThere...DoneThat...]

...this makes me want to go out and stock the pantry...


...it also reminds me of a funny email, claiming that recycling is a better ROI than the stock market... how had you bought $1K in certain stocks over the past year, your current value would be less than $50... but had you drunk $1K worth of beer and returned the cans/bottles, you'd have @$200...