Nobody Sees Hyperinflation As A Credible Outcome But It’s Coming (And No Currency Will Escape It)

Monday, April 30, 2018
By Paul Martin
April 30, 2018

Egon von Greyerz breaks down what we need to know about interest rates, gold, silver, and oil in relation to the coming hyperinflation. Here’s the details…

by Egon von Greyerz of Gold Switzerland

The coming hyperinflation will start slowly and few people will realise what is coming. But once the first real inflation signals are appearing, the process will speed up fast as the currency debasement accelerates.

Right now we are most probably seeing the first signs of inflation. The rising CRB index, together with rising oil, silver and interest rates are all telling us that inflation is coming. Initially, we will see a gradual increase but soon inflation will accelerate until we in the next few years reach hyperinflation.


Of course, nobody sees hyperinflation as a credible outcome of todays’s low growth environment. But hyperinflation is a currency event and it will come as a result of all major currencies finishing the move that started with the creation of the Fed in 1913. Since then, all currencies have fallen 97-99% in real terms. So there is only 1-3% to go to reach zero. But the problem is that they won’t just fall 1-3% but 100% from today. This will be achieved by massive money printing in an attempt to save a debt infested global economy.

So why will central banks now succeed with creating inflation when they have failed for so long? They have for some time used their two major tools to create inflation by printing money and lowering interest rates to zero or negative. But why do they want inflation since it destroys the value of money? For example, an inflation rate of average 3% halves the value of money in 24 years. What is desirable about that?

The simple answer is that inflationary growth creates the impression of real growth. Inflation gives the illusion that people are better off whilst it instead makes them poorer and destroys the value of their savings.


So in spite of unlimited money printing and credit creation, governments around the world have failed to create their desired growth by inflation. The reason for this is that the velocity of money has declined to the lowest levels for over 60 years. As the graph shows, money supply is up 16x from $0.9 trillion to $15 trillion since 1981. At the same time the velocity of money has declined by almost 2/3rd.

The more money that is printed, the less it is used. As the chart shows, money printing has gone exponential from 2006 whilst velocity has crashed. This is really a paradox and a new phenomenon. There are some simple explanations. Firstly, the printed money is not reaching the people. The banks have not been lending the printed money as they were more interested in shoring up their weak balance sheets. So where has all this printed money gone? The banks have used it for their own trading. It has also gone to the benefit of the top 1% or less who have invested in stocks, bonds and property. In these asset classes we have seen massive inflation fuelled by cheap money and unlimited credit. But those figures don’t show up in the official inflation numbers or the velocity ratio.

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