Hyperinflation has usually happened in tandem with an executive that has control of the money supply, and uses it to decrease the real value of debt owed by the government, or to simply print money for the government’s use. Think of Zimbabwe today or Weimar Germany. Alternately, there’s the former Soviet-bloc type inflation that occurred during the 1990’s. Today in the US, we have an independent central bank, which can limit the growth of the money supply to prevent hyperinflation. JoshGolden, what makes you think there could be hyperinflation, why couldn’t the Fed prevent it, and do you have any historical antecedents to give as an example for the current US situation?
As for deflation, we haven’t had deflation since the 1930’s, and that was partly due to widespread bank failure against which we have many safeguards today – FDIC, banks with multi-state branches, and a Fed credibly committed to lending money to banks during crises. Moreover, deflation brought about by more modern, Japan-like circumstances, should be fairly easily solved by a credible committment to money supply growth by the Fed.
Bottom line, we’ve got a very professional and well-run Fed when it comes to inflation and deflation. (Their role in the mortgage business is a little less stellar.) So JoshGolden, what makes you think there is a problem?