Recession AND Hyperinflation - Could it Happen in NZ?

Last month Alasdair Macleod, Head of Research at Goldmoney.com suggested the USD could hyperinflate by the end of the year.  What are the big picture indications that he may be right and what does this mean for New Zealand?

What happens in the United States has direct consequences for NZ and the rest of the world because 61% of all bank reserves are denominated in US dollar. 

The Federal Reserve continues its policy of monetary expansion.  Since its inception in 1914 the Federal Reserve has never been able to reduce its balance sheet for more than a few months.  In every historical period and on every continent the over issue of money has led to hyperinflation.

The recent fall of the USD against a basket of fiat currencies may be a further sign of the dollar’s declining value. 

This loss of value can most clearly been seen when compared to gold, the long term stable measure of value.

Last week we learned that U.S. GDP was down 32.9 percent on an annualized basis last quarter.  That officially makes last quarter the worst quarter in U.S. history.

More than 54 million Americans, one third of the workforce, have filed new claims for unemployment benefits during the last 19 weeks.

Walmart Inc. is joining the ranks of Macy’s and L Brands in eliminating hundreds of corporate jobs in order to cut costs.

Are the same drivers present in New Zealand?

The NZ government continues to believe COVID-19 poses a threat to the country.  This could lead to further economic disruption.

The Reserve Bank is pursuing its own policy of monetary expansion with plans to expand money supply by $163 billion over the next 5 years.  This will raise national debt to 53% of GDP.

Like the USD the NZD continues to depreciate relative to gold.

Food for thought?  The essence of any contingency planning is to anticipate what MAY happen and take appropriate action.  If you own a NZ business RedPill now has resources that can help in making those preparations. 

“By failing to prepare, you are preparing to fail.”
― Benjamin Franklin