Hello friends,
1946 saw the central bank of Hungary, a country devastated by both the great depression and fallout from WWI, begin printing money to meet its budgetary needs. The result was a daily inflation rate that neared 200%, meaning the purchasing power of a dollar earned in the morning was cut in half by a worker’s lunch break.
More recently the African country of Zimbabwe found themselves in a similar situation. Periods of 2008 saw the price of a loaf of bread increase 10x overnight. This devaluing occurred when the government, unable to repay loans to the IMF along with civil servant salaries, resorted to increasing the money supply in circulation. This strategy of course snowballed, with reports at the time indicating the country was printing so much new money that it literally ran out of usable paper to print additional Zimbabwe dollars.
These are examples of hyperinflation, a period of out-of-control price increases within an economy at rates exceeding 50% month over month. Instances of hyperinflation are rare, especially in the developed world. What we in the United States are more accustomed to is slight price appreciation over time. For anyone that's recently had a home built, filled up at the gas pump or bought groceries the change in prices has felt anything but slight.
2020 ended with 2 trillion dollars of currency in circulation, up 11% from the previous year. No twelve month period has seen this steep of an increase since the 1940s. Add to that the 2021 American Rescue Plan and a proposed infrastructure bill and the economy will be flooded with capital like no other point in our country’s history. These extraordinary steps were taken to keep America functional during the pandemic, however we are now seeing what happens when too much money chases too few available goods: inflation.
What We're Watching
Tuesday June 15th - NAHB Home Builders Index
Why It's Important: Strong buyer demand has encouraged builder sentiment so far this year, however increasing costs of construction materials dampens affordability.
Tuesday July 20th - Bezos Takes Flight
Why it's Important: Blue Origin will launch its first crewed suborbital flight, and onboard the New Shepard will be Amazon founder and world's 2nd richest person Jeff Bezos.
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NYS Fair Housing Notice
Steven Luttman
Broker/Owner SJLincoln Realty
35 Bath Street, Ballston Spa NY 12020
(518) 309-8584