If hyperinflation in US, what would happen in Australia?

I have been reading/watching/analysing all the reasons/arguments for and against hyperinflation in the US.

Most of them focus on what would happen in the US.

However, I am interested to know, what would happen to Australia (or other countries) if hyperinflation does happen to the US.

Would our currency crashes too?

Would other economies suffers from high inflation as well?

What do you think?

 

I'd start home brewing beer again.

 

I asked Gonzalo Lira (the pro hyper-inflationist) the same question and this was the answer he sent me. As he says ..."it will be bad"

Dear ........,

First of all, thank you for reading my blog, and being sufficiently moved by my writing to e-mail me back.

As to the impact of the crash of the dollar on the rest of the worldI cannot honestly say. I wish I could, but I really cannot.

I can anticipate that in small, commodity dependent countries, such as Chile (where I live), a dollar collapse will have a momentary panicking effect, but no long-term damage. Witness the 2008 crash: The Chilean peso dipped from CL$580 per dollar to CL$680 in a matter of weeksbut then steadily gained strength against the dollar, until now, it is hovering around CL$500 per dollar.

But in diversified second-tier economies, such as the UK, Germany, Australia, Switzerland, etc., I cannot honestly foresee what would happen in a dollar-collapse scenario. Frankly, as a native, you would have a much better idea how your economy would react to a dollar hyperinflation than I would.

But any way you slice it, it would be bad. This is the flip side of Globalization: Our Depressions are global too.

I'm sorry I'm not more helpful. But thank you very much for your noteit meant a lot to me. Do keep in touch,

Gonzalo.

 

what a gentleman. sounds like a good guy

 

We'd have no choice but to start being self-sufficent on a national level.

It would once again be more cost effective to manufacture (capital equipment, vehicles, textiles etc) here rather than importing from countries that, while more efficient at it than us, just can't compete due to currency valuation.

It'd be painful to start with...and investment capital will have to be hard won from those that have saved their cash rather than living on credit... but we humans are an adaptable bunch.

 

Managed $USD devaluation, which should be good for all other countries and individuals not holding the dollar?

page 12 onwards of this excellent article, explains a $USD devaluation and a fix to Gold http://www.scribd.com/doc/53526093/QBAMCO-Apropos-of-Everything-II-III

'Devaluation & Transformation' The next global monetary system and the implications for assets and wealth

.

 

I just sent the same question to Jim Rogers, and asked him if possible to make a comment about this in any future TV or radio interviews.

I hope he will respond to my question

 

Wages rise sharply drives up prices
Prices rise sharply driving up wages
Interest rates rise driving up prices

This is what happened in Australia around 1972/80.

Regard Errol43

 

A good article that explains what happened in Germany and the US :

"At bottom, it was the unsuspecting middle class who were Germany's savers, pensioners, purchasers of life
insurance, including everyone from workers who saved to the modestly well-off, who not only suffered the
worst of the agony while the inflation lasted but also were left after it was over with the most staggering
permanent loss in relation to their whole substance. This class paid the piper for all of Germany. Great
numbers of pensioners were left totally impoverished and forced back into the work gang to end their days
there. The encouragement to thrift, an old German weakness, turned out to have been a complete swindle.
Instead of a levy on all the Germans to pay for Germany's indulgences, a levy which might have been heavy
but could have been fair, Germany left the levy to fall on those who were too innocent to evade it, and from
them it took everything they owned. In any case, it was not the piper who went unpaid."

Not sure if this link works: http://www.zerohedge.com/sites/default/files/Jens Parsson - Dying Of Money.pdf

It is an article from mises.org ,
Dying of Money: Lessons of the Great German and American Inflation



"Despite the obliteration of the wealth of millions of individual Germans, the inflation was merely a transfer of
their wealth, like any tax, and not in any sense a destruction of wealth. For every German's total loss, there
was an equivalent gain to some other German debtor or to Germany as a whole, through the discharge of their
debts"

 

Remember it well and it was not that pleasant - and I think people were relatively more courteous then so here's hoping the petrol keeps pumping and the shelves keep filling.

 

With a reputed ~95% of money supply being credit and the anticipated explosion in debt defaults, how can hyperinflation occur while the hallucinated wealth evaporates? All the printing equates to nought if tens of trillions in credit disappears into thin air, credit freezes and the velocity of money plummets: deflation takes hold. Either that, or Lira is right.

 

This is the article that has swayed some to the hyperinflation side recently

http://fofoa.blogspot.com/2011/04/deflation-or-hyperinflation.html

 

Except that those Germans who gained in that process have left Germany for the USA before the WWII

 

What I am trying to draw from this article is in relation to the question posed in the heading to the thread, 'What would happen in Australia" and so am looking for similarities :


"It is impossible to overemphasize the importance to Germany's collapse of the period from about March of
1920 to the end of 1921, in which Germany was feeling quite healthy and prosperous while the rest of the
world was enduring a severe recession. Prices in Germany were steady, and both business and the stock
market were booming. The exchange rate of the mark against the dollar and other currencies actually rose for
a time, and the mark was momentarily the strongest currency in the world. From the first moment of this
prosperity, however, Germany had already embarked on a new monetary inflation which bought the boom.
Germany's fate was thus already chosen at the moment when the boom began, and it was gradually sealed as
the boom progressed"

Familiar ?

(Hat tip to rbaggio for his post on money supply growth in Australia)

 

silverwink that is a terrible potential you've raised. I'm interested to hear what others have to say. I've long pondered the Argentina/Canada/Australia nexus and the subsequent decline of Argentina through self-interested politics and international banksters. I can see a potential such as you've described.

 

Australia is at much less risk than hyperinflation than is the USA or Japan.

However, the hyperinflation risk in the USA is significantly lower than that of the risk in Japan. So take any hyperinflation theories with a grain of bitter salt. Most of these theories are written by gold bugs, and yes, most of them have an element of truth to them - that governments tend to inflate their money supply to control their unmanageable debt levels. The problem is that Japan has not hyper inflated, yet it has a debt-to-GDP ratio of about 225%. The USA has a debt-to-GDP ratio that is not even HALF that of Japan, and yet everyone is talking about the threat of hyperinflation. It should really be Japan they are talking about, as it is in a much more dangerous situation in this regard.

 

http://www.brr.com.au/event/frame/77404

this might help give some perspective

 

if savers lose in a hyperinflationary situation how to do those heavily in debt get away with it?

 

Yes, Japan does have a much larger debt level than the US, but the Japanese behave very differently from Americans. Japanese simply don't spend, the government has been trying to get them to do that for years, but they just won't. They don't lose their money in stock market crashes because they don't invest. Have you ever done business in Japan? Hiring workers is bad enough, firing doesn't happen. You can't compare apples with grapes and come to a similar conclusion. Japan is different.

 

Great points u9026a. I heard that in Japan, because they don't sack anyone, they give 'troublesome' or 'older' employee a desk, and a newspaper, and thats it. They sit all day at the desk with their newspaper.

Also Japan HAS productive capacity and HAS massive trade surpluses. The US has little of the former, and none of the latter.