comments on hyperinflation(by detachedbear)

hyperinflation	detachedbear	NEW 10/28/2007 8:25:11 AM
"Andmore devaluation is coming. Perhaps another 50 percent. The markets areconvinced that the Fed is going to drop rates again on Halloween byanother half percentage point. This means hyperinflation ..." McHughhas it exactly wrong. Do I mean that the dollar is not being devalued?No, the evidence is overwhelming that the dollar IS being devalued. Theconclusion that hyperinflation will result is the non-sequitor. Dollardevaluation has caused increases in oil prices. Food prices aredefinitely up. What is NOT up is people's ability to pay the increasedprices. The pressure on the consumer is unbearable and will soon showup in horrible retail sales. Many are predicting this effect. How isthis "hyperinfaltionary"? WalMart is already lowering prices. The onlyinflation we will see is in necessities like food where people have nochoice but to buy, and in markets where we have foreign competitionlike crude oil. Foreigners find our stock markets cheap because of theweak dollar, but what happens when earnings drop? The devaluation ofthe dollar will make our products cheaper for foreign importers, butnot enough cheaper. The devaluation of the dollar may make it easier topay off debt but when have we ever done that? The pressure willcontinue until the consumers crack, until retail sales drop sharply,and interest rates have to be increased to attract foreign capital tofund government deficits. Want to tell me that that environment will behyperinflationary? Crude oil imports would be so expensive that wecouldn't buy them. Is that hyperinflationary? The history ofhyperinflation is that debts are cleared, and new debt is verydifficult to get because no one trusts your currency and you must makeother guarantees to get financing. If that ever happens in the US, thenwe will be living in a different world with a different politicalsystem and different leaders (maybe even a different upper class). I think that the collapse of the consumer is inevitable, and that theresult will be a severe recession. I think that this recession will beso bad that we will actually have to change some of our bad habits,such as dependence on foreign oil. That sounds like a deflation iscoming to me.