Dec 13, 2009 A Flaw in the Hyperinflationary Argument intothegreyzone.com
People assuming hyperinflation are assuming that the cash injected into the system will be spread equally or nearly equally, resulting in competitive bidding with more dollars for the current pool of goods and services. I believe this assumption to be in error. It is my opinion that the cash being pumped into certain hands is being pumped deliberately into those hands in order to change the ratio of wealth in the country. In other words, it’s being used purely as a wealth redistribution mechanism.
Imagine for a moment if there are 10 people in a room and each has $100 and there are a fixed amount of goods in the room held by each person. Prices will balance out between people at some level. If I give each person another $100 then prices will rise to reflect the decrease in the value of the currency. But if I give $1000 to one person, prices are unlikely to rise much at all. If I raise prices on my goods, the other 8 people (aside from myself) won’t be able to afford them. And I can’t legally charge higher prices to the one person. That $1000 is inflationary but far far less inflationary than a roughly equal distribution of the same amount through the general population. Yet the person with the additional cash now can purchase more than the rest of us. In effect, he has become wealthier while we have become poorer.
This is what I believe is the intent of the current financial policies of the central banks today – to further entrench the wealthiest people at the top of the pyramid. This process can never be hyperinflationary unless the excess cash escapes into the general populace. And I doubt that it ever will. Instead it will be used to manipulate and buy the stocks and major resource flows of the world, placing the elite in even more control of our society. And of course, this leaves the door open to mistakes by the ruling elite that can lead to a deflationary collapse. Unless Helicopter Ben actually gets in a helicopter and starts dropping $100 bills around the country, there cannot be a hyperinflationary blowoff under the current credit/debt conditions.
P.S. Note also that Ben can also lose the devaluation war if Japan and Asia choose to devalue faster than he does. And Ben is bound by practicality in that if he devalues too fast, he destroys himself and those he is trying to protect due to the reserve currency status of the dollar.