Hyperinflation is a possibility, say Morgan Stanley

As the year progresses we will be reading more articles like this one.-Lou

Hyperinflation is a possibility, say Morgan Stanley

That’s not in Zimbabwe by the way.

Morgan Stanley’s Jocahcim Fels and Spyros Andreopoulos look at the possibility of hyperinflation hitting the western shores of the UK, Europe and the US in their latest note. Their conclusion is a little scary.

One stark lesson from the ongoing financial and economic crisis is that so-called black swans — large-impact, hard-to-predict and seemingly rare events — can occur more frequently than generally believed.

With policymakers around the world throwing massive conventional and unconventional monetary and fiscal stimuli at their economies, we think that it is worth exploring the black swan event of very high inflation or even hyperinflation.

While such an outcome is clearly not our main case, the risk of hyperinflation cannot be dismissed very easily any longer, in our view. We discuss the historical evidence, the conditions that can lead to very high or hyperinflation, and whether and how it might happen again.

So hyperinflation is a black-swan event that, given all the other black-swan events of late, should not be dismissed.

Read Article Here:
http://ftalphaville.ft.com/blog/2009/01/30/51876/hyperinflation-is-a-possibility-say-morgan-stanley/