Hyperinflation

Question:

If the Fed is ultimately forced to be the buyer of last resort for a tidal wave of US Treasury debt, would the un-leased hyperinflation due to monetization dramatically raise US housing prices as a real asset safe haven to inflation? If people cannot afford the payments, I cannot get my head around this?

Answer:

I think the answer is that in local currency terms prices would rise.  But in real terms - in terms of an external price point, say gold or CHF, they would decline significantly. 

Large debtors would see their debts wiped out.  Monthly Payments denominated in fixed local currency amounts will be affordable as wages/handouts will be increased in local currency by a moneyprinting government keen to maintain people's consent.  

An example is Mexico in 70s.  In mid 70s you could get a mortgage in pesos with a fixed monthly repayment.  (This is a real example)  By mid 80s the monthly repayment would not  buy you a pack of cigarettes.  But conversely the price of the house in USD terms had declined from say $ 20000 to say $5000.  So the mortgaged homeowner both gained (on the monthly payments) and lost. 

My impression in the US and elsewhere is that hitherto inflation has been diverted/trapped into asset prices and by virtue of maximum abuse of reserve currency privilege and old fashioned military enforcement the US has kept a cap on day to day inflation suffered by the average working man.  However this is now breaking down (with the renewed rise in oil) and accordingly they will have to increase the size and scope and speed of monetization so that it encompasses a much wider set of interest groups i.e. beyond Goldman and JP.  Though of course the glitterati will still come first.  In this sense the Yugoslavia hyperinflation of the Milosevic regime is a helpful model.  Powerful financial industrial groups got the printed money first and then it trickled down in a waterfall to the rest of the population, in order of political power.  And of course permanent war is a necessary corollary to this. Hence the 1991-95 wars following the mid 80s hyperinflation.  

What a happy future for all of us to look forward to!