The Nine Steps of Hyperinflation:

1. BOOM. Markets rise. Creation of asset bubbles.

2. BUST: Market Crash. Inflation goes negative. Central Banks overreact and cut interest rates. Money injections.

3. BOND BOOM: Government debt balloons. Debt issuance soars.

4. STABILIZATION: Stocks and commodities recover. Bonds stabilize. Volatility declines.

YOU ARE HERE

5. BOND BUST: Inflation goes positive. Bond buyers pull out. Central Banks step in and buy bonds (Quantative Easing). This gradually crowds out and scares off real buyers.

6. CURRENCY CRISIS: Money flees inflated currency, at first a trickle then a flood.

7. INFLATION SOARS: Quantitive Easing. Currency weakness pushes prices. Inflation accelerates. Commodities rise. Inflation reaches pre-bust highs.

8. POINT of NO RETURN: Central Banks are slow to contract money supply. Government continues to spend more. Deficits continue to grow. Real economy is still slow. Prices spiral.

9. CURRENCY DESTRUCTION: Double digit inflation. Currency devaluation. Bond market crash. Inflation goes logarithmic. Confidence in money is destroyed. Eventually even monetary contraction will not help as demand for cash evaporates.

- Johnny Oxygen

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