Today, anyone
who talks about hyperinflation
is treated like the shepherd boy who cried wolf. When the wolf actually does
show up, though, belated warnings will do little to keep the flock safe.
The current
Federal Reserve strategy is apparently to wait for significant price inflation
to show up in the consumer price index before tapering. Yet history tells us
that you treat inflation like a sunburn. You don’t wait for your skin to turn
red to take action. You protect yourself before leaving home. Once inflation
really picks up steam, it becomes almost impossible to control as the politics
and economics of the situation combine to make the urge to print irresistible.
The
hyperinflation of 1790s France illustrates one way in which inflationary
monetary policy becomes unmanageable in an environment of economic stagnation
and debt, and in the face of special interests who benefit from, and demand,
easy money…..In 1789,
France found itself in a situation of heavy debt and serious deficits….. Thus,
the debate over the first issuance of the paper money, known as assignats, in
April 1790 was heated, and only passed because the new currency (paying 3 percent
interest to the holder) was collateralized by the land stolen from
the church and fugitive aristocracy. This land constituted almost a third of France
and was located in the best places.....To Read More....
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