Could worldwide deflation lead to national hyperinflation?

Wyatt Ciesielka
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For years, economists have worried about inflation.  But now, the fear of deflation is haunting governments and business leaders alike.  Could we experience a devastating deflationary period followed by an almost unimaginable death-blow of rapid "Zimbabwe-like" inflation?  How can you prepare?

Whether deflation or inflation takes root in 2009, there is no doubt that the world economy is under intense pressure. Even in the United States, unemployment and poverty are increasing and "food banks are reporting a 30% increase in the number of people seeking assistance – double the increase reported just six months ago" (CNNMoney.com, January 21, 2009).

Historically, the pains and consequences of inflation (more than deflation) have been reported in detail. For example, in pre-World War II Germany, workers were paid twice a day, loaded pounds of bank notes into wheelbarrows, and rushed to the local shops to buy the day's necessities! By 1923, the price of a loaf of bread had risen to 140 billion marksfrom just two marks three years earlier (The Economist, December 23, 1999)! Quickly, people's life savings vanished and anger mounted. We know that world war resulted in part because of this severe economic pain.

But hyperinflation is not just a pre-WW II German phenomenon. From Chili to Poland, from Ukraine to Argentina, from Zimbabwe to Peru, many countries have suffered terribly in recent decades because of uncontrollable inflation. Recall the decades of food riots, political imprisonment, and death squads that were a backdrop of Argentinean society even into the early 2000s (PBS, "Commanding Heights", 2002).

So, in 2009 should we worry about hyperinflation, or deflation?

Remember, it was deflation that financially destroyed millions of Americans during the Great Depression, and economists see deflation incubating once again. For example, Merrill Lynch executive Gary Dugan recently warned that "the problem of deflation could last for two to three years" (Reuters, January 20, 2009). Deflation destroys economies because, as prices decline, businesses cannot afford to retain staff, so unemployment soars, wages are cut further, and the deflationary cycle self-reinforces.

It is very possible that worldwide deflation will strike over the coming years. It is also possible that since the US and many of her long-time allies suffer from structural financial weaknesses and have been eclipsed by continental Europe in terms of population and overall financial output (WSJ, "American Power is on the Wane", January 14, 2009), the English-speaking nations will be unable to independently recover economically.

If the European economy accelerates ahead while the US and British economies remain stalled, or if the US's creditor nations cease supporting the US dollar, this could then lead to "Zimbabwe-like" hyperinflation for the US, Great Britain and our longtime allies. Regardless of exactly how the details unfold, economic collapse has happened in other modern nations. We are not immune.

We earnestly pray that God grants our nations mercy. But, your Bible foretells that severe times are in store for the US and English-speaking nations if we don't repent. And God's faithful Church has long warned that a German-led Europe will eclipse "modern Israel" and that this European superpower will ultimately enforce their economic system around the globe (see our booklet The Beast of Revelation: Myth, Metaphor or Soon-Coming Reality?).

The only real way to ensure your needs are satisfied is to "seek first the Kingdom of God and His righteousness" (Matthew 6:33). However, this Work has also continually warned that we should also take physical steps to reduce our expenses, pay off our debts, set aside emergency savings, and get our financial house in order! As examples, listen to "How to Survive Stress," or read "Are You PREPARED?" What is happening in the world economy is real. Are you heeding these warnings?

Please study our booklet Fourteen Signs Announcing Christ's Return to better understand what the future holds. And pray that God gives you a zealous, repentant heart to turn to Him now … before it is too late (Zechariah 1:3-4).