Will the U.S. economy see hyperinflation, or deflation followed by hyperinflation?

There are several approaches to correcting our current monetary situation. I personally hope we don’t see hyperinflation at all because we are weaning ourselves off the Fed and taking responsibility for our investments. I would rather suffer through a modest recession to gain some real fiscal stability rather than continue our trend of inflation and debt. However, I am not sure how plausible this is without serious radical changes that would most likely result in a much more drastic recession than i imagine. But, i believe the more reasonable steps than increasing our debt to the Fed are pulling out of Iraq, using that money for infrastructure, and weaning America off the Fed bill by bill.

Hyperinflation has usually happened in tandem with an executive that has control of the money supply, and uses it to decrease the real value of debt owed by the government, or to simply print money for the government’s use. Think of Zimbabwe today or Weimar Germany. Alternately, there’s the former Soviet-bloc type inflation that occurred during the 1990’s. Today in the US, we have an independent central bank, which can limit the growth of the money supply to prevent hyperinflation. JoshGolden, what makes you think there could be hyperinflation, why couldn’t the Fed prevent it, and do you have any historical antecedents to give as an example for the current US situation?

As for deflation, we haven’t had deflation since the 1930’s, and that was partly due to widespread bank failure against which we have many safeguards today – FDIC, banks with multi-state branches, and a Fed credibly committed to lending money to banks during crises. Moreover, deflation brought about by more modern, Japan-like circumstances, should be fairly easily solved by a credible committment to money supply growth by the Fed.

Bottom line, we’ve got a very professional and well-run Fed when it comes to inflation and deflation. (Their role in the mortgage business is a little less stellar.) So JoshGolden, what makes you think there is a problem?

Hyperinflation could certainly occur in the United States. We;re already seeing some of th eresults of fiscal irresponsibility in Greece and it looks like Portugal and Spain may be the next countries needing bailout money. Italy and France might be next in line. Only Germany, with its high productivity and strong economy can save them. The danger is that they could pull it down as they go into economic collapse. And the U.S. is not safe, with most of its bonds being held by the Chinese. Our approach appears to be to throw money at problems for short-term political advantage and the future of the country be-damned