Hyperinflation starts with an undershoot

(The Gibbs phenomenon in economics)

Even hyperinflation follows simple mathematical laws. An ideal mathematical square wave changes between the high and the low state instantaneously, and without under- or over-shooting. This is impossible to achieve in physical systems, as it would require infinite bandwidth. Square-waves in physical systems have only finite bandwidth, and often exhibit ringing effects similar to those of the ibbs phenomenon!. "n a normal physical and an economical system the bandwidth forces the rectangular pulse to initiate an undershoot and an overshoot which is needed to build up a sharp upward slope #. The ringing may involve several periods.

Fig. 1: Gibbs phenomenon (→ ringing)
Extracted from

ibbs$phenomenon$!%.svg &public domain'

Strange as it may seem the physical effect also may be identified in the rise of the Argentinean hyperinflation curves. The same effect may be observed in a tsunami, which is initiated by a drawbac() the withdrawal of the waterline into the sea. "n effect it is a ibbs phenomenon &* ringing' in the immediately following subsequent flood pulse.

! ibbs phenomenon # +ust Another ,yperinflation -ost - -art !

The drawback3 as an indicator
.aves consist of positive and negative phases, i.e. ridges and troughs. "f a tsunami with a leading ibbs phenomenon hits the coast the first hit may be a brea(ing wave or flooding. "n the case of a trough a drawback will occur as the shoreline recedes dramatically, exposing normally submerged areas. The drawbac( is a well-(nown warning signal for all inhabitants to loo( for higher grounds. The tsunami/s wave period is about !# minutes, in which 0 minutes may consist of the receding drawbac( phase. Then the wave builds a 1 minute long ridge, to be followed by the next trough phase. The process repeats either in building up the maximal amplitude or reducing the wave/s power. .i(ipedia/s Shallow$water$wave.gif &created by 2raaiennest' illustrates the rhythmic 3drawbac(3 of surface water associated with a wave. "t follows that a very large drawbac( may herald the arrival of a very large wave. This tsunami-mechanism suggests to consider the maximum drawbac( level as an indicator to predict the maximal level of the soon to be expected &next' pulse.

Explaining the Gibbs phenomenon as a tsunami's drawback
The drawbac( may be explained as the water reservoir to build up the amplitude for the arriving pulse, which needs a gigantic amount of water on top of the local 4ero level. The wave will borrow the masses of water from the surrounding areas and is able to subtract the water several minutes before the pulse/s top level arrives. "n fact the pulse already started with the drawbac( and needed some minutes to build the top level. The ibbs phenomenon is a universal physical effect. "n economics the physical constants are different and the tsunami/s wavelength in minutes may become months or years, but the general idea is the same. "n economics the monetary base declines, which reduces the inflation level to negative values. The deflation is in effect the drawbac( in the ibbs phenomenon, which may oscillate a few times before the real flan( of the pulse rises.

0 Source: Tsunami - .i(ipedia

The Argentinean Hyperinflation4
The money supply as well as the consumer price inflation dropped below 4ero before the pulse rises.

source) +ust Another ,yperinflation -ost - -art ! &used to derive a mathematical model'

5 Argentine economic crisis &!6667#%%#'

.e may even identify the double period in the ringing phase of the producer price inflation, which is caused by the standard ibbs phenomenon. -lease note that the amplitude of the undershoot is ca. #8. The first undershoot dipped at a minimum !666 and the second one only !-# months before the slope started rising &at +anuary #%%#'. 9oth minimum dips were three years apart. Argentina/s hyperinflation pulse lasted !.: years and topped at !#%8 inflation. At the end a trrailing undershoot occurred, which dipped at a level of ca. -!8. The consumer price inflation follows the producer price inflation with a damping factor and a delay in the leading phase.

source) +ust Another ,yperinflation -ost - -art ! &used to derive a mathematical model'

ther !amples of hyperinflation
Zimbabwe and Weimer5
;eflation always precedes hyperinflation, with the most recent example of hyperinflation is the #%%< - #%%6 =imbabwe experience, and the .eimer >epublic hyperinflation in the !6#%/s.. ;eflation precedes hyperinflationary collapse with declining ?elocity ff @oney. Ance panic sets in the velocity of @oney starts rising.

: Source) ;eflation -recedes ,yper"nflation

"nterpreting the Gibbs phenomenon in hyperinflation
" decided to investigate +ust Another ,yperinflation -ost - -art ! and comment some definitions from that post. " Bust wanted to see all arguments in an overview. The problem seems to be to denominate the inflationCdeflation numbers in gold. The standard representation is in fiat currencies. Additionally most consumer price inflation numbers have been manipulated. • A deflationist is one who loo(s very closely at the present structure of everything, the laws, the rules, the regulations, but ignores the political &collective' will that bac(s it all up. ;eflationists miss the hyperinflation that is coming. The deflationists ma(e all their calculations in dollar-denominated terms. 3Inflationists3 are railing against the growing debt bubble and warning that it would end badly. The mandatory function of the political will is the bailouts of ban(s. The political will &* the collective will' always does whatever will lessen the immediate pain, even if it will most certainly cause greater pain later. The decision to stop bidding on dollars rests solely in the hands of those with large stoc(piles of physical gold * this is why Dhina and some other D9s are gathering physical gold. * All -aper is ST"EE a short position on gold: * There is really only one place for capital to flow to) oldF * "The go ! !eri"a#i"es p$rami! is a "igorous free mar%e# crea#ure. &# canno# be pu# !own wi#h a simp e !ec ara#ion #ha# #he paper is no onger re!eemab e in go !' as go"ernmen#s !i! wi#h currenc$. &# is a short selling scheme #ha# has become a #rap from which few shor# se ers wi escape."(. * Paper claims in the form of derivatives far exceed the underlying physical metal on which they are based. * Electronic credit can be destroyed, while physical notes issued by a central ban( cannot. This is why deflation is possible in a credit based monetary system, but not in a paper based monetary system. * @oney is more valuable than credit because in the event of default, the physical currency holders &@%' are (ing. * The Ged is creating electronic reserves &credit' to support the balance sheets of the big ban(s. The ban(s are simply ta(ing it and using it to cancel out their derivative losses or are hoarding it in order to prepare for future losses. This will be proceeded until all bad assets are completely liquidated. * The top levels &derivatives, etc.' of the inverse pyramid are already dead. * Hyperinflation and currency collapse are basically the same thing. ,yperinflation and deflation are almost the same thing. And hyperinflation and inflation are similar in name only. * all fiat currencies are in a race to the bottom. * there are many multiples more debt than capital in the world economy. • ,yperinflation &H the loss of confidence' leads to the massive printing of base money &new cash'.

1 written by +ohn ,athaway in !666

Sometimes there is a 3deflationary head-fake3 right before the onset of hyperinflation as the private ban( credit money disappears... . * This is the Gibbs phenomenon " described in the previous chapter. This deflation phase is the initiating phase of the loss of confidence and hence the hyperinflation. .e will have a grand deflation Depression &unemployment, falling prices - when priced in gold', blac( and white pictures, etc... ... but it will be denominated in AE; 3hyperinflation is the process of saving debt debt-backed assets &@9S/s etc..' at all costs, even buying them outright for cash.3 Guture hyperinflation fuel is stored in the savings balloon during the period of credibility inflation. .hen the debt starts to fail, so does the credibility of paper debt to the savers. The Ged then is trying desperately to restart the credibility feedbac( loop. The hyperinflation fuel stored in the savers/ balloon &larger than the underlying world of real things' turns into real price inflation as it scrambles to be spent. The political will &and the Ged' however will IAT let that savers/ balloon deflate. The Ged simply buys those deflating @9S/s &etc..' at full price and suddenly the air in the savings balloon has been replaced with non-elastic fresh !-cash. Gold cou ! sop up most of the hyperinflation presently stored in the savers balloon without destroying the real economy "redit money &in the debtors balloon' is tied to the functioning of the economy and base money &used by the Ged to prop up the savers balloon' is not. #ase money & !$ is the fuel in all hyperinflations while credit money vanishesF "f the velocity of the monetary base ! Bumps from fear, base money can chase scarce goods with the same disastrous effect as an exponential increase in the money supply, even before that actually occurs. ;eflation results in a huge windfall for the wor(ing classes &* with rising incomes'. As general price levels go exponential so do government obligationsF As prices rise, the government will need more money to pay for the same amount of 3governing3 in each successive cycle &monthly'. * price hyperinflation%

• • •

• •

• •

"nflation cur#es for !wiss and $!%economies
" chec(ed the web for inflation curves and found the following graph with two negative phases around #%!% and #%!#. -lease note that the amplitude of the undershoot is ca. !.:-#8. The first undershoot dipped at a minimum #%%6-#%!% and the second one at #%!#-#%!0 &three years apart'.

Source) Swit4erland

) "nflation versus @0-growth, Graph) =29 in ;@A &!66:-#%!5'

The JS-inflation also dipped !-#8 below 4ero at #%%6-#%!%, but more recent data are missing)

JS D-" inflation &year-on-year' from !6!5 to #%!%. JS D-" monthly data series obtained from the Gederal >eserve Economic ;ata &G>E;' database provided by Economic >esearch at the St. Eouis Ged.
Dreative Dommons DD% !.% Jniversal -ublic ;omain ;edication. -ublished at JS$"nflation.png 9y Eawrence(hoo

As has been proven from historical Argentinean curves hyperinflation may start with a double minimum -#8-dip at distances three years apart &!666 and #%%#'. The second -#8 minimum dip occurs immediately before the steep tsunami-li(e rise of the !#%8-topping inflation curve. The mathematical model of the Argentinean economy and the JS economy may not match very well, but we do not have a better model to estimate a relation between the undershoot amplitude and the hyperinflation/s top amplitude. Also the pulse width may be derived from the distance between both undershoot dips &three years'. Argentina/s hyperinflation pulse lasted !.: years and topped at !#%8 inflation which in a mathematical analogy seems to be related to the undershoot level of -#8. .e did identify similar undershoots in Argentina, in Swit4erland and &at least for ! undershoot' in the JS-economy. Jndershoots were in a typical range ca. -#8. The first undershoots in Swit4erland and the JSA were in #%%6. The second undershoot in Swit4erland was #%!#-#%!0. >ight now the Swiss inflation level is found at %8 and it might mar( the beginning of the tsunamili(e !#%8-wave pulse. "f correct this Argentinean model may eventually be used to calculate the duration &!.: years' and the amplitude of the coming global hyperinflation.

Sign up to vote on this title
UsefulNot useful