Stagflation or Hyperinflation?

Many Austrian school economists/followers such as Peter Schiff state that we’ll experience hyperinflation. If the U.S. were a third world country, she’d already face a currency crisis. However, since our debt is denominated in our currency, we have the ability to kick the can down the road. The question remains, will the U.S. experience stagflation or hyperinflation.

The Keynesians are stating that we will have a deflationary depression while the Austrians are suggesting that we will experience hyperinflation. I’m in the middle, and believe that stagflation will occur. We will have moderate levels of inflation because the velocity of money is LOW. MZM velocity is at 1.38, which means money is changing hands at 1.38 times within a given year. This MZM velocity is a decent way of looking at the velocity since the MZM is measuring money supply with this equation: M2 –time deposits (like Bank CD’s) + money market funds. It’s better than M2 because MZM ignores time deposits in their calculation. To calculate MZM velocity, you take the nominal GDP (16.4 trillion)/MZM (around 11.55 trillion to get to a velocity calculation of around 1.38.

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