by Gary Christenson, Deviant Investor:

Hyperinflation Myths:
Hyperinflation occurs in banana-republics and not modern western countries.
Hyperinflation cannot occur in the United States because the U.S. issues dollars – the reserve currency.
BOTH IDEAS ARE INCORRECT. For more, read Bill Holter:

WHAT ARE THE CONSEQUENCES OF HYPERINFLATION?
The hyperinflations of past centuries have hurt the poor and middle classes more than the wealthy because they owned real assets.
Hyperinflation destroys savings, assets, purchasing power and retirement expectations, along with moral values.
The value of the currency is smashed. The economy “resets” and life goes on, albeit much changed.
Hard assets such as real estate, fine art, land, gold and silver fare better than many other assets.

CAUSES:
The government spends too much and creates debt unpayable via borrowing or taxes, and monetizes the debt. The central bank “prints” currency units and “buys” the debt. Watch the debt to GDP ratio.
Businesses and people rush to spend the currency before its value declines further. Velocity of the currency increases, people hoard hard assets, reject unbacked fiat currency units, and prefer to trade with stable currencies.
Interest rates and interest payments on government debt rise. Selling bonds is difficult and the central bank may become the only buyer. Watch the ratio of interest payments to total government expenses.
The ratio of total debt to GDP rises. The ratio of interest payments to total government expenses rises.
A tipping point happens. That point is difficult to predict because emotion, culture, and expectations are influential.

HYPERINFLATION IN THE UNITED STATES?
Speculation based on a few assumptions.

Official U.S. national debt has increased since 1913 at 8.8% per year every year. The rate of increase since 1971 has been the same. Assume the rate of increase will be slightly higher due to tax cuts, larger interest payments, Medicare costs and wars.

Interest rates declined (until recently thanks to central bank actions) since the early 1980s. Shorter term U.S. Treasury rates have increased for six years. The Ten-Year rate bottomed in mid-2016 and has traded higher since then. The Fed announced they want higher rates. Assume interest rates will increase for many years.

WHAT IS THE PROBLEM?
U. S. government expenses are “out-of-control,” much larger than revenues and increasing about 4.6% per year even though interest rates are low.

As rates rise the government spends more for annual interest payments, which increases the deficit and accelerates the debt problem.

If the Fed monetizes the deficits and forces interest rates lower, the dollar will devalue rapidly.

Rising debt and increasing interest rates create vicious circles that promote each other. Something will “break.”

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