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How much is a hyperinflation scenario on a global scale possible?
How much is a hyperinflation scenario on a global scale possible?
How much is a hyperinflation scenario on a global scale possible?
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** To draw global conclusions for the phenomenon of inflation or hyperinflation. Let's start, as always, with Piotr's geography and determining the reasons for the price increase itself. **
** At the beginning, the euro area, an extremely important consumer of the world market. The European Commission estimated that consumer price inflation in the euro area will amount to an average of 7.6% in 2022, i.e. 6.1% higher than the previous forecast (compared to 3.2% in 2021). BUT! Already in 2023, he predicts a decline in inflation to 4%, and although it is still higher than the previous forecast of 2.7%, it means stabilization of prices. S&P Global Ratings is less optimistic than the ECB, as it expects consumer price inflation to increase to 7% in 2022 and fall to 3.4% in 2023, i.e. from 6.4% and 3%, respectively. **
**Cause? The war in Ukraine and the limitation of the inflow of cheap fuels from Russia and an increase in their prices. Of course, higher energy and food prices are also mentioned as key drivers of inflation expectations. Energy prices increased by 97.2% y / y in May 2022. Right away in Spain, producer prices increased by 43.6% y / y - the fastest pace among the four largest economies of the Euro. Producer prices in Italy increased by 34.6% y / y, while in Germany and France the corresponding PPI indices increased by 33.6% y / y and 25% y / y, respectively. This is what European inflation did as a result of the war. **
** Inflation risk was the main factor behind the first interest rate hike in 11 years. The ECB said the big first step of raising interest rates on 7/21/22 by 50 bp was the right one as it sought to normalize its monetary policy interest rates and inflation risk was a key determinant of the first interest rate hike. **
** The ECB aims to bring inflation back to 2% over the medium term. **
**Now yes. If the euro area, to which exports grow from the economically strongest regions of the world - China and Hong Kong (from 37% to more than 40% of total exports), keeps inflation under control, as does the USA, then there is no reason to think about the domino effect. That is, the transfer of the price increase trend to other parts of the world, not directly affected by the war in Ukraine, and thus the increase in oil and gas prices caused by it. **
** Even less there can be no hyperinflation. **
** I will just add that hyperinflation has been affecting Turkey for several years now, the major economy of Asia and Europe, without affecting the global downturn, on the contrary, cheap exports from this country are driving a surplus in the foreign trade turnover account. **
The war in Ukraine, the primary factor of inflation, will continue for about 2 years, this is how much time Europe has to replenish the deficit of energy resources or return to the pre-war state, and about this amount of time, economists discount their inflation calculations.
like if you like.
aha, data from https://info.ceicdata.com
** At the beginning, the euro area, an extremely important consumer of the world market. The European Commission estimated that consumer price inflation in the euro area will amount to an average of 7.6% in 2022, i.e. 6.1% higher than the previous forecast (compared to 3.2% in 2021). BUT! Already in 2023, he predicts a decline in inflation to 4%, and although it is still higher than the previous forecast of 2.7%, it means stabilization of prices. S&P Global Ratings is less optimistic than the ECB, as it expects consumer price inflation to increase to 7% in 2022 and fall to 3.4% in 2023, i.e. from 6.4% and 3%, respectively. **
**Cause? The war in Ukraine and the limitation of the inflow of cheap fuels from Russia and an increase in their prices. Of course, higher energy and food prices are also mentioned as key drivers of inflation expectations. Energy prices increased by 97.2% y / y in May 2022. Right away in Spain, producer prices increased by 43.6% y / y - the fastest pace among the four largest economies of the Euro. Producer prices in Italy increased by 34.6% y / y, while in Germany and France the corresponding PPI indices increased by 33.6% y / y and 25% y / y, respectively. This is what European inflation did as a result of the war. **
** Inflation risk was the main factor behind the first interest rate hike in 11 years. The ECB said the big first step of raising interest rates on 7/21/22 by 50 bp was the right one as it sought to normalize its monetary policy interest rates and inflation risk was a key determinant of the first interest rate hike. **
** The ECB aims to bring inflation back to 2% over the medium term. **
**Now yes. If the euro area, to which exports grow from the economically strongest regions of the world - China and Hong Kong (from 37% to more than 40% of total exports), keeps inflation under control, as does the USA, then there is no reason to think about the domino effect. That is, the transfer of the price increase trend to other parts of the world, not directly affected by the war in Ukraine, and thus the increase in oil and gas prices caused by it. **
** Even less there can be no hyperinflation. **
** I will just add that hyperinflation has been affecting Turkey for several years now, the major economy of Asia and Europe, without affecting the global downturn, on the contrary, cheap exports from this country are driving a surplus in the foreign trade turnover account. **
The war in Ukraine, the primary factor of inflation, will continue for about 2 years, this is how much time Europe has to replenish the deficit of energy resources or return to the pre-war state, and about this amount of time, economists discount their inflation calculations.
like if you like.
aha, data from https://info.ceicdata.com
** To draw global conclusions for the phenomenon of inflation or hyperinflation. Let's start, as always, with Piotr's geography and determining the reasons for the price increase itself. **
** At the beginning, the euro area, an extremely important consumer of the world market. The European Commission estimated that consumer price inflation in the euro area will amount to an average of 7.6% in 2022, i.e. 6.1% higher than the previous forecast (compared to 3.2% in 2021). BUT! Already in 2023, he predicts a decline in inflation to 4%, and although it is still higher than the previous forecast of 2.7%, it means stabilization of prices. S&P Global Ratings is less optimistic than the ECB, as it expects consumer price inflation to increase to 7% in 2022 and fall to 3.4% in 2023, i.e. from 6.4% and 3%, respectively. **
**Cause? The war in Ukraine and the limitation of the inflow of cheap fuels from Russia and an increase in their prices. Of course, higher energy and food prices are also mentioned as key drivers of inflation expectations. Energy prices increased by 97.2% y / y in May 2022. Right away in Spain, producer prices increased by 43.6% y / y - the fastest pace among the four largest economies of the Euro. Producer prices in Italy increased by 34.6% y / y, while in Germany and France the corresponding PPI indices increased by 33.6% y / y and 25% y / y, respectively. This is what European inflation did as a result of the war. **
** Inflation risk was the main factor behind the first interest rate hike in 11 years. The ECB said the big first step of raising interest rates on 7/21/22 by 50 bp was the right one as it sought to normalize its monetary policy interest rates and inflation risk was a key determinant of the first interest rate hike. **
** The ECB aims to bring inflation back to 2% over the medium term. **
**Now yes. If the euro area, to which exports grow from the economically strongest regions of the world - China and Hong Kong (from 37% to more than 40% of total exports), keeps inflation under control, as does the USA, then there is no reason to think about the domino effect. That is, the transfer of the price increase trend to other parts of the world, not directly affected by the war in Ukraine, and thus the increase in oil and gas prices caused by it. **
** Even less there can be no hyperinflation. **
** I will just add that hyperinflation has been affecting Turkey for several years now, the major economy of Asia and Europe, without affecting the global downturn, on the contrary, cheap exports from this country are driving a surplus in the foreign trade turnover account. **
The war in Ukraine, the primary factor of inflation, will continue for about 2 years, this is how much time Europe has to replenish the deficit of energy resources or return to the pre-war state, and about this amount of time, economists discount their inflation calculations.
like if you like.
aha, data from https://info.ceicdata.com
** At the beginning, the euro area, an extremely important consumer of the world market. The European Commission estimated that consumer price inflation in the euro area will amount to an average of 7.6% in 2022, i.e. 6.1% higher than the previous forecast (compared to 3.2% in 2021). BUT! Already in 2023, he predicts a decline in inflation to 4%, and although it is still higher than the previous forecast of 2.7%, it means stabilization of prices. S&P Global Ratings is less optimistic than the ECB, as it expects consumer price inflation to increase to 7% in 2022 and fall to 3.4% in 2023, i.e. from 6.4% and 3%, respectively. **
**Cause? The war in Ukraine and the limitation of the inflow of cheap fuels from Russia and an increase in their prices. Of course, higher energy and food prices are also mentioned as key drivers of inflation expectations. Energy prices increased by 97.2% y / y in May 2022. Right away in Spain, producer prices increased by 43.6% y / y - the fastest pace among the four largest economies of the Euro. Producer prices in Italy increased by 34.6% y / y, while in Germany and France the corresponding PPI indices increased by 33.6% y / y and 25% y / y, respectively. This is what European inflation did as a result of the war. **
** Inflation risk was the main factor behind the first interest rate hike in 11 years. The ECB said the big first step of raising interest rates on 7/21/22 by 50 bp was the right one as it sought to normalize its monetary policy interest rates and inflation risk was a key determinant of the first interest rate hike. **
** The ECB aims to bring inflation back to 2% over the medium term. **
**Now yes. If the euro area, to which exports grow from the economically strongest regions of the world - China and Hong Kong (from 37% to more than 40% of total exports), keeps inflation under control, as does the USA, then there is no reason to think about the domino effect. That is, the transfer of the price increase trend to other parts of the world, not directly affected by the war in Ukraine, and thus the increase in oil and gas prices caused by it. **
** Even less there can be no hyperinflation. **
** I will just add that hyperinflation has been affecting Turkey for several years now, the major economy of Asia and Europe, without affecting the global downturn, on the contrary, cheap exports from this country are driving a surplus in the foreign trade turnover account. **
The war in Ukraine, the primary factor of inflation, will continue for about 2 years, this is how much time Europe has to replenish the deficit of energy resources or return to the pre-war state, and about this amount of time, economists discount their inflation calculations.
like if you like.
aha, data from https://info.ceicdata.com
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The scenario of hyperinflation on a global scale is possible, but its probability is low. Hyperinflation is an extremely high level of inflation that leads to a rapid decline in the value of money. There have been cases of hyperinflation in the history of world economy, such as in Germany in the 1920s or in Zimbabwe in the 2000s. However, currently, thanks to better tools for controlling inflation and financial systems, such extreme phenomena are less likely. Nevertheless, political destabilization, economic crises, or excessive money printing can lead to an increase in inflation, so it is worth monitoring and reacting to signals of growing hyperinflation.
The scenario of hyperinflation on a global scale is possible, but its probability is low. Hyperinflation is an extremely high level of inflation that leads to a rapid decline in the value of money. There have been cases of hyperinflation in the history of world economy, such as in Germany in the 1920s or in Zimbabwe in the 2000s. However, currently, thanks to better tools for controlling inflation and financial systems, such extreme phenomena are less likely. Nevertheless, political destabilization, economic crises, or excessive money printing can lead to an increase in inflation, so it is worth monitoring and reacting to signals of growing hyperinflation.
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