What are the Chances of Hyperinflation in the U.S.?

On Friday, Lew Rockwell ran a piece on his site in which The Gold Report interviewed John Williams of Shadow Stats.  Williams predicts that there will be hyperinflation.  In the interview, he does not define hyperinflation.

While I understand that different people have different definitions for hyperinflation, it is nice for them to define it if they are predicting it.  Some people would say that hyperinflation is when prices are going up 20% or more per year.  Others would say 100% or more per year.  Others would say we are in hyperinflation now because of the huge increase in the monetary base.  Others would say that hyperinflation is occurring only when consumer prices are going up every single day.  This last case would be like Zimbabwe or Weimar Germany where people receive their pay from work and they immediately run to the store to buy food or anything else before prices go up again.

It is certainly unprecedented what the Fed has done in the last few years.  The adjusted monetary base has approximately tripled.  This has never happened since the creation of the Fed in 1913.  But while we are in uncharted waters, I don’t think we will see hyperinflation.  Anything is possible, so we can’t say that it can’t happen, but it seems unlikely.

I do find it plausible that we could see price inflation of 20%.  I would not consider this hyperinflation.  If we define hyperinflation as prices going up every day, then it is highly unlikely.  If we define it as prices doubling in a year, then I might give it a 5% chance at best.

The reason I think hyperinflation (as defined by the more extreme cases) is highly unlikely is because the bankers (who control the Fed) would lose too much themselves.  In a severe case of a currency collapse, the division of labor would break down.  If there are no alternative monies readily available, there will be major chaos.  I don’t think that is likely.  Why would the bankers want to destroy their own pensions and create a world in which trucks stop delivering food to the grocery stores?

In addition, the U.S. dollar is still the reserve currency of this planet.  While that may be slowly changing, I don’t think foreigners will be too happy if the U.S. goes into hyperinflation mode.  I believe that is one of the major reasons that Volcker slammed on the monetary brakes in the late 70’s and early 80’s.  I’m sure foreign governments and other elitists pressured him and the Fed into saving the currency.

Again, I won’t say that anything is impossible, but people should be careful not to be so loose with their language.  To just say that we will have hyperinflation without defining it and without telling us why the Fed and the bankers would allow this to happen, is really shooting from the hip.

The Fed will slam on the monetary brakes again one day, just as Volcker did three decades ago.  When that happens, congress will finally be forced to cut spending and we will experience a very difficult recession/ depression.