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Some people have suggested that hyperinflating in America could be done electronically to avoid the problem of the practicalities of physically providing massive amounts of cash directly to the people, as mentioned already.  This is especially an issue because currently there are no large notes in general circulation.  A massive amount of small notes would need to be provided or larger bills would have to be put in general circulation, which means they would have to be distributed, and that almost certainly means many more such bills would have to be printed. 

The way hyperinflating would be done electronically would be to add zeros behind the number in people's bank accounts, two or even three or even four or more, thus multiplying the balance by 100, 1000, 10,000, or even more. 

With so much more money in their bank accounts all of a sudden, people would of course be very tempted to spend at least a lot of it - and if they would do so, that would, indeed, lead to a hyperinflation. 

The example I have been given is Argentina.  I think Argentina is a special case.  South America is not exactly a paragon of avoiding hyperinflations in recent decades - they have had several, mostly in the 1970's, mostly using printing presses - but in at least one case in recent years, Argentina, so I am told, it was done electronically, by putting zeros behind the numbers in people's bank accounts so they suddenly had a lot more money in there (multiplied by 10, 100, or even 1000) and they spent it.  That would, of course, as noted above, lead to a hyperinflation. 

I don't think the Fed would be so stupid, and they already have a track record in that regard, documented elsewhere on this website.  But the inflationists keep talking about the Fed "printing money" and how that will lead to hyperinflation.  In fact, most of our modern money is not printed, it is electronic, and it is lent out to get it into the system, not given away.  That is why the analogy used by most inflationists these days is out-of-date. 

But that is not even the issue, in particular, with regard to what I am talking about on this page.  I think Argentina has to be viewed in the context of the situation it is in.  South America in general has a recent history of hyperinflating.  So when Argentina tried to save itself the last time, they merely did it electronically.  I think it has to be viewed in the context of the Argentine and South American situation - their history, the traditions of the continent that they are on, and how they fit into that.  In other words, how they would think.  I think North America and Europe have a very different environment. 

The one thing all these places have in common in the past decade is using massive government spending to keep the economy afloat.  Argentina has also been doing that since 2001 under the Kirchners (in fact, that is probably why they stayed in power after they got in power following Argentina going through several presidents in a short time in late 2001).  And Argentina is bankrupting itself in the process, just like everyone else who is doing so.  And that is part of what will make the coming downturn bad. 

But that is a separate issue from hyperinflating - I do not think the Fed is going to put enough cash (electronic or paper) into the system to make that happen in America.  There is, in fact, a law against doing so in America, passed in 1978 and still being enforced even though it expired in the summer of 2000, with the Congress, the legislative body that passed the law in the first place, monitoring very closely how the Fed is doing in meeting its mandate under that law for low inflation.  So even if the Fed does hyperinflate electronically, I do not think that will happen unless and until the situation is so bad that the people are spooked by the bad situation already (people here do not have a reference point of South American or Argentine conditions) - and I have my doubts that even that will happen, and even what the government itself is doing now is borrowed money. 

I think the Fed well knows that multiplying bank accounts would be highly inflationary, and that is why when they did provide some cash to people directly in their bank accounts as described already, they did so by direct deposit - a small amount in absolute terms, rather than simply multiplying the account.  That is also why the Fed passes larger amounts of new money through the banks, to be lent out.  Borrowed money is not hyperinflationary, it has to be paid back, it does not stay in the system, which money has to do to be hyperinflationary (there can be a temporary inflation effect when it first comes into the system, and we have been experiencing that, that is part of the inflation we have been seeing, but not all of it).  In reality, in terms of actual conditions in terms of how countries actually operate, bearing in mind that most countries in the world are not heavily computerized to be able to inflate electronically on a massive scale, for money to be inherently hyperinflationary, it has to come off a printing press as physical cash that is then given away (usually in the form of higher wages, paid in cash, when that happens).  Yes, coins are debased, too, and that used to be the only way before there was a printing press - but that was a slower process, it is much faster to print bills in any denomination you want - and that is, for example, what Germany did in the early 1920's (and is why the Germans are scared stiff of hyperinflation to this day and would only accept the euro if the ECB was headquartered in Frankfurt, the home of the Bundesbank, Germany's central bank before the ECB, and modeled after Germany's Bundesbank, with its heavy emphasis on avoiding hyperinflation).