Wa-oah. Marc Faber has a reputation as a bit of a doom-monger, but he has really surpassed himself with this one. From Bloomberg (emphasis ours):
May 27 (Bloomberg) — The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.
Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.
“I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.”
Federal Reserve Bank of Philadelphia President Charles Plosser said on May 21 inflation may rise to 2.5 percent in 2011. That exceeds the central bank officials’ long-run preferred range of 1.7 percent to 2 percent and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.
Now, there is certainly an inflationary risk to the massive expansion of the Fed’s balance sheet, and exiting quantitative easing and the extremely low interest rate environment will be tricky for the central bank — but we’re still very far from the kind of hyper-inflation described by Faber.
So we’re fairly sure that scenes like the below, a Zimbabwean paying the bill for his dinner, won’t be repeated in a White Castle or Red Lobster anytime soon.
Related links:
“Filling the system full of money is insufficient to threaten a rise in inflation” – FT Alphaville
Hyper-inflation is a possibility, say Morgan Stanley – FT Alphaville
Of bonds and stocks and the Weimar Republic – FT Alphaville
Irony of the day, Zimbabwe dollar edition – FT Alphaville