Main Menu

This is a comment about inflation in Germany in 1922 and in modern Zimbabwe - two places and times that have been cited by various prognosticators who are claiming, or even insisting, that modern America is about to have a major, if not even catastrophic, bout with hyperinflation. 


Germany in 1922 did not have a well-developed credit system.


Zimbabwe in modern times does not have a well-developed credit system. 


That is why they experienced inflation, not deflation.


America, on the other hand, has a well-developed credit system – and that is why there are going to be major debt defaults leading to deflation, despite the so-called massive increase in the money supply in recent times.  In Germany and Zimbabwe, that money was supplied directly to the people – resulting in massive inflation.  In modern America, almost all the money is being supplied through the banking system, as loans – which have to be repaid.  When they aren’t, deflation results, not inflation.  Loans that have defaulted have to be written off – which is a decrease in the money supply, not an increase. 

Note:  Germany in modern times does have a well-developed credit system – but we are talking about 1922 here.  On the other hand, as far as I am aware, Zimbabwe has never had a well-developed credit system (and if it ever did, that long-since does not matter in the meantime).