How Hyperinflation Will Happen

The fine folks over at Zero Hedge posted this great analysis of how hyperinflation could happen.  It opens up with a "where we are" moment.

Right now, we are in the middle of deflation. The Global Depression we are experiencing has squeezed both aggregate demand levels and aggregate asset prices as never before. Since the credit crunch of September 2008, the U.S. and world economies have been slowly circling the deflationary drain.

To counter this, the U.S. government has been running massive deficits, as it seeks to prop up aggregate demand levels by way of fiscal “stimulus” spending—the classic Keynesian move, the same old prescription since donkey’s ears.

But the stimulus, apart from being slow and inefficient, has simply not been enough to offset the fall in consumer spending.

And this great explanation of an important insight:

If we think that hyperinflation is simply inflation on steroids—inflation-plus—inflation with balls—then it would seem to be the case that, in our current deflationary economic environment, hyperinflation is not simply a long way off, but flat-out ridiculous.

But hyperinflation is not an extension or amplification of inflation. Inflation and hyperinflation are two very distinct animals. They look the same—because in both cases, the currency loses its purchasing power—but they are not the same.

A tad long, but really worth reading.  I think it's the best presentation of what the voices in my head have been telling me that I've come across.

When?  The author thinks the precipitation incident could happen any time from this fall through (but not later than) the end of 2011.  As I've said, I think the market is going to further deflate this fall, but that's based on technical analysis and this sort of event is more like a "black swan" that doesn't fit the usual predictions. Still, my guess is the deflation/depression gets worse, and then the hyperinflation happens.