Paul Krugman calls Peter Schiff out on being wrong about hyperinflation. The biggest mistake Mr. Schiff has done is put a timeline on his projections. John Williams of Shadowstats put a timeline instead – saying no later than 2014.
They might both be proven wrong, but I suspect that the time to worry most about runaway inflation is when no mainstream commentator longer worries, and the keynesians and monetarists are running around in circles pointing fingers.
If foreign central banks stop hoarding Treasuries, and foreign investors stop holding dollars, then the game changes significantly. Currently, most of Asia are trying to tie up pacts to trade without the dollar. If that plays out well for them, that would be step one. Step two might be the Japanese accidentally getting their long-desired inflation, which raises interest rates on their bonds, with the result that they must start monetizing not because they want to “start the economy”, but to avoid government default. In such a scenario, I figure they might start dumping dollars and treasuries to save the yen.
But all this is really a moot point – because if desire to hold money (specifically dollars) ever goes down, then the US inflation will come home to roost. History tells us that at some point, that will occur. Krugman may not want to acknowledge his previous remarks at that point (on the other hand, he doesn’t want to acknowledge calling for a housing bubble either…)