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Great Depression

Why High Inflation Is Inevitable

How this economic disaster ends is something about which many of us speculate. Two extreme endings are likely — a sudden deflationary collapse or a period of very high inflation/hyperinflation which ultimately cripples commerce and resolves itself in a deflationary collapse. In either case, the deflationary collapse is another Great Depression.

It is important to know which route will occur because of what will happen to asset values along the way. A move directly into a Great Depression will depress severely most asset values, especially common stocks, housing and other hard assets. Bonds, cash and fixed incomes may be beneficiaries in the sense that their purchasing power increases.

If the Great Depression is preceded by hyperinflation, just the opposite will happen, at least through the transition stage. Cash, fixed incomes and bonds will be devalued, perhaps even wiped out, if the hyperinflation is severe. Stocks, housing and other assets are likely

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