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Hyperinflation is here

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Another day, another missile, another rather indifferent market reaction. North Korea has fired a missile over Japan. It is a continuation of existing tensions rather than an escalation, and markets have reacted accordingly.
  • Statistical quirks (or rather ending bizarre statistical quirks) helped push US consumer price inflation back up. Central banks should look through the noise to focus on the trends, but the image of rising inflation makes another rate hike easier to sell. The Bank of England sounded hawkish – there is an expectation that growth data could be revised higher.
  • In 1922, the start of the Weimar hyperinflation saw the German Mark lose 27% of its value against the dollar every fortnight. Bitcoin has lost 45% of its value against the dollar in the last fortnight. If Bitcoin were a currency, that loss of value would be considered hyperinflation. German Mark banknotes could be reused as wallpaper. Bitcoin cannot.
  • Euro area trade data is unlikely to excite comment. US retail sales are a little more interesting to markets – this data should not be impacted by hurricane-affected disruption, but the rising inflation may show up in nominal sales figures. There are some opinion poll results on US consumer sentiment too.