I recently came across a 1982 Mexican 10 peso coin. It is about the size of a half dollar, and at the beginning of 1982, it was worth about 40 cents. It is now worth a little over a tenth of a penny. That is the equivalent of a $100 bill becoming a quarter.

My question is whether you think something similar could happen here in the U.S.A.?

-- J (Y2J@home.comm), July 18, 2000

Answers

If they pass the national sales tax thing you should see the functional equivilant to hyperinflation. Add 28% to most things and then figure what the states are going to do as most of their income taxes stop, being tied to filing with the feds and all, and you could see a sudden jump of 50% which may or may not come back down as corperations get the idea that they are saving money by not having to pay income tax or tax accountants. I thought that one of the complaints today is that to many companys pay little or no income tax now? How can the price come down if their costs don't come down? As you can see, I for one am not in favor of the national sales tax primaraly due to the fact that big business gets of scott free for the most part and the burden shifts to the consumer almost totaly. Another example of a problem with the national sales tax is that a family with an annual income of $30,000 will spend almost all of that money and a family with an annual income of $2,000,000 doesn't need to spend all of it to live comfortably, hence a lower percentage tax burden. Right now in this country the top 10%, businesses included, pay about 90% of the total taxes and the bottom 90% pay about 10% of the total taxes. Your about to see that little tidbit flip. The little thing in USAToday 2 fridays ago was probably allowed in as some more prep work along the road towards the national sales tax otherwise it wouldn't have been allowed. I know of other attempts to get that and other information out through paid adds that were flat refused by the media. Ask yourself why was this one was allowed? Check out http://www.givemeliberty.org for the add if you didn't see it.

The fiat dollar has to be tied to something of real value (like gold) to be stable, otherwise its apparent value changes with the amount in circulation. As we borrow from the fed they create more and the amount in use becomes worth less per unit, Just like rare comic books or coins. The fewer there are the more valuable each individual one is worth and conversly the more the less.

My answer to the original question is No, I don't think it is very likely with the exception stated above and it isn't technicaly hyperinflation, it just looks like it. We get the more modest version as more money is printed each year. Maybe we could get deflation if the washington types start giving the so called surplus back to the fed to pay down the debt, but how long would that be allowed to go on?

-- Just passin through (nobody@nowhere.com), July 18, 2000.

Lets try the hyperlink one more time. href="http://www.givemeliberty.org">http://www.givemeliberty.org

-- Just passin through (nobody@nowhere.com), July 18, 2000.

I give up. Please cut and paste.

-- Just passin through (nobody@nowhere.com), July 18, 2000.

J: I know it's a serious question, but remember in the movie "Back to the Future" when M.J. Fox takes a cab, and the driver turns around and says "One hundred, forty two dollars and seventy nine cents" (for a ten minute ride).

I alway thought that someday, we would be saying that too.

Just my .0000002 worth

Mar.

-- Not now, not like this (AgentSmith0110@aol.com), July 18, 2000.

Just passin through,

That is an interesting assessment of the national sales tax, I will have to do some more research and give it some more thought.

You hit the nail on the head when you said, "The fiat dollar has to be tied to something of real value (like gold) to be stable".

You then go on to say, "We get the more modest version as more money is printed each year".

My question is: What guarantees that the government will always be able to slowly inflate the dollar, and thus give us, "the more modest version"? What guarantees that the government won't lose the handle on the situation, resulting in a Mexican peso style inflation?

-- J (Y2J@home.comm), July 18, 2000.

Mar,

There's no doubt in my mind that we will. The question is when? That's why I started this thread, to get others' opinions as to why the U.S.A. is different than Mexico (or Thailand, or Russia, etc.).

-- J (Y2J@home.comm), July 18, 2000.

Just passin, here's the link: http://www.givemeliberty.org

-- David L (bumpkin@dnet.net), July 18, 2000.

>> ...opinions as to why the U.S.A. is different than Mexico (or Thailand, or Russia, etc.) <<

Hyperinflation is not an impossibility, but there is a big difference between the USA and Mexico, Thailand and the rest. It is the amount of financial assets (stocks and bonds, mainly) held in the USA and the existance of a good feedback mechanism (frequent elections) for injured investors to change government policy.

To put it simply, hyperinflation would hurt both wealthy and ordinary people who, between them, have a lot of power.

In the past, when hyperinflation has occurred, it is in countries where debts far outweigh assets, and much of the debt is held by foreigners. The USA has moved noticeably in this direction over the past 30 years, but we still have a long way to go down that path before we resemble Mexico.

-- Brian McLaughlin (brianm@ims.com), July 18, 2000.

Brian,

I think that we both agree and disagree.

I completely agree with your statement that, "In the past, when hyperinflation has occurred, it is in countries where debts far outweigh assets, and much of the debt is held by foreigners". I also agree with you that the USA has moved noticeably that way, but I must disagree with you when you say that we still have a long way to go.

I feel that the only thing keeping us from serious inflation (maybe even hyperinflation) right now is that the rest of the world continues to hold dollars as a reserve currency. If the world decides that there is a better place to hold reserves (gold, or the Euro, maybe), then we would finally have to face the serious consequences to our "spend, don't save" mentality.

In the end, the reality is that the world has only been off the gold standard since Nixon defaulted in 1971. The monetary authorities have been able to keep the pure fiat system alive for almost 30 years. But does anyone really believe that they will be able to keep it alive forever?

-- J (Y2J@home.comm), July 19, 2000.