Faber: U.S. Should Prepare for Hyperinflation

(in case you can't read German or tiny ass letters)
'when we have paid one hundred billion marks then i can give you something to eat'


Want to share this gem from FT's alphaville. Hyperinflation here we come? Or just more depressing threats? Humph, at least the threat of hyperinflation is getting its 15 minutes of fame... and look! It's my 2nd favorite Fedhead Chuck Plosser tossing in his $0.02.

Wa-oah. Marc Faber has a reputation as a bit of a doom-monger, but he has really surpassed himself with this one. From Bloomberg (emphasis ours):

May 27 (Bloomberg) — The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.

Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.

“I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”

Federal Reserve Bank of Philadelphia President Charles Plosser said on May 21 inflation may rise to 2.5 percent in 2011. That exceeds the central bank officials’ long-run preferred range of 1.7 percent to 2 percent and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.

Now, there is certainly an inflationary risk to the massive expansion of the Fed’s balance sheet, and exiting quantitative easing and the extremely low interest rate environment will be tricky for the central bank — but we’re still very far from the kind of hyper-inflation described by Faber.

So we’re fairly sure that scenes like the below, a Zimbabwean paying the bill for his dinner, won’t be repeated in a White Castle or Red Lobster anytime soon.

Are we absolutely sure about that, FT? I wouldn't put any money on it.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.

2 comments:

Junior:
I am a big Marc Faber fan but do not currently expect hyperinflation in the US. I am not certain I will be alive tomorrow. As Damon Runyon once wrote, "There ain't nothin' so certain in the course of human affairs, that it's more than about 5 to 2 against". The worst I presently forsee for the US is two decades of 1950s style Argentinian inflation, or annual rates of 20-35%. Not a pretty prospect either.

with you, Pop. I don't see it either. That's too easy an out and just not feasible. we're a mess but we're not THAT much of a mess.

Jr