Will we see hyperinflation in 2013? While the sky may be falling, it’s hard to predict the timing of when it will collapse on our heads.
–Update: Read our latest post – Global Hyperinflation–
We can’t know, but we can look for signs that things are getting worse. Hyperinflations start off as ordinary inflation and then accelerate. Governments that refuse to cut spending have to print money in order to keep up. The additional money adds more inflation causing the acceleration.
A couple months ago when I wrote about my fear of hyperinflation, I included this graph:
Unlike global warming, this is the real hockey stick. Now here’s the updated graph, current within the past week or so:
It hasn’t gotten better. We’re headed into an inflationary 2013 with the Fed printing money full steam ahead. This is one key sign to watch next year. You can check it yourself anytime here: St. Louis Fed M1 Graph.
Another thing to watch in 2013 is federal fiscal policy. I’m not referring to the so-called fiscal cliff, which is a sideshow. This picture from Mike Scully gives the general idea:
Deficits shot up at the end of the Bush administration and continuing through the Obama years.
-From US Spending
The government projects that the deficit will be less in 2012 and come back below $1 trillion in 2013, but that is not likely. There are no plans whatsoever to cut spending. Medicare and Social Security spending can’t help but increase. Federal projections depend on the fantasy that revenue will increase dramatically, 40% from 2011 to 2014.
If revenue stays flat and spending doesn’t increase, the deficit will be $500 billion higher than projected. That could be optimistic. Even with the fiscal cliff revenue will not increase significantly, spending will still increase, and the economy could get worse which would cause revenue to drop. Unable and unwilling to cut spending, the federal government will resort to printing more money.
So watch the fiscal numbers, both revenue and spending. The administration might release such news on a Friday when people are thinking about the weekend, or when a big story is dominating the news cycle. And watch that hockey stick for 2013. Keep your eyes open, your gas tank full, and your pantry stocked.