Hungary Marches Down Hyperinflation Path; What About the US?

As I watch political events in Hungary, I cannot help but think Hungary is on a path towards hyperinflation.

Please consider Der Spiegel report 'Democracy Is Being Trampled On in Hungary' and see if you agree.
The European Commission on Tuesday announced that it was combing through both the new constitution, which took effect on Jan. 1, and a new law pertaining to Hungary's central bank, the Magyar Nemzeti Bank (MNB), to determine if they adhere to European Union treaties. Furthermore, the Commission said on Tuesday that the EU and the International Monetary Fund (IMF) have not yet decided whether to resume negotiations over much-needed financial assistance for Budapest.

It didn't take long for markets to react. Yields on 10-year Hungarian bonds spiked to 10.7 percent on Wednesday, continuing a sharp rise since the talks over a €20 billion ($26 billion) EU/IMF aid package for Hungary collapsed in December. The country's currency, the forint, plunged to an all-time low against the euro on Wednesday morning. Both Standard & Poor's and Moody's slashed Hungary's credit rating to junk status in the weeks before Christmas. Hungary needs to refinance debt worth €4.8 billion in the coming months.

The aid talks were broken off due to concerns about new laws regulating the central bank, pushed through by Orban's center-right Fidesz party, which controls two-thirds of the seats in parliament. Of particular concern are provisions which allow the government to appoint the bank's vice presidents, thus infringing on MNB's independence. Furthermore, the law increases the number of vice presidents from two to three, allowing Orban to appoint one immediately.

In addition, the committee which sets monetary policy has been expanded, with new members to be appointed by the Fidesz-run government.

Weakens Legal Protections

Potentially more damaging, however, is the fact that the new constitution grants parliament the right to merge the central bank with a financial oversight authority, the head of which would then be appointed by the government. Were the Orban government to take advantage of the provision, it would mean that the supposedly independent central bank president would have to answer to an Orban-appointed superior.
Hungarian Protests over Constitutional Changes

The Spiegel headline "Democracy Is Being Trampled On in Hungary" is accurate. For another opinion please consider Hungary set for protests over constitution.


Supporters of the opposition green-liberal party LMP protest in Budapest on 23 December. Photograph: Zsolt Szigetvary/EPA

Thousands of people were expected to protest in Budapest on Monday night after the government made sweeping changes to the Hungarian constitution that opposition figures say are an attack on democracy.

The demonstration near the city's opera house comes amid rising anger with the ruling Fidesz party, which critics – including the US secretary of state, Hillary Clinton – fear is eroding individual liberties and media freedom while undermining the independence of the judiciary and other state institutions.

Although Fidesz won enough votes in the last elections to command a super-majority, polls suggest its support has plunged over the last year and a half. Peter Kreko, research director at the Budapest-based thinktank, the Political Capital Institute, said: "In May 2010, 45% of voters chose Fidesz. But polls now show just 20% of people still support the party. There is a huge disillusionment with politics in Hungary now."
Hungary Currency Hits Record Low, Bond Auctions Cancelled

Bloomberg reports Forint Hits Record Low as Default Swaps Soar
The forint fell to 321.1 against the European common currency at 5 p.m. in Budapest. The previous record was 317.92 on Nov. 14. The cost of insuring Hungarian bonds using credit- default swaps climbed to a record 708 basis points from 650 yesterday, data provider CMA said.

Hungary, the EU’s most-indebted eastern member, received its second sovereign-credit downgrade to junk last month when Standard & Poor’s followed Moody’s Investors Service in taking the country out of the investment-grade category on Dec. 21.

Hungary’s state debt management agency rejected all bids at a government bond exchange auction today as the increase in yields rendered “an extension of the maturity not worthwhile,” the agency said in an e-mailed statement. The auction offered the chance for investors to swap government securities due in 2013 for 10-year notes.
Hyperinflation a Political Event

Hyperinflation is a complete loss of faith of currency.

Misguided souls preaching hyperinflation in the US for years on end have yet to grasp the fact that hyperinflation is not really a monetary event as much as a political event.

For a discussion, please see Hyperinflation Nonsense in Multiple Places.

In the above link, I provide explanations of Weimar Germany, Argentina, Zimbabwe, and numerous other countries showing the hyperinflation process is political not monetary, and also reasons why hyperinflation in the US is is extremely unlikely.

In contrast to the US, Hungary, via political actions is now on path that can lead to government takeovers of the printing presses and a loss of faith in the Forint (Hungary's currency). If voters retake control before it's too late or the government does not take over the printing presses (and constitutional freedoms are restored), a meltdown may be avoided. Unfortunately the political signs are not encouraging.

If I Only Had a Bank!?

As much as I despise the Fed, an independent Fed is better than having government bureaucrats, President Obama, or public unions in California determine monetary policy.

Please consider this scary video by Ellen Brown.



The idea that North Dakota, a small loosely-populated farm state is in good shape only because it has a state bank is preposterous. Worse yet, Brown takes that absurd position to the extreme, with a proposal to end the Fed and put California politicians (state politicians in general) in charge of printing money to support union causes.

Note that if Ellen Brown got her way, it would take a political event, not a monetary one to change direction.

Moreover, should populist Ellen Brown get her way, I would have to rethink my US hyperinflation position. She is another one of those who understands various problems with the Fed, but proposes a solution that is worse, putting state politicians in charge of printing presses.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Blogroll

News for factory,Allied Cash Advance,Photography,Beach Water Park,Educational Leadership,Vacation And Travel,Wedding Dress,Family Vacation Packages,Casino and Gambling,Health Insurance,Best Auto Insurance ( BAF ),Web Hosting Professional,Home Design And Remodeling,Information Property For Home,Wireless TV Networking,Business Plan Guide,Educational Guide,Custom Essay Writing Service,Plumber Service And Repair,Property House,Architectural House Plans,Car Auto Services,Computer service and repair,Computer Networking,Business Planning Strategies,Womens Giving,Healthcare and Medical Jobs,Retail Inkjet Solutions,Online Casino Games,Alcohol Drug Treatment,Web Designers,Apollo Amatuer Night,Public School Performance,Kanza Museum,Cap Inter Entereprises Emploi,Culinary Tourism,Business Traveller,Bridal Expo,Container Atlas Architecture,Culinary Tours - Packages and Travel,Dancing Ink Productions,Defend Automotive Group,Real Finance Group,Business Consulting Services,Home Design Audio,Health Projects International,Health Resources,Health Effects of Alcohol,History of education,Vietnam travel guide,Westland Foundation,Lighting Business,Networking Business Professionals,Housing Decoration,Future Business,Health and Beauty Tips,Hotel Cafe and Restaurant,Enhancing Education,Home Improvement Projects,Political Philosophy,Healthy Grieving Process ,Unique Weddings in New Orleans,Art Plus Science ,Advantage Business Media,Mutual Financial Services,Adventure Travel and Holidays,Alternative Medicine Treatments,Web Design and Marketing,Electronic Payment Solutions,Life Success in Business,Devium Car Interiors,Easy Divers Academy,Water Treatment Process,Software Development Company,MSDS Translation Language,Orion International Technologies,Refreshing Summer Wine Guide,Learn Technical Writing,Health Spa and Resort,Creative Book Publishing,Positive Business Mentality,Charter Healthcare,Discount Hotel Rates,United Industries,Warrior Insurance,County Tourism and Vacations,Wedding Ring Jewelry,Studio Design Decorative,Journalism Careers,Gaming Accessories Computing,Business Strategy Consultant,Cefori Technologies Information,Physics and Astronomy,News Fashion,Business Online,Michigan Apartments,Legal Information Institute,Guide Fashion Shipping,Home Insurance Quotes,Web Design Trends,Musical Instruments and Gear,Travel and Leisure,Importance of Education,Auto Financing Loans,Contractor Business Systems,Business Travel,Importance of Sex Education,Education Classroom,Creative Idea Laboratory,Luxury Paradise Vacations,Healthiest Alcoholic Drinks,Sports Betting,Business Environment,Business Directory,Internet Services,Top Styles,Architecture and Design,Discovery Travel and Tourism,Drug Abuse Treatment,Cheap Auto Financing,Business and Technology,Online Trading,Casino Gambling,Easy Online Shopping,Education Games,Social Media Networks,Online Dating,Luxury Honeymoons,Media and Entertainment,Home Decorating Ideas,Insurance Services,Payday Loans Online,Beechwood Travel Guide,Paradise Garden,Business Trends Consulting,Expert School Consulting,Latest Fashion Trends,Alternative Health Care,Technology Trends In Society,Health Technologies Resources,Island Wedding Services,Network Society,Gambling Experts,Medical Insurance Expert,Home Repair and Remodeling,Sexual Health Services,Education Resources,Automotive Solutions,Michigan Trade Associations,Luxury Fashion and Accessories,Theoretical Physics,Financial Advice,Adult Online Dating (Escorts),Pets Health Insurance,Better Homes and Gardens,Avastone Technologies,Discover Student Loans,Sports Authority,Vitamins and Supplements,Business Systems Online,Food Network Recipes,Business and Government,Smart Legal Strategy,Occupational Health Care,Music Education,Online Dating Tips (Expert),Online Marketing Lexikon,Citizens Council Network,Economics and Finance,Fashion Entertainment News,Luxury Travel Destinations,Online Auto Insurance,Home Improvement Loans,Building Business Foundation,Human Resource Consulting,Educational Media pay day loans
life insurance quotes
Credit Loans (finance)
Foreign Auto Parts
Health and Fitness
Drug abuse effects
Destination hotels and resorts
Professional Financial Marketing
Personal Finance
Computers and Technology
Auto Insurance
Real Estate Property
Computer Graphics Technology
Home Improvement
Arts music schools
Online Education Classes
Hotel and Travel
Security development program
Business auto loans
Medical And Public Health Organizations
Land and Homes
Better Health Kids
Engineered Heating
Trade Finance Services
Switzerland Tourism
Casa Travel
Clothing Accessories
University of Technology
Best Law Schools
Marketing Technology
Vacation Tour and Travel
Insurance Agents and Insurance Brokers
Construction Engineering
Healthy Home Economist
Masters Home Improvement
Michigan Web Design
Personal Online Banking
Health Education Foundation
Travel Pack
Real Estate and Home Ideas
Museum Vacations Travel
Free Statistical Software
Blog Free Statistical
Buying and Selling Real Estate
Educational Play
Big Top Business
Alternative Health
smooth skin
Products and Services
Construction Project Management
Northside Car Service
Online Essay Writing
France Health
Europe Program Modernization
European Travel Destinations
Science and Technology Project
Online Store Marketing
Law Society Consulting
Business Networking Company
Motivation to Study
Metropolitan Hotel
Technological Innovation
EAP Business
Travel Guide and Virtual Tours
The Business Partnership
Accessible Accommodation
Entertainment News
Medicines Agency
Carpet Cleaning
International House
VIP Shop
Online Clothing Shop
Institute Education Religion
Ford Escort Team
Shop Engine Part
Computer Hardware
Medical Career
Paris Construction
Professional Translation
Streaming Wizard
Alcoholism and Drug
Medical Laboratory
Commerce Business
Educational Kids Play
Space Education
Home Repair Volunteer
Fashion Talent
Health and Safety Executive
Play Web Games
Travel and Surfing
Property and Estate Agents
Technology Group Solutions
Student Service Center
Construction Industry
Media Center Computer
Teny Fashion
Home Remodeling Services
Inspector Network
Car Rentals
Leader Dogs
Rise Health Systems
Business Strategy Consultant
Personal Life Coaching
Company Business Coaching
Entertainment News
Physics and Astronomy
Science and Technology
Cheap Vacation Packages
World Business Academy
Planets Project
Travel and Leisure
Prevent Drug Abuse
Education Certified
Play Kids Games
Legal Defense Fund
Real Estate Strategies
Isolation Globale
Insurance Coverage Law
Rock Hotel and Resorts
Medical Insurance
Healthy Mind and Body
Marjahaan Autokatsastus
Free Sports Authority
Auto Insurance Coverage
Global Technics
Advitium Manufacturing
Professional Core Education
Special Finance Services
Bergen County Contractors
Great Children's Art
Health Supply Company
Social Media Power
Texas House Restaurant
Carbon Consultant
Carbon Expert
Low Carbon
Reset Carbon
Healthcare Commissioning
Virtual Job Tryouts
Ethos Academy (Education)
Intrinsic Schools
Attorney General
Technology Software
Business Plans
Digital Media
High School Resources
Adult Resources
Gamblers Anonymous
Ecuador Real Estate
Software Development
Festival Fashion
Drugs And Alcohol
Business Intelligence
Food Network Recipes
Journal Human Resources
Games and Technology
Technology Development
Web Resources Express
Payday Loans Bad Credit
Art and Craft
Business and Finance News
Ecological Sciences
Education Resources
Web Design
Music Education
World Resources Institute
Business Health Guide
azplanningforwildlife.com m2tvchannel.com bapedaldaprovjambi.com kreis-dl.net news-1212.com landratsamt-doebeln.net landkreis-doebeln.net canadiangoldreserves.net chicagohearse.com tattooremovalessex.com braziltrade-uae.com 333asia.com calliemacdesigns.com gemdoc.net simplefoodjuiceplus.com postabortionstresssyndrome.com descendingpath.com casadopinhole.net myspeechandlanguage.net sezambook.com rerecognition.info bebetsy.info carsoncitybraces.info summitcardiology.info sanfojiangsi.info trailheadgeararchery.info immigrationconnect.info nhhomeless.info tundradialogues.info ibexretail.com kreis-dl.com agiles-eam.com bestbcgolfcourse.com niittyneito.com yenikapimevlevihanesi.com hnr100.com eplogin.com richard-wagner-festival.com landratsamt-doebeln.com lra-doebeln.com terrecatalane.com thesmarterhybrids.com