As a contrarian investor, I seek to profit by opposing trades based on self-assured judgments about the future. So, in defiance of the calls for an imminent hyperinflation, I ask; what idea really killed the French Assignat? And does it threaten the dollar today?

 

I recently wrote about the idea that killed the mark. This article is intended to confirm the rudimentary premise of my previous work; namely, that a tragically vicious idea has to firmly grip the minds of the masses in order for a hyperinflation to ensue. My contention is that the misguided premises of today are (fortunately) less vicious.

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Previously, I explained why it may be inappropriate to liken the dollar to the paper mark of the Weimar Republic. It recently occurred to me that I could explain this in a simpler fashion via the tool of analogous thinking.

 

Imagine that Bernanke (and the rest of us of that matter) firmly believed that the Fed should print dollars to buy – say – 1000 ounces of gold every day. Those gold ounces would be distributed to the public at the end of every day. Furthermore, suppose that we also believed that every time the price of gold rose by $1, we should buy 1 ounce extra every day.

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An update of the daily treasury statement charts:

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