March 25, 2010

Up, Up, and Away

From John Hussman's latest shareholder letter:

Though hyperinflations are typically driven by the inevitable financing of fiscal deficits by money creation, you will not find sustained inflation without sustained fiscal irresponsibility. As Peter Bernholz notes in Monetary Regimes and Inflation, "there has never occurred a hyperinflation in history which was not caused by a huge deficit of the state." While we certainly don't anticipate anything on the order of hyperinflation, the expansion in deficit spending that we currently observe (regardless of whether one measures the deficit as a fraction of GDP or as a fraction of government spending) is beyond anything ever observed in the post-war era. I continue to anticipate a near doubling in the CPI over the course of about 10 years, focused primarily in the latter half of this decade.

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