When debt-based money is created through fractional reserve banking, the new money theoretically gets its value from the borrower’s promise to repay, or failing that, the securities that guarantee the loan.
Because debt-free currency (the so-called “capital-G” Greenback) isn’t based on a loan, how does it get its value?
It seems that the primary reason for hyperinflation is actually incompetence, as in not using reserves to absorb excess currency in circulation. Yes, in effect hyperinflation under a debt based issuance of money does creates economic bubbles, and this would include a major trade deficit. The lack of domestic industry to absorb currency within its exchanges would also be a source of excess creation. Hyperinflation under a specie basis would be a result of currency speculation particularly where foreign currencies are allowed to circulate within a otherwise sovereign economy. The structural control of access to debt based money is another dimension who is accepted as being worthy of the “debt.” An adequate supply of real money would in effect create competition for conventional banks. The lending of money under the fiat and debt basis standard is more based upon the possibility of collateral in that the loans are made and then reserves are sought to accommodate the allowed leverage ratios. The de-pegging of the Argentine Peso at the insistence of the IMF is obviously another way to create a radical devaluation of a sovereign currency which also forced that government to raid the savings of their citizens.