I think all below factors and which reinforce each other.
- Demand and Supply
- Export / Import - Trade
- Goods and Services
- Property and Financial Investments
- Saving and CPI Index
- Trade, Military and Infrastructure investments
- Confidence
Using myself as an example. I still earn my keep, invest my money, pay my loans, continue to save, do my banking and shop in super markets. All this are happening all over the country.
If I feel money is going to be worth much much less tomorrow, where there aren't much goods in the super market, people doing bank runs, hardly any economic activities, companies are emptying out, then I worry .....
What should I hold on ? Property, Gold, USD ?, Shares ? , ....
For now, even if we add another 100k or another Million into my asset, my spending pattern not going to change much. Is either saved or put into work. So how to drive hyperinflation ?
Cory
2020-0817
With fiat currencies, loss of confidence in the govt or country need to happen for high inflation or hyperinflation.
ReplyDeleteMoney supply, trade demand, interest rates, GDP, govt policies, collateral, foreign central banks reserves, economic dynamism, work culture & innovation of a country all play a part in the "confidence".
For e.g. USD with its "exorbitant privilege", is still in demand even with additional $7T of supply since March.
Whereas for Congo, even if its govt pledge to back every Congolese Franc with physical gold reserves, doubtful if demand will go up much.
However, markets have been pricing in asset inflation in terms of USD with the bull market in US stocks as well as gold & US residential properties. So far hasn't translated into daily life inflation for much of the world, except maybe food prices.
True. For developed world where one has reasonable good income, food prices are just a small part of one expenses. So probably we don't fee much pain unless we lose our job without much support.
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