Wednesday, June 25, 2008

Hyperinflation Scenarios

I'm projecting three possible scenarios for hyperinflation, based on reading the different historical accounts.

1. Short Duration: This is the soonest that hyperinflation could realistically hit.

2. Middle Duration: The "average" time scale scenario

3. Long Duration: Hyperinflation that is years away, but still based on current conditions.

This is not any kind of statistical analysis, just a range of values for planning purposes:

Slow climb: 6mo 1y 2y
Ramp-up: 2mo 6mo 1y
Crazy: 1mo 2mo 5mo
Dollar Nuked: 1 day 1 day 1 day
Recovery 6mo 1y 2y

I wrote this in March, so taking these numbers and laying them out on the calendar, here's my predictions with March 2008 as a starting point:

Slow climb: (already happening)
Ramp up: Sep 2008
Crazy: Nov 2008
Dollar Nuked: Dec 2008
Recovery: Dec 2009 - May 2010

Slow climb: (already happening)
Ramp up: Mar 2009
Crazy: Sep 2009
Dollar Nuked: Nov 2009
Recovery: Nov 2009-Nov 2010

Slow climb: (already happening)
Ramp up: Mar 2010
Crazy: Mar 2011
Dollar Nuked: Aug 2011
Recovery: Aug 2011 - Aug 2013

See previous post for more explanation. Mileage may vary. Feedback is welcome.



Anonymous said...

How did you arrive at the recovery estimates? They seem wildly optimistic to me. Reminds me of president Bush saying the other day that he believes that the fundamentals of the economy are sound, he 'really does'. You can be pretty sure that if Dubya says so, it isn't true. There are some real problems with the US industry and agriculture, dollar or no dollar.

The first (as far as I know) bank that serves 'regular' individual customers, IndyMac, has failed. This makes me think it is going to be either the quick or the intermediate option, and we should see soon enough how fast others follow IndyMac. Of course, if Freddie and Fannie go, it's game over right there.

ZenDraken said...

You're right, they are optimistic. One problem is that I didn't define "recovery" very well. Recovery in this sense means that *some* measure of stability has returned to the economy, not that everything is back to normal. And I based these numbers on rough averages of historical hyperinflation episodes.

I also have reason for real optimism: We are in a period of incredible and accelerating technological change. That alone will help pump value back into the economy. Doesn't mean it will be easy, but I do believe we will make it through all this mess and rise again, perhaps better than before.

Anonymous said...

[same anonymous]

Yes, I'm also very optimistic about some of the technological advances. I'm quite sure that the energy problems will be solved, and solved surprisingly quickly, at least as far as electricity is concerned. There are very large improvements in efficiency to be made. Transportation fuels seem to be more of a problem, but it might turn out to be possible to cover at least a large part of the present consumption from sustainable biomass that is not food and does not compete for arable land.

Another thing is that this would be the first time an advanced economy goes through hyperinflation and has ubiquituous internet access during the crisis. I'm guessing that the net will allow forms of local organizing and trading that were not possible in the past crises. It might make it easier to use local currencies temporarily and bypass the dollar, even if doing that is technically illegal.

ZenDraken said...

As for electrical power, you may be interested in this new fusion technology: Polywell Fusion.

IF it works, you'll be hearing a lot about it very soon. They've finished inital confirmation tests and are awaiting peer review of the results.

IF it works as well has they hope, it may just change the whole world.

Anonymous said...

Yes, I know about polywell. If the fusion bit works - and I hope it does -, there are still some engineering challenges in making a power plant using it. Bussard's idea was to extract electricity directly from the fusor and not use steam turbines and generators at all. The efficiency would be phenomenal, but this has never been done before and will require some technical hurdles to be passed. (Of course, it's still possible to use steam/generators, if the direct way cannot be worked out.) Even in the best case, we probably won't see any energy from it until well after whichever 'hyperinflation scenario' turns out to be correct.

Anyways, I think the electricity problem is solvable even without fusion.