Banking collapse and hyperinflation: the next crisis

The warning about the Gibson Paradox: Banking collapse or imminent hyperinflation?

Analysis of current financial dynamics points to a dangerous convergence: the possibility of a banking collapse preceding a phase of hyperinflation. Discussions in advanced economic circles suggest that the system is loaded, like a dam about to overflow, waiting for a trigger to start the cycle of monetary runaway. The central concern lies in how massive credit expansion, driven by central banks, clashes with the reality of credit available to the non-financial productive sector.

The dynamics of money and the velocity of circulation

There is a consensus among some analysts that money, despite constant injection by central banks, is not reaching the average citizen. The growth of M2 relative to M1, according to these models, suggests credit restriction to the real market. However, for this situation to translate into hyperinflation, a catalyst is required; scenarios such as the implementation of basic incomes or the activation of checks are mentioned as the engine that drives the velocity of monetary circulation.

The dilemma of the Gibson Paradox

The concept of the Gibson Paradox is introduced within the framework of this possible crisis. It is argued that tax collection, by falling due to the destruction of supply, cannot by itself slow down monetary velocity. This, it is proposed, inevitably leads to inflation where the value of the currency is drastically eroded. Some postulate that the path is not deflation, but a generalized inflationary escalation, trinc by cycles of bubbles, first in stocks and then in solid assets such as gold.

Havens and the credibility of Fiat

Faced with the uncertainty of fiat money, a mobilization towards tangible assets is observed. The scarcity of physical gold and the discreet purchase of metals by states are noted, although some question whether markets have already priced in this pressure. The notion of a fake currency, designed to maintain the illusion of improvement, contrasts with the need for a real currency to sustain the purchase of raw materials.

The tipping point, the 'button' that triggers the collapse, remains the big question. The system appears to be on a collision trajectory, a defined course towards a tipping point that surpasses any known traditional economic model.

With these analyses, the trajectory towards a new economic paradigm is presented as a complex process, where business cycle theory seems to crumble before the magnitude of the political and monetary forces at play.

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