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The Only Way Out Is Either Hyperinflation Or Defaulting To The Fed


  • The amount of US and global debt has massively increased in a matter of months.
  • The debt was unmanageable before - global debt-to-GDP was at an all-time high in January.
  • Maybe defaulting to the Fed is the answer no one is talking about.
  • I do much more than just articles at The Lead-Lag Report: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

The arithmetic makes it plain that inflation is a far more devastating tax than anything that has been enacted by our legislatures. The inflation tax has a fantastic ability to simply consume capital.

- Warren Buffett

When does the money run out? Does it? There is a massive public dilemma happening right now in the back of minds of economists around the world. The general public is on board with bailing out unemployed citizens with massive monetary and fiscal stimulus, but they should also be concerned with what happens next and the long-term growth implications of current stimulus. After all, the money will not run out. But we are borrowing from the future, and eventually, it must be paid back in one way or another. As I mentioned on the Lead-Lag Report, I see two probable outcomes, and neither of them is fiscal responsibility, higher taxes, and paying off the debt in a reasonable matter. I think the only way the world, and the US, is going to pay back the unreasonable debt burden created is going to hyperinflation or defaulting to the Fed - the next great policy twist in Federal Reserve history.

A look at the global debt-to-GDP ratio does not give much comfort, either. It hit a record 322% in January, and the US debt-to-GDP was sitting around 107%. With an economic recession (numerator dropping) and increasing debt (denominator decreasing), what do you think will happen to these numbers when it’s all over? Up, up, and away! Just not in a good way. This means that servicing and refinancing this debt overall is a tricky and expensive endeavor, and there already wasn’t room to move before. It’s easy for the consensus to forget that we do, eventually, have to raise interest rates. Right now, it’s like a Formula 1 racer with half-done tires with his pedal to the metal. Eventually, he will have to slow down

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This article was written by

Michael A. Gayed, CFA profile picture
Michael A. Gayed is portfolio manager, and author of five award-winning research papers on market anomalies and investing. He has a BS with a double major in Finance & Management from NYU Stern School of Business, and is a CFA Charterholder. Michael runs the investing group The Lead-Lag Report, focused on helping investors outperform in all market conditions. It offers a tactical, data-driven approach to investing, to achieve long-term success even in the face of uncertainty. With increasing market volatility, it's essential to understand risk-on/risk-off signals, seize high-yield opportunities, and leverage award-winning research to maximize returns. Learn More.

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Comments (517)

gelstretch profile picture
Hyperinflation is always the end game..... Failed governments have historically spent their way into extinction and the landscape is littered with examples. Today alone, Biden is advocating the immediate grant of $300 Billion be distributed into the ghettos of America. He says they are most disadvantaged and most in need....... this is populism unhinged, and is politically motivated. Joe knows money will buy their votes in a New York second. Hmmm. If elected, Joe will be coming for whatever is left, and he is a visionary for what is good for you !
It's a TOP profile picture

"Today alone, Biden is advocating the immediate grant of $300 Billion be distributed into the ghettos of America. He says they are most disadvantaged and most in need....... this is populism unhinged, and is politically motivated."

So Trump is even more unhinged?

“I support actually larger numbers than the Democrats, but it’s got to be done properly. We had something where it gave you a disincentive to work last time.” - Donald Trump.

So he wants even more than $3 trillion. And you are freaking out over $300 billion. That's hilarious.
gelstretch profile picture
@It's a TOP

Yep.... I see your point, and it is clear the motives are well apparent on both sides of the fence, but dumping #300 billion into places that will do nothing to help with an economic recovery is ludicrous for sure. It is nothing more than a naked attempt to buy votes for a losing campaign in place where a few dollars will harvest a lot of votes from people that otherwise would not show up on election day. This idea is not original or unique.... it is a pattern that is practiced every four years. Remember the free cell phones from Obama...it worked !
It's a TOP profile picture

"but dumping #300 billion into places that will do nothing to help with an economic recovery is ludicrous for sure."

Nothing to help? So using $300 billion to build new housing, improve roads, provide loans for businesses, that would do nothing for the economy?

Please how this would be spent and no economic stimulation would occur. Please, I'd love to hear how you think it won't help the economy.

"Remember the free cell phones from Obama...it worked!"

To bad it wasn't from Obama. The program was first launch 3 months before he took office. The program was passed under Bush, it only started wide spread under Obama's administration.

You need to call them Bush's phones.
I suspect the Fed has (historically) be unwilling to tolerate losses because defaults would limit the ability of the Fed to unwind its balance sheet with asset sales.

I suppose the treasury could default... but they won't, since:

1. This will signal to markets that all previous monetary expansion is now permanent - potentially stoking inflation fears further.

2. Since the Fed turns over its profits to the treasury, interest payments to the Fed do not *actually* impose a financial burden. Such a burden is, of course, imposed instead on holders of dollars and dollar-denominated debts.

As for massive tax hikes to pay down debt... If Japan is any indication, government debt is not the burden it used to be. There are clearly very strong global deflationary forces, but economists are still unable to find a conclusive explanation. The (once popular) Asian savings glut theory is not very convincing. Until we know precisely why this is occurring, it will be difficult to predict an imminent reversal.

My best guess is that technology and globalization have:

- tremendously reduced the need for capital investment
- kept a lid on middle-class wages
- prevented price increases on manufactured goods, and
- replaced an almost endless array of physical goods and services with free and infinitely scalable ones, residing in a single, inexpensive phone

Since Japan was hit first, followed by Europe, perhaps the (uneven) collapse of global population growth is playing a role. Honestly, it's hard to say - I'd love to hear your thoughts.

All I know for sure is that this crisis is much more inflationary than what we saw in 2008. In 2010, I realized that gold at $1300 was no longer cheap, and concluded that we are destined to follow in Japan's footsteps - with collapsing inflation and interest rates. I wouldn't make the same prediction this time around.

PS: I also agree that hyperinflation predictions are absurd.
@Allanbr - 'As for massive tax hikes to pay down debt... If Japan is any indication, government debt is not the burden it used to be. '

Two differences between Japan & USA I will point out.

1. Japan debt mostly held domestically vs USA debt mostly held internationally

2. $US is reserve currency still which poses additional wrinkles per Triffen's dilemma.
If the Dems take control of the house, senate and presidency they will raise taxes but instead of paying down the debt they will spend the money on more social programs
1. Free college education-with the decreasing youth population for middle class families the colleges will turn to any warm body just to keep paying the bills. They do not care in the least if someone graduates as long as they can keep the government footing the bill for a couple years of that warm body.
2. More free healthcare for immigrants. The Dems know that to insure a strong electorate base you need to expand the populations dependent on the Federal Government. Look for dreamers to become US citizens.
3. More money for public education: the Dems have to reward those that support their party most and that the public educators.
4. More Federal Workers to enforce all the new regulations coming this way.
5. Send money to big Democratic states to help out with their growing debts.
6. Federal Pension bailout for state and local governments underfunded pension programs.

The debt crisis will never change till people stop buying our federal bonds. Hyperinflation will only occur when exporters stop selling us goods in US currency. Neither which I see occurring in the next decade. So why not sell debt, have the Fed buy it back and just print more paper? Its work for the past 3 decades.
It works until it doesn't.
Diesel profile picture
The Fed will become the biggest holder of US debt and it will be able to write off that debt since the money comes out of thin air anyways.
That which is unsustainable and can't continue on forever will eventually end, and it will not likely end gradually or pleasantly IMO. Even if the fed were benevolent and had the peoples best interest in mind, which I do not believe for a second but even if it were true, then I still don't think it is realistic to expect that they would be all powerful to just print as much money as needed out of thin air, write off the debt, wave a magic monetary wand, or whatever, and suddenly fix the result of many decades of financial mismanagement of governments of both political stripes. If it were so, then why should we even try to collect any taxes or income in the first place, just have the fed write the governments (and their buddies) a "blank check" to spend as much as they like on whatever they like and they'll just print more and no problem ... this in fact is not so far off of what is already happening. It has not worked and will continue to not work in increasingly dramatic escalating fashion. It is a bit like an alcoholic curing their hangover with another shot in the morning, and saying that so long as they don't run out of liqueur then there won't be any problem.
TJ Roberts profile picture
@Diesel @Cashflow Curator Hmmmm, you mean they are not already? $22T, $32T, $122T, does it matter? Remember, Congress shall have the power to print and coin money, but sadly in 1913, we let the criminal banksters into the henhouse. Sadly, the Fed is NOT Federal, but in the past year, the Department of Treasury and the Federal Reserve have merged, so now they more or less are. Some people may flock to gold or silver to hide their wealth, but if the dollar goes down, there will be calamity, and food, fuel et al. will be the real wealth. The bottom line is that our country is teetering on the edge. Dirty criminals like George Soros, Tom Steyer and other traitors have been funding BLM, and then you have the pandemic hoax with the Bill & Melinda Gates Foundation at the top with Fauci, Berx, Collins et al. on the payroll. The middle class is being decimated by this hoax while the essential monopolies are laughing their a$$es all the way to the bank (Bezos Amazon, Walmart et al.). The next few months will be brutal, but understand what is at stake; this could really be the last election in our country if the globalists win. Trump 2020, and then we can put the criminals in jail where they belong or hang for treason. In the past ~4 years, Trump has brought a lot of business back to the US, but unless we win the House, keep the Senate and keep stage-1 dementia Biden out of office, then it's game over. The globalists want the US to become a Weimar Republic, and they are trying to destroy our country using many different approaches — pandemic, BLM race card division, etc.
@rbaa1 fortunately the global health organizations and military leaders of the world had the incredible cosmic coincidental foresight and amazingly predictive abilities to perform a tabletop dress rehersal for nearly an exactly identical situation in October 18, 2019 that they called "Event 201" so that they were prepared for what ended up happening several months later. They even gave out corona virus plushy stuft animals as a keepsake for the event, just a few months before the supposed global outbreak.

Boy, those guys are good at predicting and preparing for the future ... what incredible luck! And precisely 0.0% of mass media ever pointed out this incredibly "coincidental" planning.
"The Only Way Out Is Either Hyperinflation Or Defaulting To The Fed"

And you just now figured this out?
The Fed has been floating the idea of permanently monetizing the debt for at least the past 5 years. They know the end game. Why else do you think that MMT has been growing in popularity? They will try to do it in a controlled manner so as not to cause hyperinflation. History shows that this has never worked for long. Go figure.
gelstretch profile picture
Inflation in cost of living is likely, but inflation in the value of Gold vs the Dollar is a probability.
"With an economic recession (numerator dropping) and increasing debt (denominator decreasing)"...
No. In an economic recession, the denominator drops, and with increasing debt the numerator increases.
FED doesn't include inflation from groceries and staples in their view. That's wrong of them, but that's what they do.
@Who cares about your portfolio? - they make liberal use of hedonic adjustments, that's for sure. Why buy Prime Rib that has seen price increase of 18% when one can just buy low end offal instead?!? :-)
Offal? Sounds awful.
@Who cares about your portfolio? The fed actually does include food inflation in the CPI numbers. However, the Fed also produces another measure of inflation - the CPI-E (excluding food and energy). It provides a better gauge of monetary inflation because it is less subject to such volatile inputs, and is therefore taken more seriously by the fed.

For example, a war in the middle east would immediately spike energy prices for reasons that have nothing to do with monetary policy. This would immediately spike the CPI, but only slowly trickle into CPI-E.
The Federal Reserve is not an extension of the US Government as the name implies.  It is a privately owned foreign central bank run by the banking cartel to defraud and keep people in debt servitude for ever.  Now they are buying real assets  and we are the debt holders.  What happens if the Feds call in their loans and we default and will be enslaved to them, this is enabled by how the money system operates and represents criminal activity. 
USA is bankrupt now, but the Feds have the power to print money endlessly and the sham goes on without the public being any the wiser. Governments are hostages in the sham.

The only way to erase counterfeit money (fiat money) and counterfeit assets amounting to hundreds of trillions of dollars is to erase the debts associated with these fake assets. They are not toxic assets. They are fake assets.

• You cannot solve the debt problem by issuing more debt. You solve the debt problem by cancelling, completely, all national, corporate and personal debt. You do this simultaneously across the planet, and you do it permanently.
Debt forgiveness has a sound basis in law. It reflects the century-old legal principle of the Doctrine of Odious Debts.
Vooter profile picture
Let it collapse...forgiving debt isn't going to teach anyone anything...destitution, however, will teach people a LOT...
Sundance Utah profile picture
@freedom 101
Millions of people depending on pensions and 401K retirees probably disagree with this approach.

The Fed owns a lot of debt, but much of that debt is an asset for private citizens also.
Sure, destitution taught the people of post-WWI Germany and the Weimer Republic a lot... how to embrace Nazism and militarily conquer its neighbors!
DadHammer profile picture
The government needs to reduce spending, not raise taxes.
This. Exactly this.
Privatize the Federal Government. Nobody misses them during a shutdown.
Northwest Investor profile picture
"This. Exactly this.
Privatize the Federal Government. Nobody misses them during a shutdown."

Completely wrong, %100.

Government spending is the only reason the economy is still floating. The Covid shutdown, without massive government spending to support the economy would have quickly resulted in financial collapse, cascading defaults of mortgages, loans, the entities that issued those debts, the investors who hold them.

There's a reason why, around the world, all sorts of different governments ranging from very right wing to leftists have chosen a different path than you suggest.

When there is no demand in the economy -- _EVERYONE_ misses government spending.

It's a really basic concept, good to try to get you head around it.
@Northwest Investor Without mandatory government enforced shut down of small businesses and the economy, there would not have been the need for massive government stimulus to prop up demand. More government is not the cure, it is the disease (not COVID).
Thanks Michael.
But would the percentage of payed interest to GDP not be a better measure?
Because as long as rates are low households and goverments should be able to sustain extended debt-levels.
If pricing power (inflation) evolves (for instance steel get's more expensive) the FED could allocate money in a different way.
Sell gold, unwind bond purchases, ...
The goverment could raise (e.g.) income-taxes as well.
-》Less purchase-power for people
= less demand
= less inflation pressure.

Or maybe (bold) goverment could even subsidize food with more debt.
Debt would rise further, but inflation would not have an impact for the public.
But at some point it might be more and more difficult to sell US-bonds.
The dollar might lose value.
-How much depends on the needs of other countrys and as well how other countrys do relativ to the US.
On the other hand the dollar should be supported because commodities around the globe are priced in dollar.

A ("slightly") weaker dollar should improve consumption of comodities in the world and (as well) give exports from the US an advantage.
->Production in the US could become more attractive.
More US-production means more value is created in the US.
That, at some point, would support the dollar as well.

Maybe a modest inflation (2-7% in average) could be tolerated.
Because with that debt private household and company-debt will shrink over the next decades to more sustainable levels.

And as long no huge country is able to offer high yields (for save bonds) -no pressure would be there to jack up rates.

Tricky but not hopeless. -Or ?
cliffecon profile picture
It's an interesting read. I wonder, though...if the economy recovers (read: a vaccine is developed) before the underlying capacity of the economy is significantly reduced, then, if demand once again returns to "normal", why would we need to experience hyperinflation, since capacity is ample to meet demand? The only "purpose" of inflation in that case would be to effectively reduce the real level of debt.

Anyway, I do wonder about the following from the article, "A look at the global debt-to-GDP ratio does not give much comfort, either. It hit a record 322% in January, and the US debt-to-GDP was sitting around 107%. With an economic recession (numerator dropping) and increasing debt (denominator decreasing), what do you think will happen to these numbers when it’s all over? " Sounds like we've confused the numerator and the denominator here. Seems to me we're talking about the numerator (debt, not GDP) increasing (i.e. not dropping) and the denominator (GDP, not debt) dropping. Its debt over GDP, not the other way around.
There will be no vaccine in the forseeable future. Researchers have been searching for a vaccine for the SARS virus for the past 18 years with no success. Any vaccine coming to market in the next year will be a scam at worst, or will have limited effectiveness at best. The worst part is the pharma companies producing the vaccine are immune from prosecution for any "unexpected" side effects.
In my opinion Venezuela not having a strong currency and Greece having no independent currency and fiscal policy, it won’t be a good idea to compare US with their economic history. Dollar would be needed globally if the global debt to gdp ratio would continue to rise. US would be less under pressure if its share on global debt diminishes as other countries also dig deep for money. Fed has the advantage of exporting dollar to other countries (by increasing its velocity it could realize that), which makes it easier for US with no hyperinflation but little inflation and tax hike to close up its debt to gdp gap. Moreover, raising its trade barriers enables them to reduce their current account deficit in coming years.
boombustvalue profile picture
Do you think the US has an independent currency with the eurodollar liability market creating an extra layer of demand that doesn't allow dollar to depreciate? Also why would you characterize that as an advantage when its persistent current account deficit is caused by an overly strong dollar? Raising trade barriers also doesn't reduce the US current account deficit, it makes it worse because of the retaliatory responses. Its a two way street. Ever since Trump erected his protectionist policies current account balance has gotten worse.
DadHammer profile picture
Trump is keeping other countries from ripping us off.

We have agreed to horrible trade deals with other countries.
@alpnasir money has to be a store of value if it’s to have value. Unstable currency breeds more of the same.
MoneyPig profile picture
A bigger risk than this gibberish is a loss of talent to China. This is the single greatest threat to our future.

Most everyone in Jamiaca has a pHD. Does it matter, no. Jamiaca got no talent.
boombustvalue profile picture
Whats your reasoning and argument for disagreeing? Michael Gayed has a CFA, I would be more respectful. What are your credentials? You have strong opinions but dismiss opposing views as gibberish without any arguments. Thats just immature.
Jamaica has issues that cause the talent to flee. Exhorbitant real estate and living costs, 40% tax rate, lousy public health care, basically a socialist government. Anybody who can, leaves.

I have a 6 year old Jamaican grandniece who is brilliant. Let’s hope she can get back to school because she’s bound for better things.
Vooter profile picture
I bet they can spell "Jamaica"...
MoneyPig profile picture
Blowing the go gold smoke. Why not add .22 caliber bullets to your list. Got a friend literally sitting on and eating off of tens of thousands of .22 caliber bullets.
DKB2 profile picture
Small rifle primers can also be a hot commodity.
Also, have you tried to locate a chest freezer lately? I found 2...but they were in Puerto Rico.
boombustvalue profile picture
The first country to hyperinflate on fiat currency is actually not France through John Law, but rather in China during the Yuan dynasty (China is actually the creator of monetary fiat). This is why gold is recognised as a permanent store of value in the East and why the Chinese are obsessed with gold hoarding. Most Americans are still in denial, blinded by the idea of self exceptionalism, deluded into thinking the US is impervious to a sovereign default or currency crisis. America has already hyperinflated twice in its short history of existence. Ironically, the US was also the last modern country to adopt a central bank because of its high degree of skepticism of centrally managed fiat. The West has lost touch of economic reality with MMT and Keynesian dogma. Capital flight out of currency is just a bank run on a fractional reserve bank, except at the central bank rather than commercial bank level. The inflection point is not quantifiable though in an economic model since it is nonlinear in nature. Does the mass exodus out of a theater from the sound of a gun shot after the 1st person flees towards the exit? 5th person? 10th person? Only the paranoid will survive a monetary reset. The majority assumes that Japanese deflation is the path forward. But if you look deeper you will see vast differences between the American situation and Japan. The entire fiat house of cards is at risk of imminent collapse. Lebanon was the first sovereign to default. That was the Bear Stearns moment. The Lehman moment has yet to come.
The two American examples are not called-out for a reason. On happened in 1779 and lasted less than a month. The second was by the Confederate states.
surfgeezer profile picture
@haetae -Just baloney.
Fixed currencies did not work any more than Gold did for one simple reason, we constantly create more demand for money. Both population growth and the number of new things and services is constantly growing. Ridiculous to think gold keeps up with that kind of demand growth for exchange. What don't you get about money is for exchanging things within a society easier?

It flat does not work to have a set exchange rate in a single currency for a commodity like gold with a finite supply, as comforting as that thought might seem to some.rkets.If anything those countries you site failed because they did not respond to change well- ie lack of Capitalism and Free Markets coupled with extremely slow trade exchange.

Gold is not liquid or supply able to vary with demand for exchange.
If in fact, you do have all currencies constantly changing in things like population, relative competitiveness, the rate they exchange things externally and internally, it makes zero sense to have gold as some intermediary exchange- that function is called free market FX in Capitalism.

Japan is not the Reserve currency. Its slower GDP growth rate makes it possible to borrow at lower inflation taming rates than what it receives in Interest from the US debt it owns. They literally make money lending to the US and it helped keep their goods cheaper here.
MoneyPig profile picture

Blah, blah own this, own that, just don't hold debt and cash. Gold is like .22 caliber bullets, when society is over both have some value.

I don't think society and civilization will end anytime soon.
Thomas Osborne profile picture
The Fed is a criminal enterprise. Paying money to a criminal enterprise is a crime.
surfgeezer profile picture
Just scary you probably believe that.
Says a lot about our financial education system.
Tubsy profile picture
Great book PJ:)
TO ALL: Life eventually ends!
surfgeezer profile picture
but currencies and countries do not have to.
YES THEY DO !! Always and everywhere
Of course you’ve read Toynbee’s “A study of History”
BubbaJM profile picture
I've always said, Inflation is the easiest way out of this problem.... and I'm pretty sure it will eventually occur. I don't know if it will be actual "hyperinflation" which the US has never really seen. ( I would not call the inflation of the 70's actual hyperinflation). And yes, Income taxes will go up eventually too.... once the liberals make it into office. We have gone too far with easy money, to consider at this point actually ever balancing our budget again. Our democratic system is too easily designed to tax the wealthy. The savers and those retired, will suffer the most. I'm not saying I support that..... but it seems the logical and inevitable way out of this mess. Inflation will hurt everyone, (but will have more of an impact on those with substantial savings, and those no longer working)...but I doubt the Fed will allow interest rates to actually go up enough to combat inflation....at least not immediately. They will want some inflation to basically "inflate" away the debt.... this will also create less income inequality both through higher taxation of the wealthy.... and the natural decrease in "real" wealth as inflation eats it away. I do not believe the Fed will actually allow interest rates to rise too high, (Like Paul Volcker did in the early 80's) as the shock to the Stock and housing markets would likely prove too great an impact and destroy any remaining "Wealth effect"... which may spark a second "Great depression". The only bright spot I see is that we have been able to go for very long periods borrowing money without significant consequences.... so we may be able to continue to get away with it for "decades" (But not forever). Our economy now, unfortunately, is one of the biggest "ponzi" schemes going.... but as bad as our country is at creating more debt..... there are many much worse than we are!
Doctorpm profile picture
I'd point out that the only presidents who had budgets surpluses were liberals - Clinton, Johnson, Truman & FDR. Eisenhower did also but I would hardly call him a conservative by today's standards.
BubbaJM profile picture
@Doctorpm Bill Clinton did run a surplus. I'd call him a democrat (but not a liberal by today's standards). Johnson wouldn't be fair to say he ran a surplus...(the vast majority of his 5 years in office he ran a deficit... unless you want to attribute the small surplus in 1969 to the 20 days he spent in office that year). Truman...sure... with a 90+% tax rate on the highest income, doesn't seem like it would be that difficult. I have a problem with the mentality that says it is OK to tax "a small group, someone other than myself" at an egregious tax rate.... as long as it benefits the rest of society. Some things are just plain "wrong"! .....(just because it might help the rest of us get out of a hole we dug.....doesn't make it suddenly "OK") ...it reminds me of another analogy, which I will choose not to use.
@BubbaJM - I would add that Clinton benefited tremendously with the dotcom mania adding 100s of billions to US taxes right up into the crash. Greatest bubble ever. I believe I read there also were some accounting shenanigans with social security that added to income coming in to create the very small budget surplus. Still impressive that it happened though, though days are looong gone.
I wish you would explain yourself in a bit more detail, to support your assertions. For instance, “that worked out pretty well for Venezuela” assumes that the reader has intimate knowledge of the events leading up to the hyperinflation in Venezuela. Could you expand on that a bit? Thanks.
Also, do you think hyperinflation, as defined by inflation in prices over 50% per month, is really possible, or just high inflation?
Hyperinflation is not only possible, it has already happened. Post WWI Germany, and Zimbabwe are the most recent examples, behind Venezuela. The value of any currency is based on supply and demand. If a country has large exports they want to be paid in the local currency. Buyers of the exports have to convert their currency to the local currency in order to pay for the exports. When the demand for the currency is high the value of that currency increases. That makes the exports more expensive. The government can either print more money or increase imports to reduce the value of the currency. The converse is also true. If a country imports more than it exports, the demand for the currency decreases and the value drops.

In the case of Venezuela, before Chavez came to power, Venezuela was one of the largest oil exporters in the world. The bolivar was strong and the standard of living was one of the highest in South America. Venezuela also had huge currency reserves which Chavez decided to spend on social programs.

When Maduro came to power, he effectively nationalised the oil industry. The big foreign oil companies who were managing the oil production were kicked out and replaced with incompetent locals. Oil production dropped like a brick along with the value of the bolivar. Maduro chose to print more money to make up for the loss of export revenue. Thus the inflation began.

The USA has the advantage of the US dollar being the world reserve currency. As the Fed prints more dollars, the inflationary effects of the printing are exported. Many foreign corporations and governments have loans denominated in dollars and the interest payments must be made in dollars. As such, the Fed has a vested interest in keeping the value of the dollar low in order to prevent foreigners from defaulting on their loans.

Just because the US dollar is the world reserve currency does not make it immune from hyperinflation. At the end of the day, it all comes down to the market's confidence of the government underlying the currency. Maduro has little or no confidence. He appears from his actions to be economically illiterate. Should it ever reach the point where the markets have no confidence in Washington, the dollar will suffer the same fate.
@Dennis954 Chavez didn't spend the money on "social programs," well unless you consider the "trickle down" from his pockets to his cronies, much the way tRump is spending our money. Everyone likes to call him a socialist, but he is far from that high standard. Just another crony elitest, lining his pockets, and those of a few close associates, incompetents given positions they are poorly suited for, much like tRump's band of nair-do-well's, headed by Boy Blunder.
It's a TOP profile picture
Or the FED forgiving US debt and increasing reserve requirments.

The solutions are simple. If debt becomes a problem for the US Government the FED Reserve can forgive thembondsmit holds wipingmout the debt and relieving the Government of the debt payments.

If inflation is a problem and raising rates isn't working or they can't raise them much the FED can extract dollars from the system by requiring banks to hold more reserves. This will require banks to take billions or 100s of billion of dollars out of circulation and hold them.
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