A Simple Hyperinflation Index by Robert Wayne Atkins, P.E.

A Simple Hyperinflation Index
Copyright © January 7, 2011 by Robert Wayne Atkins, P.E.
All Rights Reserved.

Will there be inflation or deflation in the years ahead?

Although both are possible for short periods of time, the overall trend will probably be an inflationary one. The United States of America, and most other nations throughout the world, have been living with inflation for many decades. However, only occasionally during the past 100-years have specific countries experienced Hyperinflation.

Hyperinflation occur when prices change significantly on a daily basis. In a hyperinflationary economy the purchasing power of paper money drops significantly every day, or every 24-hour period, or sometimes even faster. Hyperinflation is already present in some parts of the world and it may not be too long before it becomes a nightmare reality in the United States of America.

In a separate article published on October 7, 2010 on this web site called "The Hyperinflation Meltdown" I benchmarked the prices of three commodities: gasoline, diesel fuel, and fresh hamburger. The reasons I chose those three commodities are as follows:

Gasoline: Most of us in the United States who still have jobs depend on gasoline in one way or another to get us to and from work. If gasoline begins to significantly increase then it will take a bigger bite out of our already very small paychecks, and that will mean that most of us will have less money available to pay our other bills. Those of us on fixed incomes will therefore be forced to figure out how we can either reduce those other bills or eliminate them, such as eating less each day or cancelling our cable TV service.
Diesel Fuel: The things we buy are moved around the world and around our nation in vehicles that use diesel fuel. If the price of diesel fuel increases significantly then this will directly impact the delivered cost of almost everything we buy. All the major freight companies, including FedEx and UPS, already have a fuel surcharge as part of their published rate structures. This means that any and all increases in the price of diesel fuel will be immediately transferred to the delivered cost of the products we purchase. The impact of that increase will depend on the price of the product in relationship to its shipping cost. For example:
- Expensive Products: A product such as a refrigerator may cost $1,000. This total cost may be $900 for the refrigerator plus $100 for the total shipping cost. If the shipping cost increases 50% then the new shipping cost will be $150 and the new price of the refrigerator will then be $1,050. This represents a five percent increase in the price we would pay for the refrigerator.
- Inexpensive Products: A ten-pound bag of white rice may cost $6.00. This total cost may be $3.00 for the rice and $3.00 for the total shipping cost. If the shipping cost increases 50% then the new shipping cost will be $4.50 and the new price of the ten-pound bag of rice will then be $7.50. This represents a twenty-five percent increase in the price we would pay for the bag of rice.
Fresh Hamburger: Some food products have a very long shelf life. This is true for almost all canned food products. Canned foods are usually processed during the harvest season and then stored in a warehouse for future sale. This means their cost was locked in at some time in the past. On the other hand, fresh food products need to be prepared and delivered fresh to the customer in a relatively short interval of time. Therefore, a fresh food product will more rapidly respond to the total impact of hyperinflation when compared to a long shelf life food product that was prepared many months ago. That is why fresh hamburger was included as one of the three products to watch for the true impact of hyperinflation.

On October 7, 2010 I wrote down the price of each of the above three products. In the southeastern United States regular unleaded gasoline could be purchased for approximately $2.62 per gallon which includes all taxes, and diesel fuel for approximately $2.99 per gallon which includes all taxes, and fresh hamburger for approximately $2.88 per pound before a sales tax is added.

In addition, on October 7, 2010 fresh milk could be purchased for approximately $2.28 per gallon before a sales tax is added. Fresh milk is being included to balance the index with two oil products and two food products (meat and dairy).

Since October 7, 2010 I have periodically checked the prices of the above four commodities. The following table shows what has happened to those prices:

Hyperinflation Index for 2010

Date	Gasoline	Diesel Fuel	Fresh Hamburger	Fresh Milk	Total All Four	Annualized Inflation Percent
October 7, 2010	$2.62	$2.99	$2.88	$2.28	$10.68	Start Year 2010
December 7, 2010	$2.85	$2.94	$2.88	$2.28	$10.95	15.2%
January 7, 2011	$2.97	$3.29	$2.88	$2.48	$11.62	35.2%

Hyperinflation Index for 2011

Date	Gasoline	Diesel Fuel	Fresh Hamburger	Fresh Milk	Total All Four	Annualized Inflation Percent
January 7, 2011	$2.97	$3.29	$2.88	$2.48	$11.62	Start Year 2011
February 7, 2011	$2.95	$3.38	$2.98	$2.48	$11.79	17.6%
March 7, 2011	$3.42	$3.79	$3.08	$2.48	$12.77	59.3%
April 7, 2011	$3.53	$3.82	$3.08	$2.68	$13.11	51.3%
May 7, 2011	$3.72	$3.99	$3.08	$2.83	$13.62	51.6%
June 7, 2011	$3.57	$3.82	$2.98	$2.78	$13.15	31.6%
July 7, 2011	$3.49	$3.79	$2.98	$2.48	$12.74	19.3%
August 8, 2011	$3.59	$3.79	$3.08	$3.14	$13.60	29.2%
September 7, 2011	$3.49	$3.69	$3.08	$3.17	$13.43	23.4%
October 7, 2011	$3.15	$3.63	$3.08	$3.18	$13.04	16.3%
November 7, 2011	$3.21	$3.73	$3.08	$3.18	$13.20	16.3%
December 7, 2011	$3.15	$3.73	$3.08	$3.18	$13.14	14.3%
January 7, 2012	$3.25	$3.63	$3.08	$3.18	$13.14	13.1%

Hyperinflation Index for 2012

Date	Gasoline	Diesel Fuel	Fresh Hamburger	Fresh Milk	Total All Four	Annualized Inflation Percent
January 7, 2012	$3.25	$3.63	$3.08	$3.18	$13.14	Start Year 2012
February 7, 2012	$3.47	$3.76	$3.08	$3.18	$13.49	32.0%
March 7, 2012	$3.67	$4.09	$3.28	$3.18	$14.22	49.3%
April 7, 2012	$3.75	$4.05	$3.28	$3.18	$14.26	34.1%
May 7, 2012	$3.55	$3.94	$3.28	$3.18	$13.95	18.5%
June 7, 2012	$3.29	$3.69	$3.28	$3.18	$13.44	5.5%
July 7, 2012	$3.23	$3.58	$3.28	$3.18	$13.27	2.0%
August 7, 2012	$3.37	$3.69	$3.28	$3.18	$13.52	5.0%
September 7, 2012	$3.85	$3.97	$3.28	$3.38	$14.48	15.3%
October 8, 2012	$3.51	$3.93	$3.28	$3.38	$14.10	9.7%
November 7, 2012	$3.29	$3.83	$3.28	$3.48	$13.88	6.8%
December 7, 2012	$3.16	$3.89	$3.38	$3.48	$13.91	6.4%
January 7, 2013	$3.27	$3.86	$3.38	$3.48	$13.99	6.5%

Hyperinflation Index for 2012

Date	Gasoline	Diesel Fuel	Fresh Hamburger	Fresh Milk	Total All Four	Annualized Inflation Percent
January 7, 2013	$3.27	$3.86	$3.38	$3.48	$13.99	Start Year 2013
February 7, 2013	$3.39	$3.83	$3.38	$3.48	$14.08	7.7%
March 7, 2013	$3.65	$3.93	$3.48	$3.48	$14.54	23.6%
April 7, 2013	$3.39	$3.83	$3.48	$3.48	$14.18	5.4%
May 7, 2013	$3.49	$3.75	$3.48	$3.48	$14.20	4.5%

Will the United States of America enter a period of hyperinflation? I don't know. But I will update the above table on a regular basis so we can see if our leaders are able to keep inflation to a reasonable level.

Revision History:
May 7, 2013 - May April 7, 2013 prices to the above table.
April 7, 2013 - Added April 7, 2013 prices to the above table.
March 7, 2013 - Added March 7, 2013 prices to the above table.
February 7, 2013 - Added February 7, 2013 prices to the above table.
January 7, 2013 - Added January 7, 2013 prices to the above table.
December 7, 2012 - Added December 7, 2012 prices to the above table.
November 7, 2012 - Added November 7, 2012 prices to the above table.
October 8, 2012 - Added October 8, 2012 prices to the above table.
September 7, 2012 - Added September 7, 2012 prices to the above table.
August 7, 2012 - Added August 7, 2012 prices to the above table.
July 7, 2012 - Added July 7, 2012 prices to the above table.
June 7, 2012 - Added June 7, 2012 prices to the above table.
May 7, 2012 - Added May 7, 2012 prices to the above table.
April 7, 2012 - Added April 7, 2012 prices to the above table.
March 7, 2012 - Added March 7, 2012 prices to the above table.
February 7, 2012 - Added February 7, 2012 prices to the above table.
January 7, 2012 - Added January 7, 2012 prices to the above table.
December 7, 2011 - Added December 7, 2011 prices to the above table.
November 7, 2011 - Added November 7, 2011 prices to the above table.
October 7, 2011 - Added October 7, 2011 prices to the above table.
September 7, 2011 - Added September 7, 2011 prices to the above table.
August 8, 2011 - Added August 8, 2011 prices to the above table.
July 7, 2011 - Added July 7, 2011 prices to the above table.
June 7, 2011 - Added June 7, 2011 prices to the above table.
May 7, 2011 - Added May 7, 2011 prices to the above table and added a Modified Hyperinflation Index that includes fresh milk.
April 7, 2011 - Added April 7, 2011 prices to the above table.
March 7, 2011 - Added March 7, 2011 prices to the above table.
February 7, 2011 - Added February 7, 2011 prices to the above table.
January 7, 2011 - Created this new web page.

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