Why we think in Austrian economics, and what a hyperinflation scenario would mean for your portfolio
31st July 2026
This week the Federal Reserve held rates steady after what Chair Kevin Warsh himself called a genuine "family fight," with three committee members dissenting because they wanted to raise rates rather than hold. Shortly afterwards, the Bank of England held at 3.75%, also against three dissenting votes pushing for a hike. Both central banks are holding the line in public while the money supply figures tell a less comfortable story underneath.
US M2 has grown by roughly a trillion dollars in seven months and now sits above $20.4 trillion, and the Fed has returned to quantitative easing through monthly Treasury purchases even as headline inflation sits above target. In the UK, June's CPI printed at 2.6%, above the Bank's 2% target, with the Bank's own projection showing inflation climbing toward 3.2% by the end of the year.
None of this happened by accident, and none of it will resolve itself by accident either. How you interpret it depends heavily on which economic framework you were taught to see it through. We think one framework explains it better than the others, and it is not the one most financial professionals were trained in.
US M2 has grown by roughly a trillion dollars in seven months and now sits above $20.4 trillion, and the Fed has returned to quantitative easing through monthly Treasury purchases even as headline inflation sits above target. In the UK, June's CPI printed at 2.6%, above the Bank's 2% target, with the Bank's own projection showing inflation climbing toward 3.2% by the end of the year.
None of this happened by accident, and none of it will resolve itself by accident either. How you interpret it depends heavily on which economic framework you were taught to see it through. We think one framework explains it better than the others, and it is not the one most financial professionals were trained in.
The economics most advisers were taught
Walk into most wealth management firms and ask the adviser what they think drives the business cycle, and you will get some version of the Keynesian or monetarist mainstream: recessions are demand shortfalls to be managed with fiscal stimulus and interest rate adjustment, inflation is a dial central banks can turn with reasonable precision, and money is largely neutral over the medium term provided policy is calibrated correctly.
This is the economics taught at most universities, examined in most professional qualifications, and assumed without much scrutiny across most of the financial services industry. It is not that it is entirely wrong. It is that it treats central planning of the money supply as a solved engineering problem rather than a fundamentally uncertain one, and it tends to treat each cycle of easy money and its aftermath as a surprising anomaly rather than the predictable output of the system itself.
Walk into most wealth management firms and ask the adviser what they think drives the business cycle, and you will get some version of the Keynesian or monetarist mainstream: recessions are demand shortfalls to be managed with fiscal stimulus and interest rate adjustment, inflation is a dial central banks can turn with reasonable precision, and money is largely neutral over the medium term provided policy is calibrated correctly.
This is the economics taught at most universities, examined in most professional qualifications, and assumed without much scrutiny across most of the financial services industry. It is not that it is entirely wrong. It is that it treats central planning of the money supply as a solved engineering problem rather than a fundamentally uncertain one, and it tends to treat each cycle of easy money and its aftermath as a surprising anomaly rather than the predictable output of the system itself.
Ludwig von Mises, Austrian economist
What the Austrian school says instead
The Austrian school, developed by economists including Ludwig von Mises and Friedrich Hayek, starts from a different premise: that economic value is subjective, that prices (including the price of money itself, which is the interest rate) exist to coordinate the independent decisions of millions of individuals, and that when a central authority distorts that price rather than letting it emerge from genuine saving and lending, it does not eliminate the underlying problem. It postpones it and usually enlarges it.
The Austrian business cycle theory, most fully developed by Mises and later Hayek, argues that artificially suppressed interest rates encourage businesses to borrow and invest in projects that only make sense at that artificially low rate. Capital gets misallocated into longer, more speculative projects than genuine savings would support. The boom feels like prosperity while it lasts. The correction, when it comes, is not bad luck. It is the market re-discovering the truth that the earlier prices had concealed.
Hayek's central insight, one that won him the Nobel Prize in 1974, was about the limits of centralised knowledge. No committee, however well-intentioned or well-staffed, can gather and process the dispersed information held by millions of individual market participants making millions of individual decisions. The market price system does that job by aggregating information no single body could ever collect. When you override that system with policy targets, you are not improving on the information the market held. You are discarding it.
Applied to where we are now, the Austrian lens reads this year's data differently to the mainstream one. A trillion dollars of new money supply growth in seven months is not a neutral technical adjustment. It is newly created purchasing power entering the economy, and it does not enter evenly. It shows up first in asset prices and in the hands of whoever receives it earliest, then works its way through the economy as rising prices for everyone else, arriving last and hardest for anyone living on fixed income or holding cash. Three Fed committee members and three Bank of England committee members voting for tighter policy against their own chairs is not statistical noise. It is exactly what you would expect when a central bank tries to hold policy accommodative in the face of above-target inflation it can no longer describe as transitory.
Why this matters for how we manage money
We do not run Brigantia on the assumption that central banks will always get this right, or that the next decade will look like a smooth continuation of the last several decades of expanding credit and asset prices. We build portfolios and financial plans on the assumption that monetary mismanagement is a recurring feature of modern economies, not a rare tail event, and that a sound long-term plan has to survive periods when it happens.
That does not mean panic, and it does not mean abandoning equities or hiding in gold. It means diversification that is genuinely structural rather than cosmetic, a bias toward real assets and productive businesses over long-duration paper promises, and a healthy scepticism toward any plan that only works if policymakers continue getting the calibration exactly right for the next thirty years.
The Austrian school, developed by economists including Ludwig von Mises and Friedrich Hayek, starts from a different premise: that economic value is subjective, that prices (including the price of money itself, which is the interest rate) exist to coordinate the independent decisions of millions of individuals, and that when a central authority distorts that price rather than letting it emerge from genuine saving and lending, it does not eliminate the underlying problem. It postpones it and usually enlarges it.
The Austrian business cycle theory, most fully developed by Mises and later Hayek, argues that artificially suppressed interest rates encourage businesses to borrow and invest in projects that only make sense at that artificially low rate. Capital gets misallocated into longer, more speculative projects than genuine savings would support. The boom feels like prosperity while it lasts. The correction, when it comes, is not bad luck. It is the market re-discovering the truth that the earlier prices had concealed.
Hayek's central insight, one that won him the Nobel Prize in 1974, was about the limits of centralised knowledge. No committee, however well-intentioned or well-staffed, can gather and process the dispersed information held by millions of individual market participants making millions of individual decisions. The market price system does that job by aggregating information no single body could ever collect. When you override that system with policy targets, you are not improving on the information the market held. You are discarding it.
Applied to where we are now, the Austrian lens reads this year's data differently to the mainstream one. A trillion dollars of new money supply growth in seven months is not a neutral technical adjustment. It is newly created purchasing power entering the economy, and it does not enter evenly. It shows up first in asset prices and in the hands of whoever receives it earliest, then works its way through the economy as rising prices for everyone else, arriving last and hardest for anyone living on fixed income or holding cash. Three Fed committee members and three Bank of England committee members voting for tighter policy against their own chairs is not statistical noise. It is exactly what you would expect when a central bank tries to hold policy accommodative in the face of above-target inflation it can no longer describe as transitory.
Why this matters for how we manage money
We do not run Brigantia on the assumption that central banks will always get this right, or that the next decade will look like a smooth continuation of the last several decades of expanding credit and asset prices. We build portfolios and financial plans on the assumption that monetary mismanagement is a recurring feature of modern economies, not a rare tail event, and that a sound long-term plan has to survive periods when it happens.
That does not mean panic, and it does not mean abandoning equities or hiding in gold. It means diversification that is genuinely structural rather than cosmetic, a bias toward real assets and productive businesses over long-duration paper promises, and a healthy scepticism toward any plan that only works if policymakers continue getting the calibration exactly right for the next thirty years.
A picture of (a small part of) Austria
What a genuine hyperinflation scenario would look like
We want to be precise about this, because the word gets thrown around loosely. Hyperinflation in the technical sense, typically defined as price rises exceeding 50% in a single month, is a specific and historically rare event, usually triggered by a government financing its spending directly through money creation because it has lost access to credit markets or tax revenue, often during or after a war or a collapse in state capacity. Weimar Germany in 1923 and Zimbabwe in the late 2000s are the standard reference cases, and both involved a state that had effectively lost the ability to fund itself any other way.
That is not the current base case for the US, the UK, or the eurozone, and we are not forecasting it. What we are seeing is something more familiar and considerably more common historically: elevated, sticky, above-target inflation running alongside continued money supply growth, a central bank caught between inflation risk and growth risk, and a geopolitical backdrop, principally the ongoing Middle East conflict and its effect on Strait of Hormuz shipping and energy prices, adding a genuine supply-side inflation risk on top of the monetary one. It is worth running the more severe scenario as a stress test regardless, because a financial plan that only survives the mild version is not really a plan.
If inflation accelerated meaningfully further, whether toward a genuine currency crisis or simply a prolonged period of high single-digit or low double-digit inflation, the assets that have historically preserved purchasing power share common characteristics: they represent a claim on something real rather than a promise to pay a fixed sum of currency in future.
Equities in productive businesses. Companies that own real assets, hold pricing power, and can raise prices roughly in line with their input costs have historically preserved real value through inflationary periods far better than cash or long-dated fixed income, even though the ride can be volatile in nominal terms.
Gold. Central banks have been buying gold at a scale not seen in decades, with the World Gold Council projecting purchases of 700 to 900 tonnes for 2026, more than double the pre-2022 average pace, and gold has traded at successive record highs through the year. Central banks are not buying gold because they expect a quiet decade. They are buying it as a deliberate hedge against exactly the currency and policy risk we are describing here.
Real estate and other hard assets, held with sensible leverage rather than excessive leverage, since debt itself becomes easier to service in real terms during genuine inflationary periods, provided the asset's income keeps pace.
Short-duration and inflation-linked government debt, rather than long-dated conventional bonds, which are the single worst-performing mainstream asset class in almost every serious inflationary episode because their fixed coupon and principal are worth progressively less in real terms with every passing year of elevated inflation.
What performs badly in genuine high-inflation environments is just as instructive: cash sitting idle, long-dated fixed-rate bonds, and any financial plan built around a single fixed number rather than a strategy that can flex with conditions.
The Brigantia position
We are not permabears and we are not gold bugs. We hold meaningful equity exposure for the clients for whom it is appropriate, because equities remain one of the best long-term inflation hedges available and because time in the market, not timing the market, is still the foundation of building real wealth. What the Austrian framework changes is not whether we invest. It changes how seriously we take the tail risks that mainstream forecasting tends to treat as unlikely enough to ignore, and how deliberately we build portfolios that do not depend on central banks getting the next decade exactly right.
Living overseas as an expat already means your financial life is more exposed to currency and policy decisions made in economies you may not be living in. A financial plan that assumes those decisions will always be well calibrated is a plan built on hope rather than analysis.
You can book an initial call below.
We want to be precise about this, because the word gets thrown around loosely. Hyperinflation in the technical sense, typically defined as price rises exceeding 50% in a single month, is a specific and historically rare event, usually triggered by a government financing its spending directly through money creation because it has lost access to credit markets or tax revenue, often during or after a war or a collapse in state capacity. Weimar Germany in 1923 and Zimbabwe in the late 2000s are the standard reference cases, and both involved a state that had effectively lost the ability to fund itself any other way.
That is not the current base case for the US, the UK, or the eurozone, and we are not forecasting it. What we are seeing is something more familiar and considerably more common historically: elevated, sticky, above-target inflation running alongside continued money supply growth, a central bank caught between inflation risk and growth risk, and a geopolitical backdrop, principally the ongoing Middle East conflict and its effect on Strait of Hormuz shipping and energy prices, adding a genuine supply-side inflation risk on top of the monetary one. It is worth running the more severe scenario as a stress test regardless, because a financial plan that only survives the mild version is not really a plan.
If inflation accelerated meaningfully further, whether toward a genuine currency crisis or simply a prolonged period of high single-digit or low double-digit inflation, the assets that have historically preserved purchasing power share common characteristics: they represent a claim on something real rather than a promise to pay a fixed sum of currency in future.
Equities in productive businesses. Companies that own real assets, hold pricing power, and can raise prices roughly in line with their input costs have historically preserved real value through inflationary periods far better than cash or long-dated fixed income, even though the ride can be volatile in nominal terms.
Gold. Central banks have been buying gold at a scale not seen in decades, with the World Gold Council projecting purchases of 700 to 900 tonnes for 2026, more than double the pre-2022 average pace, and gold has traded at successive record highs through the year. Central banks are not buying gold because they expect a quiet decade. They are buying it as a deliberate hedge against exactly the currency and policy risk we are describing here.
Real estate and other hard assets, held with sensible leverage rather than excessive leverage, since debt itself becomes easier to service in real terms during genuine inflationary periods, provided the asset's income keeps pace.
Short-duration and inflation-linked government debt, rather than long-dated conventional bonds, which are the single worst-performing mainstream asset class in almost every serious inflationary episode because their fixed coupon and principal are worth progressively less in real terms with every passing year of elevated inflation.
What performs badly in genuine high-inflation environments is just as instructive: cash sitting idle, long-dated fixed-rate bonds, and any financial plan built around a single fixed number rather than a strategy that can flex with conditions.
The Brigantia position
We are not permabears and we are not gold bugs. We hold meaningful equity exposure for the clients for whom it is appropriate, because equities remain one of the best long-term inflation hedges available and because time in the market, not timing the market, is still the foundation of building real wealth. What the Austrian framework changes is not whether we invest. It changes how seriously we take the tail risks that mainstream forecasting tends to treat as unlikely enough to ignore, and how deliberately we build portfolios that do not depend on central banks getting the next decade exactly right.
Living overseas as an expat already means your financial life is more exposed to currency and policy decisions made in economies you may not be living in. A financial plan that assumes those decisions will always be well calibrated is a plan built on hope rather than analysis.
You can book an initial call below.
