Printing money is Europe's only way out.

Run_to_da_hills

Get your wheelbarrows ready.

"Hyperinflation becomes visible when there is an unchecked increase in the money supply usually accompanied by a widespread unwillingness on the part of the local population to hold the hyperinflationary money for more than the time needed to trade it for something non-monetary to avoid further loss of real value. Hyperinflation is often associated with wars (or their aftermath), currency meltdowns, political or social upheavals, or aggressive bidding on currency exchanges". http://en.wikipedia.org/wiki/Hyperinflation

Isn't this what brought on hyperinflation in the Weimar Republic?

http://www.marketwatch.com/story/printing-money-is-europes-only-way-out-2011-07-20?reflink=MW_GoogleNews

andrew

The operative word being unchecked increases in the money supply; one can increase the money supply in a 'checked' fashion. Also, as long as banks don't lend out the large amount of reserves they've built up, then there can't be hyperinflation. Not every increase in the money supply is akin to Weimar Germany.

later12

The eurozone has already, of course, engaged in its own version of quantitative easing via the ECB, as we have seen with interest rate rises and in terms of new EU wide regulations on capital requirements equivalent to 7% of assets, it has also engaged in tightening.

The argument that monetizing debt is the only option available is not credible, by the way, but 'printing money' is not, in itself always a bad thing.

SecurityGuy

It has always been a continuous, omnipresent increase in the money supply since fiat money was introduced. That's the way of generating "controlled inflation", in other words just one more tax that affects everyone and is invisible enough not to make people rebel.
Hyperinflation is when this process gets out of control.

Bumblegoose

Why cant we just press the reset button like delete all the debt gamesaves then like start everyone off with 10000 in their bank its all numbers on the monitors anyway like it doesnt matter cop on lads press the reset button.

andrew

Bumblegoose wrote: »

Why cant we just press the reset button like delete all the debt gamesaves then like start everyone off with 10000 in their bank its all numbers on the monitors anyway like it doesnt matter cop on lads press the reset button.

It's not just numbers though. Those numbers represent people's money, investors, businesses, people's pension funds etc. While it seems abstract, at the end of each number is a very real person.

SecurityGuy

Right, it's not government to government (or state to state) debt.
The state is the debtor and people are creditors so there is no balance and no way to press the reset button....

Sea Sharp

Severe hyperinflation (think 1930s Germany, Zimbabwe) happens when one currency is printing money and nobody else is.

If everybody is doing it, we'll see inflation but not the kind that sees us replacing our wallets with wheelbarrows.
If the ECB print off a couple of trillion we will probably see inflation like in the 1970s oil crises.

I'd imagine the ECB is waiting until it has enough exposure to European sovereign debt before introducing a series of controlled, much needed stimulus packages.

Worst case scenario: A pint of guinness will be near to €10 in 2020.

old_aussie

No other countries would trade with Ireland.

SecurityGuy

Some economists say we should expect double digit inflation so I did some math for a pint of guinness in 2020 with these assumptions:

Assumed inflation 15%
Years to 2020: 9

Total price increase: (1.15)^9= 3.51
which means 251% price increase.

With current pint price 5 euro:
Price of pint in 2020: 17.55 euro

So 10 euro seems quite optimistic. On the other hand it's hard to expect high inflation over all 9 years, but compound interest is ruthless anyway.

Sea Sharp

SecurityGuy wrote: »

Some economists say we should expect double digit inflation so I did some math for a pint of guinness in 2020 with these assumptions:

Assumed inflation 15%
Years to 2020: 9

Total price increase: (1.15)^9= 3.51
which means 251% price increase.

With current pint price 5 euro:
Price of pint in 2020: 17.55 euro

So 10 euro seems quite optimistic. On the other hand it's hard to expect high inflation over all 9 years, but compound interest is ruthless anyway.

I'd be interesting to see what kind of mathematic models are used to predict double digit inflation.

But anyways, as you say it'd be unlikely that the spike in inflation by QEing would last for a whole decade.

For a pint to go from 4euro to 10euro (That extra euro makes a big difference, stop drinking in temple bar:pac:) would be a 150% price increase

so then:

(2.5)^(1/9) = 1.10717318
or an average of 10.7% inflation.