Even as Fed balance sheet keeps climbing up and U.S takes on more national debt in the current low-interest rate environment, I am not eager to jump to the premature conclusion and entertain the idea of hyperinflation.
I'm not saying that it is improbable, I am just saying that it is an unlikely and low-probability event. Yes, it is a fat tail risk that shouldn't be overlooked because it comes with the devastating consequence. However, several conditions and criteria need to be met before we can even realistically begin to talk about the probability of hyperinflation.
Federal Open Market Committee's (FOMC) recent decision to keep the fed fund rate unchanged within the target range of 0-0.25% pretty much signaled FED's intention to hold rate effectively to zero until 2022, for at least two years. why? Based on the CPI of the past decade.
Since great recession ended in mid-2009, inflation has stayed below 2% for all but two years, therefore; Fed is more worried about disinflationary risk than inflationary risk.
Fed's initiative of "average inflation targeting" is determined to hit 2% inflation while keeping the employment low. Since Fed has been missing its inflation goal for a decade, people speculate that Fed may let the inflation run up to 3% or 4% to make up for it being below 2% for so long, thus triggering and opening the doorway to the potential hyperinflation.
While such theoretical risk is not completely unfounded, the fact remains the same that we need to have the inflation first before we can have hyperinflation.
Next, we will look at Fed's tools and to what extent Fed can influence the market.
Hyperinflation isn't likely. High inflation is certain.
Libratus
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@zuckzooey, Yes, high inflation is likely on the horizon even though last time we had high inflation in recent history were in 2007 & 1990. We just don't know exactly when.
FrozenKiwi
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Hyperinflation would require the USD to lose global reserve status. If that happens, hyperinflation is a very real risk.
This isn't improbable, it's more just a matter of time. Maybe improbable in the next decade? The US is doing all it can to lose friends. Printing money with abandon is essentially asking the rest of the world to bail out the worlds richest country.
Also, keep in mind that the enemies of the US are growing stronger, and they know that breaking the USD is synonymous with US hegemony. They have incentive and probably the tools to execute.
Libratus
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@FrozenKiwi, Yes, essentially the USD's reserve status allows U.S to "export" its inflation. I will talk about de-dollarization trend in the latter part of the series. The better question to ask is if there is any fiats out there that can become reserve currency when essentially they are all doing the same thing U.S govt does (negative interest rate, irresponsible monetary policy, debt monetization)? SDR? Yuan? Yen or Euro? I doubt it. Gold standard? I highly preferred, but unlikely to be implemented. More radical idea- Do we even need the reserve currency at all? :)