Money printing

I often read or hear people in the media talking about central banks printing away the debt.  A lot of this talk comes from people trying to make a big bullish case for gold.  However, when any central banker is asked about that type of policy the answer is unanimously no.  They all say it is better to default then to inflate away the debt.  Here is a chart of some hyperinflation events caused by printing away the debt.

Those are monthly inflation rates.  These numbers are staggering.  It is easy to see why Germany resists excess money printing in the current situation.  I don't believe any country has ever successfully inflated away a large debt without a bout of hyperinflation.  It drives people away from the currency and once confidence is lost hyperinflation takes over.  Everybody is hurt in a big way by massive inflation.  Only some people are hurt in a big way by defaults.  Central bankers in the U.S. and Europe are very much aware of this.  There are people that want to abolish the FED.  However, imagine if the U.S. government had full control over the money supply.  Would you trust our elected officials we have today with that power?


It is quite clear that the global economy is not going to grow its way out of the mountain of debt is is under.  The U.S. government is over spending by over $1 trillion every year and the economy is barely growing.  That is a huge amount of stimulus even if it is not being called so.  Take away that over spending and we would be in recession without a doubt.  Exactly how long we can maintain that extra spending is a good question.  If we can't grow out of the debt the only other choices are default or hyperinflation.  I believe both the U.S. and European central banks have enough autonomy that they will not succumb to the printing pressure completely.  Therefore, default and deflation is the more likely scenario in the end.  The only remaining question is when.

Bob