newbie confused about inflation and prices

As I understand it, there are 2 opposing forces at work in a recession.

First, fewer  jobs means less money to spend means reduced demand, which lowers prices.

Second, all that paper money being spewed out 24/7 by gov't means higher prices.

So why is Peter Schiff and others predicting hyperinflation? So confident as to say buy gold and commodities, and expect Walmart prices to look like Saks Fifth Avenue.

How does he know which of these opposing forces will win? After all, in the 20s and 30s, and UK in the 80s [I am told] and now [so far] prices are dropping.

Wasn't the only stagflation so far the Nixon 70s?

As always, links to short pieces or audios are best, but I appreciate all replies.

 

Smiling Dave:

So why is Peter Schiff and others predicting hyperinflation?

Most people who know of Schiff, have not read Crash Proof, but work off his YouTube sound bites.

Schiff is predicting the eventual and inevitable destruction of the dollar via hyperinflation.  He is not a market timer.

Same thing with Marc Faber.

The reason for this, is that they understand the incentives for politicians.  The incentives are not to come clean, be honest with the constituents and to ask for sacrifice to liquidate debt.  Hans Hoppe explains this as well in Democracy: The God That Failed.

The long term outlook for the US is that eventually the service costs on the debt, will exceed tax receipts, and then the government will have to print from that point forwards.  That is where the claims of hyperinflation come from.

The price deflation (decrease in prices) actually sets the stage for high inflation when the new money hits, because it lowers the price baseline. It also incentivizes inflationary policy to prevent "deflationary spiral" (which is nonsense, because goods usually get cheaper over time, but people still buy them).

For this reason, deflation often goes before hyperinflation in the sequence of events (Weimar).

As Milton Friedman said, "inflation is always and everywhere a monetary phenomenon." Fewer jobs might mean less money for labor (except people with jobs are paid more) but every dollar not spent on labor is retained by the capitalists. An increase in the money supply is the only thing that causes general price inflation, ever. Recent dramatic increases in the money supply will eventually cause dramatic price inflation. No one can say exactly when this will happen, but it will.

Smiling Dave:

...now [so far] prices are dropping.

In the US, at least, CPI has actually been increasing in the past few months.

Wasn't the only stagflation so far the Nixon 70s?

 

What about hyperinflation in Germany?  Or hyperinflation in Argentina?  Stagflation takes place when controlled reserves increase at a faster pace that uncontrolled reserves fall.

Jonathan M. F. Catalán:

 

What about hyperinflation in Germany?  Or hyperinflation in Argentina?  Stagflation takes place when controlled reserves increase at a faster pace that uncontrolled reserves fall.

Can you please expalin what comtrolled and uncontrrolled reserves are?

 

Smiling Dave:

Can you please expalin what comtrolled and uncontrrolled reserves are?

 

Murray Rothbard uses the terminology to describe two different forces which are effecting the size of aggregate bank reserves.  Uncontrolled reserves refer to reserves which are decided upon by the individual clients of the bank, or basically the demand for money and credit being destroyed by liquidation of malinvestment.  Controlled reserves refers to money injected or removed by central planning agencies, like the Federal Reserve.  So, when uncontrolled reserves are falling at a faster rate than controlled reserves are increasing it means more people are withdrawing money than the Fed injecting.