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Will It Be Inflation or Deflation?

Every business must use proper planning; some use it better than others. One company that is far superior to the US automaker's business planning is Toyota. With the use of innovative business planning Toyota introduced the high mileage hybrids at the same time gas prices began to rapidly rise. This is the type of business planning that leads to great success.

Personal planning is similar to business planning. Properly plan for the future and you'll be much more successful. When planning a personal budget, future expenditures, or choosing investments, proper planning is essential for maximum success.

As of today, the US is engaging in a hyperinflationary path. The Federal Reserve is creating billions of dollars to loan to ailing banks. Remember, inflation is not rising prices. Inflation is the dilution of the value of money. And when Ben Bernanke, in his famous helicopter speech, says that the Federal Reserve can dilute the value of this country's money at will, I'll take him at his word. That's no empty bluff.

Right now we are on a hyperinflationary path; however, will we continue on this path all the way to the end as Weimar Germany did in the early 1920's? We certainly need not. The currency became completely worthless in Weimar Germany due to hyperinflation. The exchange rate in 1914 was 4.2 Marks to one U.S. dollar. By 1920 it had changed so drastically that it took nearly 39.5 Marks to on U.S. dollar. The trend continued down this path until November 1923 where it would take 2.4 trillion Marks to equal one U.S. dollar!

By the next month the Mark was worthless and was replaced. This is one very good example of hyperinflation that a country can experience; unfortunately bringing them to the point of worthless currency. But is it really necessary to continue a path of hyperinflation to this point? No. The US was on an inflationary path in the 1970's. This could have continued to the point of worthless money but it didn't. Attention of the rapidly raising costs contributed to the cessation of the inflationary path with the aid of Paul Volcker.

Well, here we are, 28 years later, and again this country is going down a hyperinflationary path. Where will it stop this time? Will it continue to the ultimate end like Weimer Germany in the 1920's, or will it be halted like it was in 1980? If it is halted, at what point will that be?

These are good questions to which I wish I had the answers to. Inflation often leads to situations like what is going on in Haiti where riots are breaking out over food prices and people are being killed.

When will today's hyperinflationary path change courses? I would like to know the answer to that. Rapidly rising home prices didn't seem to cause much complaint from the public; of course those who owned homes already didn't notice this.

There is a saying, 'the tide will raise all ships' and this is true. It is nearly impossible for the prices of gasoline, food, and clothing to rise and also the prices of homes to rise as well. The best guess I would have is that the hyperinflation will continue until the price of homes begin to rise again.

Riots and deaths over rising prices of food and gasoline usually is impetus to hyperinflation coming to an end.

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J Stromsteen has many years experience in the insurance and finance industry. She writes for the website Bush's Depression as well as first time home buyer to comment with up to date details on the unfolding subprime mortgage crisis. Click here for other unique business articles.

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