How Long Until Prices Stop Rising?

Proper business planning is essential in any business. Some companies are better than others of course; for instance, Toyota’s planning is superior to the U.S. automaker’s planning. Toyota used innovative technology and began to introduce high mileage hybrids when the price of gasoline began to shoot skyward. This type of savvy business planning will set the stage for greater success.

Personal planning is similar to business planning. A successful life can be experienced with the right personal planning. For instance, if real estate prices continue to fall, a first time home buyer should wait until prices reach bottom. But if prices are going to rise rapidly, now would be the time to make a purchase. Planning your budget, future expenditures, and proper investments are an essential part of successful planning.

The U.S. happens to be engaging in a hyperinflationary path today. What this means is the Federal Reserve is loaning billions of dollars to ailing banks. This causes many economical problems such as inflation. Many believe inflation to be the rise of prices; actually it is a devaluation of money due to dilution. When Ben Bernanke gave his infamous helicopter speech it was stated that the Federal Reserve can dilute the value of a country’s money when they feel the need.

Currently we are on a hyperinflationary path but do we have to continue this path to the bitter end? Will Bush’s depression end in a hyperinflationary or deflationary disaster? In the early 1920’s Weimar Germany followed this road until their currency, the Mark, was completely worthless. In 1914 the Mark’s worth was about 4.2 Marks to equal one US dollar. It began falling and in 1920 it took nearly 39.5 Marks to equal one US dollar. The sinking trend continued until November 1923 it took 2.4 trillion Marks to equal one US dollar.

By December of 1923 the Mark was completely without value and was replaced. This is a prime example of a country’s currency that underwent hyperinflation to the point of worthlessness. The big concern regarding hyperinflation is if it is necessary to add to the escalation of prices until it climbs to infinity? No. In the late 1970’s the U.S. was on an inflationary path. This could have continued with more and more currency being printed into existence; however, the attention focused on the rapidly raising prices. Paul Volcker, changed the course from a hyperinflationary one that the country was going down.

Unfortunately we seem to have found our way onto this course again 28 years later. Will we be able to stop the momentum in time or will like Weimer Germany in the 1920’s? Will cheap auto insurance become not so cheap? Will all prices go to absurd levels? Can we stop it and if so, when and how? Stay tuned.