> If the dollar hyperinflates, where would people go?
The dollar is inflating right now, where are people going, besides gold? Why would the dollar hyperinflate?
The dollar is inflating right now, where are people going, besides gold? Why would the dollar hyperinflate?
As with stocks, the acronym TINA applies. As in, There Is No Alternative.
Yes, there are literally plenty of alternatives, but most of them have (dealbreaking) shortcomings.
As a very simple example of why this may be misleading, consider that house prices are not considered in the “basket of goods” that Americans buy, despite this being literally the most expensive purchase most people ever make.
The formula itself is also changed from time to time. If we were using the “old” formula, inflation would be MUCH higher (shadowstats.com for current numbers).
This is (widespread) mis/disinformation. The CPI carefully distinguishes between houses as capital goods and shelter/housing as something people consume. If you Google it, you will find that the equivalent rent for homeowners is incorporated in the CPI. Even if they ignored homeowners, the index would be very little changed if it was based on renters alone.
See https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
In order to compute the CPI-U, the people doing the work essentially call up 14,000 people and, if they own a home, they ask them how much they would theoretically charge in rent if they rented their home out.
The problem with this is obvious - most people do not do rent income estimates for a living and so the numbers are often quite far from reality.
More importantly, people find it very difficult to estimate future interest rates and they fail to take into account things like the sunk cost fallacy (see: 2008 financial crisis, where people in crashing markets still guessed they would be able to rent their homes based on pre-crash prices).
There is also the issue of a negative feedback loop, where low interest rates lead to lower than expected inflation, because “house prices only every go up baby!” - or in other words, people are perfectly willing to accept $3000 in rent even if the mortgage is $5000 if the house is increasing by $8000 a month in appreciation. This appreciation is hidden from the CPI because only theoretical rent is considered. The net result of the negative feedback loop is the fed sees that inflation is low, so it thinks it can keep rates low too, which leads to asset bubbles like in 2008. (And, likely, in 2020 with stocks too...)
Separating housing as an investment from housing as consumption is obviously the right thing to do. But if it wasn't separated, it doesn't make sense it would add systematic bias in one direction. Prices go up, prices go down. Inflation would be pushed higher and then lower, relative to the "true" value.
They do survey people who rent as well as own, so they are measuring the market directly for that portion.
As far as the owners go, I think you're disregarding the fact that the specific houses that are not being rented do not have more authoritative rents. If you use actual rental data, then you have to have a model using assumptions to map one population to another, which seems fraught with potential problems.
The point of a survey is to collect survey data, and if they don't do it, then it is that much worse of a survey, because there is no 100% substitute.
Not 100%, but I bet doing something as simple as looking at the bank accounts of the selected groups in aggregate (over a long time period) and adding in things like tax returns could get quite a bit of the way there.
To be honest, I'm surprised something like mint.com or Personal Capital don't offer their own interest rate measures.
That is not actually what hyperinflation means.
> We already have extreme asset price inflation...
Sure, but we don't have asset price hyperinflation.
> In my opinion it is only a matter of time before people realise what is going on, start dumping their dollars/euros/pounds/etc., and use something else for their daily transactions and savings, probably crypto at first.
Dump the dollars for what? Most people have no savings, they have a monthly paycheck that goes right to expenses for the most part. That alone greatly limits the velocity of money and therefore the rate of inflation.
Those people that (rightly) expect inflation (not hyperinflation) have already piled into other asset classes.
Either way, there can't be hyperinflation without a commensurate increase in money supply, which can't be achieved just by people spending their money more quickly.
> It is worth noting that every fiat currency throughout history, without exception, has hyperinflated and collapsed to nothing.
That is untrue. Hyperinflation is exceptional. Inflation over a long time can erode a lot of the value, but that isn't hyperinflation and it's not necessarily a problem either.
Nitpick. It limits the potential increase in velocity of money. Spending your money as soon as you get it is pretty much as fast as possible. The reason why there is little inflation is that these people don't have enough money to buy all the things they want to buy, meanwhile someone else is sitting on a fat stack of wealth and wondering what to do with it.
There are plenty of definitions, just none that are universally accepted.
It’s similar to “recession”, which in the USA means two quarters of negative GDP growth but isn’t a universally agreed definition.
Colloquially, in the USA, “hyperinflation” refers to Average price increases of over one hundred percent per year for a “basket of goods”.
What follows is that people lose trust in the currency and convert their currency into assets that cannot be taken away. This is hyperinflation. The "currency based" economy shrinks and there is less wealth to extract from it. Since there are a lot of fixed government expenses the amount of money that needs to be printed grows exponentially.
I$ = inflation dollar
The economy = the part of the economy that still uses I$
Inflation dollars are equivalent to dollars (I$ = $) in the beginning.
The economy is worth $1000 and has I$1000.
Government doubles money supply by printing I$2000. (100% inflation)
The economy is worth $1000 and has I$2000. I$ = $0.5.
$500 worth of value has been extracted but it circulates in the economy.
Hyperinflation begins: People start losing trust and put half their wealth into gold or something else.
The economy is now worth $500 and has I$2000. I$ = $0.25.
The government still wants to extract $500 of value out of the economy so they need to print money at a much faster rate than before.
Government quadruples money supply by printing I$6000. (300% inflation)
The economy is now worth $500 and has I$8000. I$ = $0.0625.
$375 worth of value has been extracted.
More people stop using the currency which means the economy shrinks again forcing the government to become even more aggressive.
Right now the central banks are following strategies that eventually demand every penny back that they have handed out. If inflation happens they can easily reverse their policies.