Can you expand? Why is American stimulus not comparable to Zimbabwean stimulus? Personally (as someone not familiar with these topics) I thought the video did a good job of explaining why it was comparable.
>>"Why is American stimulus not comparable to Zimbabwean stimulus?"
Zimbabwe (like Venezuela) didn't get hyperinflation because they "printed" a lot money, they had to "print" a lot of money because they get hyperinflation (1).
The video actually mention this in all the examples that use, it's only that it get the conclusions wrong. If you destroy the productive capacity of a country, you are going to get inflation, that's inevitable. That's not what happened in the USA.
The authors of the video, also, don't understand the difference between adding bank reserves (not inflationary beyond a point) and fiscal stimulus (which can be inflationary beyond a point).
The good thing is that, maybe, in the future, when hyperinflation doesn't happen this time, I will not have to hear this nonsense anymore. One can hope, I suppose.
This is a very insightful comment. I wonder if the production capacity has indeed remained intact or if it has actually been partially destroyed beyond repair. Some companies will have gone out of business. The products these companies sell will have experienced low demand during the pandemic, but their demand may rise when it's over. Will that trigger a sharp rise in prices? If all restaurants in my town closed except 1 and we all of a sudden want to dine out, I don't see how that remaining restaurant won't raise its prices when it gets flooded day after day. It's a simplistic example, but even restaurants can take months if not years to open (think licenses, contracts, hiring, training, etc). The last remaining restaurant from this simplistic example would have sustained high demand over a considerable period of time, enough to continually raise prices and not see a drop in demand
> The good thing is that, maybe, in the future, when hyperinflation doesn't happen this time, I will not have to hear this nonsense anymore. One can hope, I suppose.
I wouldn't hold your breath. Inflation doomsday predictors have been at it forever. We didn't see hyperinflation during the 2008 stimulus. That hasn't stopped people from yelling about it this time around.
The difference between Zimbabwe printing a ton of money and us printing a ton of money boils down to social capital, cultural capital, political capital & influence. The US has all of these in spades, which Zimbabwe never had. This allows the us to exert an outsized amount of influence on shaping the story, which in turn allows it to print money with impunity.
We need publicly created money because all money is ultimately publicly created - all the money any of us earns was created by the US government.
"Printing money with impunity" is a loaded phrase if ever there was one. Behind it is a whole narrative and belief structure which thinks money is something other than a unit of account, that has to be "earned" even by the entities that issue it, or somehow tied to other tangible assets. This is a bogus understanding of money, imo. Warren Mosler explains this in a variety of books and YouTube presentations.
Maybe that's kinda right, but i really comes down to production. You can't have hyperinflation if you're producing enough. You can have a big inflation, but not the venuezela kind.
And if your country is producing as much as the US is producing, you should not fear hyperinflation.
Tangent: Money supply is an adjustment variable, and most government don't even have direct power over it (not even China). more than 90% of all euros are created through loans. Consummation loans alone created more money that European stimulus package.
Mugabe printed so much money that it was a strain on the world's money-printing presses, and Zimbabwe is a small country. Doing something comparable for an economy as big as the US... I don't think so. Logistically probably impossible even though only a little money is cash, and the attempt would IMO run that "social capital, cultural capital, political capital & influence" down to Mugabe-like levels.
Even though the US may be the country with the largest ability to do that kind of thing, its ability does not stretch that far.
As I understand it, reflationing is fine provided you have a strong sovereign currency so you aren't at the mercy of the international forex markets. The US ticks this box, therefore it can pump out new money without the same risk of hyperinflation.
ZMB OTOH probably had a weak currency and an economy largely dependent on imports. Therefore when they started printing money it became worthless since it was a proxy for a currency they didn't control (the USD), and a strengthening of the USD would have a huge impact in reducing confidence in the ZMB dollar. A similar thing happened in Venezuela and Post-WW1 Germany I think.
For a better explanation see Big Debt Crises by Dalio.
That's the root cause of ZMB hyperinflation. As well as droughts and a reshuffling of agricultural land that did not benefit anyone, decreased overall production and created food stress.
> Why is American stimulus not comparable to Zimbabwean stimulus?
Well, for one thing, the US wasn’t engaging in a massive and extended campaign of expropriation of productive assets that was destroying the core of the economy over a period of years while printing orders of magnitude more dollars than had ever existed, when inflation by traditional measures waa already significant when the money printing started.
The value of money is strongly tied to consumer trust. Zimbabwe is one of the most corrupt countries in the world, and the government literally created money out of thin air to fund its wars, increase their salaries, and to protect its regime.
RobertoG|4 years ago
Zimbabwe (like Venezuela) didn't get hyperinflation because they "printed" a lot money, they had to "print" a lot of money because they get hyperinflation (1).
The video actually mention this in all the examples that use, it's only that it get the conclusions wrong. If you destroy the productive capacity of a country, you are going to get inflation, that's inevitable. That's not what happened in the USA.
The authors of the video, also, don't understand the difference between adding bank reserves (not inflationary beyond a point) and fiscal stimulus (which can be inflationary beyond a point).
The good thing is that, maybe, in the future, when hyperinflation doesn't happen this time, I will not have to hear this nonsense anymore. One can hope, I suppose.
(1) - http://bilbo.economicoutlook.net/blog/?p=3773
collaborative|4 years ago
UncleMeat|4 years ago
I wouldn't hold your breath. Inflation doomsday predictors have been at it forever. We didn't see hyperinflation during the 2008 stimulus. That hasn't stopped people from yelling about it this time around.
ismail|4 years ago
The difference between Zimbabwe printing a ton of money and us printing a ton of money boils down to social capital, cultural capital, political capital & influence. The US has all of these in spades, which Zimbabwe never had. This allows the us to exert an outsized amount of influence on shaping the story, which in turn allows it to print money with impunity.
risk000|4 years ago
We need publicly created money because all money is ultimately publicly created - all the money any of us earns was created by the US government.
"Printing money with impunity" is a loaded phrase if ever there was one. Behind it is a whole narrative and belief structure which thinks money is something other than a unit of account, that has to be "earned" even by the entities that issue it, or somehow tied to other tangible assets. This is a bogus understanding of money, imo. Warren Mosler explains this in a variety of books and YouTube presentations.
orwin|4 years ago
And if your country is producing as much as the US is producing, you should not fear hyperinflation.
Tangent: Money supply is an adjustment variable, and most government don't even have direct power over it (not even China). more than 90% of all euros are created through loans. Consummation loans alone created more money that European stimulus package.
Arnt|4 years ago
Mugabe printed so much money that it was a strain on the world's money-printing presses, and Zimbabwe is a small country. Doing something comparable for an economy as big as the US... I don't think so. Logistically probably impossible even though only a little money is cash, and the attempt would IMO run that "social capital, cultural capital, political capital & influence" down to Mugabe-like levels.
Even though the US may be the country with the largest ability to do that kind of thing, its ability does not stretch that far.
maclured|4 years ago
ZMB OTOH probably had a weak currency and an economy largely dependent on imports. Therefore when they started printing money it became worthless since it was a proxy for a currency they didn't control (the USD), and a strengthening of the USD would have a huge impact in reducing confidence in the ZMB dollar. A similar thing happened in Venezuela and Post-WW1 Germany I think.
For a better explanation see Big Debt Crises by Dalio.
orwin|4 years ago
That's the root cause of ZMB hyperinflation. As well as droughts and a reshuffling of agricultural land that did not benefit anyone, decreased overall production and created food stress.
dragonwriter|4 years ago
Well, for one thing, the US wasn’t engaging in a massive and extended campaign of expropriation of productive assets that was destroying the core of the economy over a period of years while printing orders of magnitude more dollars than had ever existed, when inflation by traditional measures waa already significant when the money printing started.
rubatuga|4 years ago