Thursday, March 19, 2015

Greetings from our lord Humongous

Got into it with a good friend about how likely a hyper inflation is in the near future.  He believes it is likely in our lifetime and will be worse than any of the many that have happened since 1918.  Here's my take on the coming disaster, it isn't coming.

I would need to understand how the US dollar backed by nothing has held its value for all these decades that it's been that way before I would have confidence to call how long it can continue this way.  It has done pretty well against gold and against all of the other world currencies for a long time.  Lots of investments have done better than gold for many years now.  Government fiat alone doesn't explain it.  If threats could create real value, North Korea would be the richest country on earth.

The view that today's world is more fragile, more prone to total breakdown into mad-max land has been tested.  It was the basis for the strategic bombing campaign in WWII.  Before that war, many believed that bombing cities would lead to a breakdown of social order and inability to maintain all of the many interdependent industries on which modern life depends.  Then the allies got control of the air and bombed German and Japanese cities to cinders, and the output from the Krupp factories never once faltered and actually increased continually until 1945.

It's a good idea to look at how scary the future looked to intelligent and well informed citizens of the 1930's  and before when the present day seems dangerous.  This famous address to the British parliament is a good example:
... As I say, the future is in their hands, but when the next war comes and European civilization is wiped out, . . .

I think it is well also for the man in the street to realize that there is no power on earth that can protect him from being bombed, whatever people may tell him. The bomber will always get through,
And in figuring just how dangerous the present day is, it's also a good idea to look at what kind of catastrophe the world has been through.  In terms of body count, I see disaster getting steadily more survivable throughout history.

Here's a little quote on the 30 years war from wikipedia for a small sample:

" . . . So great was the devastation brought about by the war that estimates put the reduction of population in the German states at about 25 to 40 percent"

in 1945, Tokyo was covered in napalm killing over 100,000 people out of a population of 3.5 million if half of them had fled the city.  Your odds of survival in Tokyo with napalm coming down are much better than your odds if you were living anywhere near a 16th century army on the move in Europe.

All kinds of disaster are more survivable than they used to be now, which leads me to believe that hyperinflation to the point of zero value, which has happened before, will also be more survivable if it happens again.

Another good point in the history of future prediction is the first world war.  Prior to 1914, most economic experts agreed that it would be impossible to sustain a war effort longer than six months.  They weren't stupid, and they weren't lazy when they made that prediction.  They looked at the data and the money just wasn't there.  One thing their assumptions left out was just how adaptable people and states are under pressure.  And they also didn't know about the accounting tricks that would be invented to squeeze more money out of people.  They wrote whole books to prove that point and I have read only the bullet points from Barbara Tuchman.  We should keep them and their data in mind whenever we hear predictions of inevitable doom, or of an unstoppable march to progress.

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