currency, inflationTo my own understanding, hyper-inflation can happen when a country is unsuccessfully trying to service its external debt by printing local currency money and converting it to the debt’s foreign currency, or perhaps when trying to pay out a large amount of inflation-fixed bonds using its local currency.
If all of the US’s external debt is in dollars and bonds that are mostly not inflation-fixed, then why is the actual risk for hyper-inflation of the dollar?
Hyperinflation simply means very fast inflation. Intuitively I would argue that a necessary condition for hyperinflation is the loss trust into the stability of the currency. The points you mentioned can generally lead to a rise in the price level as can be seen in Fisher’s equation of exchange. or However, I believe that in order for hyperinflation to occur, inflation rates need to increase over time such that people start to expect rising inflation rates which lets them demand higher wages and thus spawning a self fulfilling prophecy with ever increasing inflation rates. In order for this to difficult or impossible to stop by a central bank a political background which limits the possibilities of deflationary meassures might be necessary. Say the country has to pay reparations as Germany had to before the great depression. In such a situation the central bank might be forced to print currency and make deflationary meassures impossible. In the US there might be tensions to repay debths but I dont think there are reasons to believe that the FED is unable to or unwilling to counter high inflationary tendencies.
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