Why Haven’t We Seen Hyperinflation?

germany june 1921 to november 1923 highest monthly inflation rate over 30 000 time required for prices to double every few days during world war one like many countries germany then called the weimar republic suspended its ghost center to fund the war effort based on the belief that they were going to win the war and pay for it by plundering their enemies that plan obviously didn't work out so after the war they were left shackled with not only their own war deaths but were also fined 132 billion gold marks in reparations by the treaty of versailles the equivalent of about 269 billion dollars today the first payment of that war guilt came due in june 1921. the problem was the treaty didn't allow germany to make payments in its own currency so germany had no choice but to exchange their german marks for other respected currencies at really bad exchange rates so what was the solution well we're off the gold standard so let's just print more money and print they did that printed money was used to buy foreign currency that foreign currency was used to pay off their war reparations and soon germany was buying foreign currency at any price because why not all they had to do was print more money so in just a little over a year later the german mark was already practically worthless a fifty thousand dollar bill turned into a five hundred thousand dollar bill to a five million dollar bill to a 50 million bill to 500 million to 5 billion to 50 billion to 500 billion to 5 trillion to a 50 trillion dollar bill bills that were worth more of its weight as wood fire than as a medium of exchange a loaf of bread that cost 160 marks by the end of 1922 skyrocketed to 200 billion marks just a year later although germany was the most infamous case of hyperinflation it is far from the worst this episode is brought to you by trends learning about thousands of great business ideas that you can take advantage of long before you read about them in the wall street journal i personally enjoyed 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could have made the already dead economy worse hungary took a different approach the government intentionally caused inflation by printing literally as much money as they could what started out as 25 billion pengate in july 1945 grew to 1.6 trillion penguins six months later then just four months after that the money supply grew to 65 quadrillion which is a million billion then just another two months after that to 47 septillion that's 47 trillion trillion to make this a little bit more comprehensible something that cost 379 pengui in september 1945 went up to a trillion trillion 10 months later at one point the government had to stop collecting taxes because if they were late by just one day it would have wiped out the value of the taxes the government collected needless to say this would go down in history as the worst case of hyperinflation ever [Music] yugoslavia april 1992 to january 1994 highest monthly inflation rate 313 million percent equivalent daily inflation rate 64.6 time required for prices to double 1.4 days yugoslavia was a nation born in the wake of world war ii that was made up of these modern day countries during the early days of the breakup of these nation states in the early 1990s the second worst case of hyperinflation occurred far worse than the weimar republic yet it seems to have slipped under the public's consciousness at its peak in january 1994 the official monthly inflation rate was 313 million percent or four times higher than the weimar republic and the results were devastating people's income dropped more than 50 percent they couldn't afford food if there was any to be bought bread lines foreign gas stations were closed foreign exchange black markets emerged to put it into perspective imagine the money you have in your bank account right now then imagine moving the decimal point 22 places to the left then imagine trying to buy something then imagine trying to survive through this for two years straight from the start of 2020 to the end of 2021 for example zimbabwe march 2007 to november 2008 highest monthly inflation rate 79.6 billion percent equivalent daily inflation rate 98 time required for prices to double 24.7 hours after zimbabwe gained independence from the united kingdom in 1980 this opened up a whole new profession politicians politicians whose first priority has always been to secure those votes to secure their seat in power and how do you secure that public support as a politician who has control over the government spending offer free stuff so offer free stuff they did which created a spending problem for their government add on top of that a ton of other stuff like the government seizing farms from white farmers and giving it to black farmers that didn't know how to farm which created a food shortage the situation was made worse by costly participation in the congo war in 1998 and sanctions against robert mugabe's government in 2002. the government blames its financial problems on sanctions imposed by the eu and u.s during mugabe's reign the banking sector collapsing in the money printer going bur and you have the perfect storm to nurture some hyperinflation the general rule of thumb is that hyperinflation is when the monthly inflation rate is above 50 and since 1998 zimbabwe has been hovering around a 50 annual inflation rate mix in zimbabwe central bank continuing to tinker with the economy to try to slow down inflation and by march 2007 the country was experiencing full-blown hyperinflation with again a peaking around 79.6 billion percent a month prices in shops would go up several times a day water and power cuts happened often and there were cues at banks petrol stations and severe shortages of food in supermarkets a problem they're still struggling on and off with to this day this year inflation is hovering at around 300 percent that was the latest figure before zimbabwe's finance minister put a moratorium on publishing numbers until next year venezuela 2013 to the day a situation caused by both political and economic reasons that range from the government controlling parts of the economy shortages of food electricity medicine riots and political instability that's them from that oil revenue tanking even though they have some of the largest oil reserves on the planet gasoline has been in short supply there for years the shortage has now reached unsustainable levels and is hitting the capital caracas in the middle of a pandemic economic sanctions from the us and more with hyperinflation starting at modest levels in 2013 to peaking at around 1.6 million percent in 2018 with the venezuelan central bank estimating that the currency was inflated by 53.8 million percent between 2006 and april 2019. there's no coffee no flour no oil no butter no corn flakes there are a lot of food products missing that aren't luxuries just normal food they were able to tame the hyperinflation back down to better levels in the low thousands of percent in recent years but that still means that for the average everyday shopper on the streets prices for goods are doubling every few weeks one woman said everything is rising so quickly that what i deposit in my account doesn't buy anything all we can do is eat less and stretch what we have which brings us to today in the west [Music] the united states january 6 2020 to january 4 2021 coming straight from the fed we started this period with around 4 trillion u.s dollars in the system one year later that number is at 6.7 trillion dollars meaning that over 40 percent of all us dollars were printed in just the last 12 months well we've had an incredible surge in government spending a lot of it related of course to kova 19 and to the ordered you know economic shutdown and the fact that a lot of people were no longer out there earning money and so the government looked to replace what people were no longer earning by printing money which is what they did you had all this government spending but there were no additional tax hikes to cover the cost nor did the government try to prioritize any of its spending it didn't say well maybe we should spend less on the military so we have more to spend on fighting the pandemic right they didn't budget uh their resources they just said well we're just gonna spend more money on the pandemic but we're not gonna spend less on anything else and we're not going to raise anybody's taxes to pay for it so where did all the government spending come from it doesn't come from you know thin air the money has to come from somewhere and if they're not going to make room in the budget by cutting spending if they're not going to increase taxes to get additional revenue well then they just crank up the printing process so that's where all this new money came from the government printed it and spent it into circulation through all these programs and from the looks of it no one seems to be in a rush to slow things down a sweeping nearly 2 trillion relief package to tackle this pandemic one of the largest in our nation's history in fact no one is really talking about this at all and right now nobody seems to think that this is a problem people seem to think that we've stumbled on the equivalent of a monetary fountain of youth people like to call it modern monetary theory which is we can have whatever we want as long as government prints the money to pay for it that there's no limit that government is free as long as they print money now of course and strangely enough we haven't seen much inflation for everyday goods like gas and food prices definitely haven't gone up anywhere near 40 percent and other countries seem to be following suit so the question remains where is the inflation the reason why we haven't seen inflation yet is because the amount of money being printed is only one of the factors that contributes to inflation to get inflation here's everything you need number one industrial output how much stuff an economy makes the more stuff the more supply which equals lower prices the less stuff the higher the prices number two employment too much employment leaves employers fighting over workers which leads to higher wages which leads to higher prices too little employment leads to employees fighting over jobs which leads to lower wages which leads to lower prices number three the money supply the main topic of this video and probably the easiest to understand the more money in an economy equals higher prices as long as the economy is producing the same amount of stuff or less stuff and number four if the money is exchanging hands and if so how fast also known as the velocity of money if you print a bunch of money but that money is spent on food instead of gas food is going to experience inflation but gas isn't if you want a more detailed explanation of this i highly recommend you watch the video by economics explained on the subject it will be linked below and in our case right now the money supply has shot up a ridiculous amount but the other factors have been keeping inflation down industrial output it's been down from businesses not being able to operate which leads to less stuff but there's also less demand from you and i to buy those things so its impact on how much inflation we have is kind of neutral employment has also definitely taken a hit and with less employment comes lower wages which means lower prices not inflation and the velocity of money it's pretty slow for everyone with all the uncertainty in the air people don't want to spend money right now if they don't know if they're going to be able to keep their job or find a new one and i think the reason for that is a lot of the money that we print as is always the case ends up getting exported if you look at our trade deficits they served to record territory especially in goods where we had all-time record high trade deficits so a lot of that money got exported and it wasn't here in the u.s where it would have been used to bid up the price of goods and and services but you know what they are going to spend money on things that only go up like tesla stock every other stock real estate and bitcoin so we are seeing plenty of inflation happening right now the s p 500 has seen around a 70 increase since its crash in march the same exact period all these new us dollars were printed home prices have gone up by 8 since january which is higher than usual and pretty much everyone and their mom knows how well bitcoin has been doing but instead of calling it inflation we call it the stock market rally the real estate boom kryptos time to shine or the great crypto bubble depending on who you ask when inflation pushes up asset prices people don't complain because the people that own those assets of course feel much richer right now the downward pressures are counteracting the upward pressures and we are in a fragile equilibrium so inflation can work its way into the economy through various methods and so prices can be affected in different ways but ultimately it's consumer prices that are where all the inflation ends up once it you know finishes with making its way through the economy because that's really all everybody wants i mean people don't buy stocks because they want to own stocks they buy stocks because they think they'll be able to buy more consumer goods with the profits from their stocks but ultimately those profits have to be realized and then they have to be spent on consumer goods and the price of those goods can go up which begs the question should the money printer keep going bur can it keep going burr and i ultimately think we're going to see a real shock in terms of how high consumer prices are going to rise so you think that's how it's going to end up with all this money printing it's eventually going to hit consumer prices well it always does i mean that's like the final resting place for inflation is in the end product which is in consumer goods but those on the side are printing more and more money spending more and more money and not worrying about how much debt we have the modern monetary theory camp have an interesting argument their main thing is that since the government is the issuer of money the creator of money they don't have to worry very much about spending a lot having too much debt unlike people and businesses like us who are the users of money because they can always print more to make the debt payments the line you want to draw between the federal government let's say of the united states of america and everybody else that line that distinguishes their fiscal capacities their spending capacities from ours is really down to the fact that they can issue our currency the us dollar and the rest of us can if a government issues its own currency imposes tax liabilities or other kinds of liabilities in that currency spends only in its own currency and issues debt only in its own currency then it basically can never run out of money that is the basic of the argument with the only limit to how much money the government can spend borrow and print being the amount of stuff there is out there for the government to spend money on the limit would be the resources available for the government to hire or purchase the government can't run out of finance right but the united states could run out of resources that are available once that supply gets low then we'll see prices rise and inflation rise and if that's the case we can spend borrow and print a lot more than where we're at right now before there's too much inflation assuming that's true then we have a social responsibility to offer things like the government guaranteeing everyone has a job the green new deal stimulus checks whatever the one that mmt is most associated with is the job guarantee program an unconditional universal offer of a job to anyone who wants to work and the fact of the matter is this is kind of how the world works right now people think that we're we're describing a new policy we're not we are describing reality we're describing the way the u.s government spends the way the british government spends but should this be how the world works in the first place should we just accept that the government should have a monopoly on money in the first place one way to think about it is the government has a monopoly on a certain thing and so then why don't we get rid of that right if the government right now you know soviet union if they had a monopoly on agricultural output you know yeah there'd be an economist in there who could you know his career would be writing books about proper soviet planning of government uh you know agricultural targets and so forth but surely you would think that the right thing to do with for the concert would be to focus on let's let's change this system i don't understand why he's focusing on certain things and just conceding yes the government's going to have monopoly on money and so forth and that's the way it is if any other entity did the sorts of things and then tried to justify them or just explain what they were doing the way in his writings he talks about what the government's doing clearly that would be fraudulent in the fundamental way that he came back and said there's a distinction here that you're not getting murphy is that it's like there's a scorekeeper and obviously you know there's a distinction between the people playing the game versus the referee setting up the game but then that just begs the question why are we playing this game in the first place why is that guy the score keeper it's because they have guns and are pointing him nuts and saying you're going to play this game is because you're going to get shot otherwise all right so since neither of us is describing the way the world literally is right this second we're both explaining tweaks we want to make in this system it seems to me that's kind of a big deal our brains have not evolved very much in the last 10 000 years that means that the same humans that caused all the other examples of hyperinflation those same politicians with the same incentives that led to those disasters are the same humans in our government today with similar incentives are those really the people you want in control of the printing press so before this interview before this video i really tried to understand the other side of the argument the monetary theorist on the surface it kind of makes sense what are your thoughts on it well it doesn't make sense beneath the surface and it doesn't make sense on the surface either like no matter where you go relative to the surface it doesn't make any sense but what is true though is that if a government borrows in its own currency yes it can go deeper into debt before suffering the consequences of its profligacy than a country that's borrowing in somebody else's currency that it can't print so the day of reckoning will come later for a country that's borrowing its own currency but because the day of reckoning comes later the problems get much bigger before that happens so that means the ultimate consequences are much more severe so you get away with it for a little longer but then the pain is worse when you no longer get away with it because the idea that you get away with it definitely is nonsense right the bills have got to be paid eventually and the longer you procrastinate paying them the bigger the bill is going to be but when the government just prints money and gives it to you right when you have all these unemployed people who are sitting at home just getting a check from the government they produced nothing they added no goods or services to the economy yet they can consume goods and services in the same proportions as if somebody had actually done work and actually been you know a productive member of society all this does is drive up prices because if your work adds to the goods and services and now your help you're consuming the goods and services you help create that's fine but if now you start consuming goods and services yet you didn't help create any of those goods and services you just have more money chasing a diminished supply of goods and services and prices are going to go up and they're going to go up like never before and the irony of all of this is that the federal reserve has been promising americans more inflation well that's one promise that they're going to deliver on in fact they're going to deliver on it beyond their wildest expectations when you give government power they usually don't like to give it back so do you think there's ever going to be time where they're going to slow down the money printer or is it just going to continue forever well they can't do it forever because at some point the money has no value and you know there's not much sense in printing money that buys nothing so at some point they're going to have to turn off the presses and in fact hopefully at some point they're going to slow them down quite a bit but you know we'll see how long they can resist doing that because doing it involves a lot of pain short-term pain economically politically that our leaders really don't want and of course if you look at all of the promises that they've made to the voters that can't possibly be paid for rather than admit that you know none of this can you know is affordable they can just print the money and and act as if you know the government can provide these things so you know given the the type of leaders we have and their philosophy and their the base you know there's a good chance that they're going to push this as far as they can i mean until the dollar has completely collapsed and then they just can't get away with it anymore so before that happens there's really no incentive for anybody to change yeah because as long as they can print money and people will accept it and the value doesn't go down too much well they'll just keep doing it rather than being honest with the public and accepting the consequences one of the best ways to protect yourself against inflation and even hyperinflation is to have a great business because if you have the next big thing that people need you'll be protected in any business environment that's where trends comes in with trends you can discover emerging industries before they become a big deal just head over to the signal section and feature eyes on the latest trending sectors like niche sports or psychedelic mushrooms which are being used as a potential treatment for depression in addition to being the internet's most undiscovered knowledge hub trans is also home to a wonderful community a community of makers investors and not to mention hustling entrepreneurs just like you and me if you run a business or you're thinking about starting one trends is a must-have resource discover your next big idea by starting your one week trial of trends for the grand sum of just one dollar by going to trends.co jake tran the link is also in the video description below [Music] oolong tea and mct oil not sponsored peter schiff the guy you seen featured in this video super cool guy someone that i really like to listen to and take into account his opinions along with other people who have differing economic opinions so calm down especially you bitcoin boys he's the guy in the video that you've probably seen around i am the one percent let's talk and he's got a great podcast and youtube channel that you can check out with the links below alright alright alright i am well aware that there are a lot of plugs in this video but this plug is very important i decided at the last minute to post the entire interviews i do for these videos on a separate channel for you guys to check out because it's not like i have a lot of stuff on my plate or anything so you can check out the entire peter shift interview with the link in the video description where we talk about a ton of cool stuff like is it inevitable that more capitalistic individualistic societies naturally decay into more socialistic collectivist societies that would be linked below and it would mean a ton if you guys subscribe to that channel too back to the other me if you are new here we make video essays just like this one every single week on the most thought provoking controversial interesting subjects in the world of business every single week for free so make sure you subscribe to this channel too with the red button below i believe that's gonna wrap it up for this video thank you so much for watching you've been awesome i've been jake stay dangerous out there as always and i will see you guys in the next one [Music] foreign

Channel: Jake Tran

Views: 1,210,047

Rating: 4.8140841 out of 5

Keywords: hyperinflation, bitcoin, stocks, digital yuan, stock market crash, federal reserve, stock market, deflation, gold standard, real estate investing, real estate, stock market bubble, monetary policy, investing, investing in 2021, fiscal policy, stimulus package, quantitative easing, central bank, stimulus check update, stimulus, unemployment update, stimulus check, stimulus update, second stimulus check, unemployment, 2000 stimulus check, biden stimulus, housing market, joe biden

Id: iNNUVEfoNmE

Length: 25min 28sec (1528 seconds)

Published: Thu Jan 28 2021

Reddit Comments

[u/Snowbofreak]

M2 grew by 40%.

That doesn't mean 40% of US Dollars were printed in 2020.

[u/Squirrels_And_Llamas]

Not an economist. But at least the second half of this video sounds like the same tired story: wealthy propagandists telling us to look down at the poor "leaching off society" instead of looking up at tax evaders. When billionaires have amassed trillions of dollars since the pandemic started while simultaneously we experienced the highest unemployment since the 1930s, I think we need to rethink whose "taking advantage of the systems". A billionaire doesn't put a billion times the value back into society. An off shore bank account doesn't increase the worth of the USD. It doesn't increase the nation's infrastructure.